2 - different regulatory approaches

how many principles for business does the FCA have

12

what are 1-5 of those principles, and what do they focus on

focus: run the firm

acronym: I See My Future Man…

1. Integrity - be honest

2. Skill, Care + Diligence - be professional/competent

3. Management + Control - good governance + risk systems

4. Financial Prudence - sufficient resources (eg capital, liquidity()

5. Market Conduct - proper trading standards of behaviour

what are 6-9 of those principles, and what do they focus on

focus: deal with customers

acronym: customers can be C-C-Cuh-RAZY!!

6. Customer’s Interests - treat customers fairly

7. Communications - clear, fair, not misleading

8. Conflicts of Interest - manage them

9. Relationships of Trust - suitable advice/decisions

what are principles 10-12 of those principles, and what do they focus on

focus: protect + supervise

acronym: Can’t Run, Crook

10. Client Assets - safeguard them

11. Regulator Relations - cooperative engagement with FCA/PRA

12. Consumer Duty - good outcomes for retail customers

when might principle 12 not apply (“out of scope”)

if there is no retail customer

BUT

if a wholesale firm materially influences retail outcomes then its not out of scope

if principle 12 doesn’t apply, what happens? (and vice versa)

doesn’t apply? then principles 6+7 apply, and FTOC

if it does then it replaces 6+7

what are the 3 cross-cutting rules of consumer duty

act in good faith

avoid forseeable harm

support financial objectives [of customers]

what does cross cutting mean

rules that apply across the whole consumer duty

principles vs rules

principles = ethical guidance, outcomes focussed, no evidence

rules = compliance, can result in discipline, evidence can be required

BOTH legally binding tho

what does the consumer duty initiative comprise of

principle 12

rules

expected outcomes

formal guidance

what activity does consumer duty apply to

consumer credit

deposit taking (retail)

insurance (not reinsurance)

investments (retail clients only)

mortgages (regulated)

who does consumer duty apply to

existing AND prospective customers

what did principle 6 used to be known as

TCF - treating customers fairly

what is now used to expand on principle 6

FTOC - fair treatment of customers

what is the main point of FTOC

must act in the clients best interest

what are the 6 consumer outcomes of FTOC

fair treatment is central to the corporate culture

products/services marketed meet the needs of idenditfied consumer groups (keep target audience in mind)

consumers are provided with clear info and kept well informed

consumers receive suitable advice when they do

product performance is as the firm led the consumer to expect

consumers do not face unreasonable post-sales barriers (can cancel/switch if they want to)