ShareSoc has delivered an 8 page response to the FCA’s consultation: A new Consumer Duty : FCA Consultation Paper CP21/13.
We made the following key points:
We welcome the proposed new Consumer Duty, which will set clearer and higher standards.
For too long, retail consumers of financial products and services have been treated unfairly. Too often, the financial services industry has exploited weaknesses in the financial education, knowledge and behavioural biases of customers to charge excessive fees and deliver unsuitable products.
We find it disappointing that the current regime with its guidance of treating customers fairly is not working, and we agree that radical change is required to achieve a more satisfactory state of affairs.
We believe that a Private Right of Action is crucial to making the new proposals work. Without it, we think that little will change.
We are confused as to why the proposal is not specifically labelled as a duty of care. We feel that the FCA has not been sufficiently clear on whether its central proposal is intended to create a duty of care, and we believe this to be a failing in the proposal. Our preference is for the proposal to be formally labelled a duty of care, and for its legal effect to be consistent with this label.
We are supportive of the FCA’s initiative in this consultation but are concerned that the proposals will be diluted through industry lobbying. This must not be allowed to happen.
The consultation highlights the perceived reticence on the part of the FCA to prosecute and enforce under the Principles unless there is a clear accompanying Rule breach. We believe that the time has come for simplification of the Rules and an increased reliance on, and direct enforcement of, the Principles. This requires cultural change at the FCA.
The document does not adequately address the impact (intended or otherwise) of the proposals on sophisticated individual investors.
The consultation highlights the problems of numeracy involving financial concepts. Investors who do not have the necessary financial knowledge or access to financial education cannot evaluate products and risks. ShareSoc has identified a need for a new, free-of-charge, video-based entry-level investing course, and is planning to deliver such a course in 2021. We hope that the FCA will also consider endorsing that course.