On 23 April 2019, the FCA published a feedback statement (FS19/2) to its July 2018 discussion paper on a new duty of care. FS19/2 provides a detailed overview of responses received to its discussion paper; the FCA notes responses were ‘constructive’.
The context for a new duty of care is that stakeholders in the financial services sector have previously informed the FCA that its regulatory framework, including its Principles for Businesses (the Principles), may not be sufficient or applied effectively enough to prevent harm to consumers. To remedy this, it was suggested the FCA introduce a duty of care to reduce harm and ensure that firms avoid conflicts of interest, as well as supporting firms’ longer-term cultural change.
As a result of the feedback received, the FCA has identified two possible options for change in the duty of care which are most likely to improve consumer protection. These are:
- the FCA reviewing how it applies the regulatory framework – in particular, its application of the Principles in its authorisations, supervisory and enforcement functions, and how transparently it communicates with firms about this; and
- new / revised FCA Principles to strengthen and clarify firms’ duties to consumers, including considering a potential private right of action for Principles breaches
The FCA notes that a number of stakeholders argued that a statutory duty of care in primary legislation would be more effective than one created using the FCA’s current rule-making powers. The FCA does not believe that there is currently a sufficient basis for such legislation, but if substantive reasons arise for supporting a statutory duty, then it will consider this option further.
The FCA will publish a further paper in the Autumn seeking detailed views on specific options for change, as part of its work on the future of regulation more generally. The FCA has included this commitment in its Business Plan 2019/20.