In July 2024, the FCA launched a Call for Input (CfI) seeking feedback on refining its retail conduct rules. This review aims to streamline existing rules, reduce unnecessary complexity, and enhance clarity, especially for smaller and new firms, allowing them to comply more efficiently while continuing to protect consumers.
The FCA’s initiative is part of a broader move to balance the detailed and high-level set of rules, ensuring adequate consumer protection and promoting competition while giving firms of different sizes rules that work for them.
In this blog, we’ll contextualise the CfI, summarise its key areas of focus, and suggest the next steps for firms.
Context to the Call for Input
Retail conduct rules are the FCA requirements that ensure that financial firms treat retail customers fairly, provide clear information and suitable products, and effectively handle complaints. They are separate from the Consumer Duty, although there is significant overlap between their scope and instruction.
The CfI generally continues the FCA’s push for more guidance-based requirements rather than prescriptive rules that firms must follow. However, the FCA believes that, while this less-detailed approach may suit large firms, smaller firms prefer the certainty of prescriptive rules. Whether that belief is true or not, there still needs to be a balance between rules that can create good consumer outcomes and that are straightforward and clear for firms to adhere to.
This CfI, then asks whether the interaction between the Consumer Duty and existing retail conduct rules causes confusion and increases compliance costs. The FCA invites firms to comment and suggests a hybrid approach, combining high-level principles from the Consumer Duty with more detailed rules that smaller firms may find helpful.
Key Areas of Focus
The FCA invites comments on several important issues, including:
- Simplification of detailed rules, where high-level guidance could suffice.
- Clarification of how rules interact to prevent overlaps or contradictions.
- Balancing the benefits and costs of simplifying requirements, especially for smaller firms.
The FCA will also consider how any simplifications might impact on its statutory objectives, including its new mandate to promote the UK’s international competitiveness and long-term growth.
Importantly, the CfI does not include the Consumer Duty directly, although understanding the shifts in the rules does necessitate an understanding of the Duty’s own rules.
Why This Matters for Firms
The FCA recognises that new firms and smaller businesses face significant regulatory burdens that can impact their competitiveness and growth.
As a result, regulators are looking to make regulatory compliance more accessible while maintaining consumer protections. Although responding is not compulsory, firms are encouraged to engage with this review to ensure their voice is heard for future rules.
Next Steps
Firms are invited to submit comments by 31 October 2024 via the FCA’s online form or by email. The FCA will publish an update on its findings in early 2025.
Remember, if you have questions about the retail conduct rules or the application of the Duty in your firm, an API Compliance consultant can help. Use the form below to reach out to us.
