ShareSoc response to FCA Consultation CP21/36: A New Consumer Duty

In a detailed 12 page response to the FCA Consultation, ShareSoc made the following key points:

We welcome consultation paper CP21/36 and its proposed new Consumer Duty, which we believe will set clearer and higher standards.
We believe that the proposal should be labelled as a Duty of Care. We do not understand why the FCA has not done this. We also believe it is not clear whether the FCA’s central proposal is intended to create a duty of care. 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.
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 very disappointing that the current regime with its Principles and guidance on Treating Customers Fairly is not working, and we agree that radical change is required. For many firms, this will require a significant shift in culture and behaviour.
The Draft Handbook Text and the Draft Guidance are complex and impenetrable; it is difficult to form a view of how they will work in practice. It may take years to establish what is and what is not acceptable, what is good practice and what is best practice. We believe this focus on rules to be an extension of the excessive codification which has been a hallmark of recent regulation within the UK and within the EU.
Para 2.5 of CP21/13 highlighted 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 further cultural change at the FCA.
There are significant gender diversity issues in respect of investing. Women are under-represented in the industry. Women are less likely to invest in shares. They tend to be more risk averse and have a greater preference for interest bearing cash accounts rather than shares and funds. It is desirable that these issues are addressed a.s.a.p.
We believe that the proposal does not adequately address the needs of sophisticated individual investors, and we expect product and service providers to make conservative decisions when addressing this segment. This will be to the detriment of such investors.
Over the past three years ShareSoc have engaged actively with the FCA at both director and executive level. We believe that the FCA has changed substantially and is working to become a better and more effective regulator. The organisation still has many legacy issues to deal with, and these mean that the public image lags what is happening in the FCA today.
There is valid cause for concern about the reputational integrity of the financial services sector. The highly credible 2021 Edelman Trust Barometer in Financial Services shows it to be the second most distrusted industry; second only to social media.

The consultation paper can be read here: https://www.fca.org.uk/publications/consultation-papers/cp21-36-new-consumer-duty-feedback-cp21-13-further-consultation

Our full response can be read here ShareSoc response to FCA CP21_36- A new Consumer Duty

Post Date: February 15, 2022

One comment

Roger Lawson says:

20th February 2022 at 9:59 am

I am not clear how relabelling the proposal will help. As you say: “The Draft Handbook Text and the Draft Guidance are complex and impenetrable”. There need to be a few simple rules to make them enforceable.
You can read my more detailed comments on the FCA proposals in this note: https://www.roliscon.com/Consumer-Duty-Consultation-Response.pdf

Group description:	All levels of experience welcome. A typical meeting agenda includes: – Macro Environment – Trades: Members review existing positions and identify securities with promising TA entry patterns or setups and with suitable risk/reward. Any security, long, short, futures, options may be considered. The convener takes actual positions in trades and maintains his own detailed ledger, accurately measuring performance of individual securities and cumulative activity. Members are notified by e-mail prior to the entries or exits that are decided upon. Following each meeting an updated copy of the ledger is circulated together with the next meeting agenda. Members may wish to maintain similar ledgers of their own but there is no obligation to do so. – Technical Analysis: Techniques and systems used in trades. Members can request discussion of particular aspects of TA.
Meeting Type/Venue:	Online via Zoom
Meeting Frequency/Timing:	The first Tuesday of every month from 7 to 9pm

Group description:	Following the launch of the SIGnet Technical Traders groups, it was identified that there were a number of members who use fundamental and other information as their main source of choosing companies to invest in, who would find some understanding of technical analysis helpful to identify good entry and exit points for their investments. This new SIGnet Technical Analysis in Support of Investing group is therefore being launched and we welcome members of all levels of experience to join.
Meeting Type/Venue:	Online via Zoom
Meeting Frequency/Timing:	There will be an initial Zoom meeting on Monday 29th April at 7pm to launch this group, please email info@sharesoc.org if you are interested in joining.

Group description:	A new in person group coming soon! Keep and eye on our Events page to register for the launch meeting.
Meeting Type/Venue:	In person
Meeting Frequency/Timing:	TBC

Group description:	Open to all investors / people with an interest in investing. Typical meeting will involve members talking about recent purchases, successes, failures and possible future purchases. Also with occasional visiting speakers or members making presentations on a topic of interest.
Meeting Type/Venue:	We aim to meet on the last Tuesday of each month in a private room at a pub in Playhatch. Start time 7pm with members encouraged to meet up around 6pm for a bite to eat / drink before hand, if their diaries allow.
Meeting Frequency/Timing:	7pm on the last Tuesday of the month. Meetings likely to last about two hours but with informal ‘overspill’ before / after.

Group description:	This group was set up as a forum to discuss companies in detail, each company is introduced by a member and discussion may last one or two hours. Membership is by invitation only and is for experienced investors.
Meeting Type/Venue:	The group meets at a venue in Waterloo, London.
Meeting Frequency/Timing:	Meetings are on Tuesday mornings at two month intervals.

Group description:	Group of investors that meets on a bi-monthly basis to discuss all things happening in the world of investing, share each other’s knowledge and give the benefit of each other’s experience. Group primarily focuses on unit trusts, open ended investment companies and investment trusts. However, all investments are up for discussion and new members are always welcome and encouraged.
Meeting Type/Venue:	Remotely via Zoom on Saturdays on a bi-monthly basis, on dates collectively agreed by all group members.
Meeting Frequency/Timing:	Bi-monthly.

Group description:	Our group members have wide ranging investment experience and work backgrounds. Discussion topics include reviewing our recent stock or collective investment buying and selling activity, plus what we are considering buying or selling and the reasons for our decisions. We also have a wider discussion on where we think opportunities might arise in the next few months and what we think needs to be avoided. Members occasionally lead discussions on specific topics such as recent events attended, articles or books of interest and sources of investment ideas and information.
Meeting Type/Venue:	During the pandemic our meetings were held on Zoom, but we have now resumed meeting in person at a location a few miles to the west of Colchester. Most meetings will now be in person, but it is possible that occasional meetings will be held on Zoom in special circumstances.
Meeting Frequency/Timing:	We meet midweek every two months. Zoom meetings run for about two hours from 10.30am and in person meetings from 11am until about 3pm, including a break for lunch.

Group description:	Our group is a broad church that contains investors of varying age and experience. We discuss stocks and investment trusts that we have bought, sold or are interested in and the reasons behind our decisions, and try to make sense of the ever changing investment environment. Our members backgrounds are diverse and include corporate banking, engineering, teaching and the leisure industry. Discussions are robust and challenging but tend to be to be informal, and do not generally involve agendas, presentations or detailed preparation. We are a friendly and approachable group who welcome investors of all levels – we just ask that you contribute, at whatever level you can.
Meeting Type/Venue:	Our meetings are held in a very nice pub near to South Ealing tube station (Piccadilly Line), not far from Ealing Broadway (District, Central and Elizabeth Line). Group numbers permitting (and assuming members are happy to purchase food and drink from the bar), we may also have access to a private room in the pub.
Meeting Frequency/Timing:	We meet every 2 months, usually on a Wednesday morning at 11am.

Group description:	An online group for those who already have some experience in investing. Covering topics such as finding companies to invest in, financial statements and ratios, valuation / margin of safety, analysis of companies and investment trusts and exchange traded funds.
Meeting Type/Venue:	Online using Zoom.
Meeting Frequency/Timing:	Meetings are usually held on the 3rd Thursday of the month at 7:15pm.

ShareSoc response to FCA Consultation CP21/36: A New Consumer Duty

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