- effective prioritisation — ensuring that the consumer duty and implementation plans were being treated as a business priority;
- embedding the substantive requirements — ensuring that companies are not taking an overly complacent approach to the new rules;
- working with other companies — ensuring that information is being shared with other businesses in the distribution chain.
Now that the consumer duty has begun, the regulator will be speaking with companies and reviewing what steps they have taken over the past year to implement the duty, and it is likely to focus closely on the above three areas to see whether businesses have addressed these since the publication of the FCA’s feedback.
Companies should, therefore, give careful thought to what type of data and information they can provide to demonstrate compliance, so as to avoid the risk of further scrutiny or potential enforcement action.
What will the FCA expect to see?
Implementation plans: the FCA expects companies to continue to adapt and modify their implementation plans even now, and so these should still be treated as “live” documents and being made subject to review. Companies should, therefore, make sure that there is a plan in place, that this is being regularly monitored and adapted where necessary, and ideally be able to show that the business has modified its plan following the guidance and publications released by the regulator over the past year. This will mean that companies can show they are properly engaging with the consumer duty, and also that they are actively monitoring what the FCA is saying and ensuring this feedback is being incorporated into the business.
Communications with other companies: as well as providing copies of updated implementation plans, the regulator may also expect to see evidence showing how firms have engaged with other businesses within the distribution chain of a product. The rules surrounding the consumer duty are quite clear in that they apply to all relevant parties involved, and are not focused solely on the end parties to an overall transaction — third parties and intermediaries such as brokers are also affected. If a company is able to provide evidence to the FCA to show that it has sought to engage with other businesses and taken steps to try and agree a “joined-up approach” that ensures the new rules are being embedded and applied consistently among the various parties involved in a product, then this may go some way to satisfying the regulator that a company is suitably complying with the duty. This may be the case even where the other companies involved are not engaging. Provided the business in question can show that it has at least tried to engage with others about the duty, then this may be sufficient, provided that the company is also alleviating any potential harm to customers arising from that other firms’ non-compliance. In terms of what “data” to provide here, this may include minutes of any meetings between companies where the duty was discussed (and any new practices or operating changes agreed), as well as copies of any general correspondence sent between firms that either raises the duty as a specific topic — whether setting out proposals, or inviting other companies to a meeting to discuss the matter — or which serves as evidence of a new business practice that has been introduced as a result of the new rules.
