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:

  1. We welcome consultation paper CP21/36 and its proposed new Consumer Duty, which we believe will set clearer and higher standards.
  2. 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.
  3. 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.
  4. 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.
  5. The Draft Handbook Text and the Draft Guidance are complex and impenetrable; it is difficult to form a view of how they will work in practice.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.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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:

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

One comment
  1. Roger Lawson says:

    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:

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