UK FCA Consults on changes to its regulations on Consumer Duty

Firms approving financial promotions on behalf of third parties would be subject to the Consumer Duty.  

As part of the proposed changes, the following parts of the Consumer Duty will apply to firms in the above scenario:  

• Principle 12  
• The cross-cutting rules  
• The consumer understanding outcome 
• Rules on monitoring and governance  
• Supporting provisions (such as those relating to reasonableness and redress) 

The above will also apply to firms in the Temporary Marketing Permissions Regime (TMPR). 

Application of the Duty to defined benefit occupational pension schemes  

Firms creating a product or operating pension schemes for occupational pension scheme trustees would need to comply with the Duty if they can determine or materially influence retail customer outcomes.  

The consultation paper is proposing to amend this to make it clear that retail customers include any person who is not a client of the firm but who is, or would be, a beneficiary of an occupational scheme (rather than a beneficiary in relation to the investments held in the scheme). 

The ‘closed product’ definition  

Firms have until 31 July 2024 to implement the Duty for closed products or services.  

The FCA propose to remove the use of the defined ‘distribute’ term in the ‘closed product’ definition. Products and services should be regarded as closed where they are not being marketed or sold to new customers, or available for renewal by existing customers. There will also be amendments to this rule to include occupational pension schemes and how closed products apply to it where new members cannot join a scheme it will be classed as closed.  

Application of the Duty to non-retail financial instruments  

The exclusions linked to non-retail financial instruments will be amended so that it excludes investment funds. This is in the capacity of firms in a distribution chain selling investment funds to retail customers or firms creating funds for firms to sell to retail customers.  

Application of the Duty where an exemption applies in a sectoral sourcebook 

The FCA are consulting on a new rule to make clear that the Duty follows the scope of existing sectoral rules.