In July 2024, the Financial Conduct Authority (FCA) launched a call for input to review its requirements following the introduction of the Consumer Duty, seeking responses by 31st October 2024. The regulator aims to explore where it can simplify existing rules and reduce duplication, mainly through a balance of high-level principles and detailed regulations. This approach would ensure regulatory efficiency while fostering innovation and competition in the UK financial services market.
Objectives of the Review
The FCA’s review is not intended to overhaul the existing regulatory framework but to identify areas where retail conduct rules and guidance could be refined. The key goals include:
- Simplifying Regulations: Reducing the overlap between similar requirements and addressing potential confusion created by multiple sets of rules.
- Promoting Flexibility for Innovation: Ensuring regulations allow firms to innovate, particularly smaller firms and new entrants, without unnecessary complexity.
- Maintaining Consumer Protection: Ensuring that any reduction in regulatory complexity does not compromise consumer protection or create undue risks.
Key Focus Areas
One of the primary areas the FCA is looking into is the overlap between the Consumer Duty and the Product Governance Sourcebook (PROD), mainly where similar requirements regarding product governance may be duplicative. The aim is to achieve the same consumer protection outcomes with more streamlined rules that reduce regulatory costs without diminishing consumer benefits.
Another area of interest is the balance between high-level principles and detailed rules, which the FCA calls a “hybrid approach.” This would allow clear guidance where necessary and greater flexibility for firms to adapt to emerging trends and innovations.
Benefits of Simplification
The potential benefits of this review could be substantial, particularly for smaller firms and new market entrants who often face higher regulatory burdens relative to their resources. Reducing unnecessary complexity could lower compliance costs, ease market entry, and promote competition while maintaining the same level of consumer protection.
Additionally, a more flexible regulatory environment would support innovation in financial products and services, allowing firms to respond more quickly to technological advancements and shifting consumer demands.
Responding to the Call
The FCA is keen to hear from a wide range of stakeholders, including firms of all sizes, to understand how they might be affected by potential changes. Responses will help the FCA ensure that any adjustments to the regulatory framework do not harm competition or innovation.
While the review is focused on simplifying rules related to Consumer Duty, the FCA is not seeking feedback on the post-implementation review of the Duty itself, which has already been scheduled.
Conclusion
The FCA’s call for input represents an essential opportunity for the financial services industry to shape the future regulatory landscape. By simplifying and streamlining rules, the FCA hopes to foster a more competitive and innovative market while continuing to protect consumers. Firms are encouraged to provide feedback before the 31st October 2024 deadline to help the regulator strike the right balance between oversight and flexibility.
How to Get Involved
To participate in the call for input and share your views on how the FCA can refine its requirements, visit the FCA’s website or contact your regulatory liaison for further details on submitting a response.
Please get in touch with us if you have any questions about the contents of this update.
References
- Review of FCA requirements following the introduction of the Consumer Duty, Financial Conduct Authority, September 2024.
