To help firms implement the Duty, the Financial Conduct Authority (FCA) explain more on the areas of the Duty that they have been receiving firm queries on which are relevant for the wider market.
- October implementation plans
In FG22/5, the FCA said firms’ Boards (or equivalent management body) should have agreed their implementation plans by the end of October 2022 and be able to show they have scrutinised and challenged these plans to ensure they are deliverable and robust to meet the new standards. They also said that firms should expect to be asked to share implementation plans, Board papers and minutes with supervisors and be challenged on their contents.
The October deadline reflects that firms will need clear plans in order to implement the Duty properly and on time. The FCA do not expect firms to have necessarily fully scoped all work required to embed the Duty by the October deadline, but they do expect firms to have set out how they will do so in time to ensure timely implementation. Firms’ plans should, by the October deadline, be sufficiently developed to provide both firms’ governing bodies and us with assurance that the expectations set out in the Duty have been carefully considered and will be implemented for new and existing products by 31 July 2023.
Firms should also consider any work needed with other parties to prepare for the Duty and ensure their plan allows enough time for this.
- Consumer Duty Board champions
The FCA want firms’ Boards and senior management to ensure that good outcomes for consumers are central to their firm’s culture, strategy and business objectives.
In FG22/5, the FCA said that they expect firms to have a champion at Board (or equivalent governing body) level. They said that this champion should be an Independent Non-Executive Director (NED), where possible. For larger organisations with group structures, they expect this champion to be at an appropriate Board level to ensure that the Duty is discussed in a meaningful way.
The primary role of the Board champion is to support the Chair and CEO in ensuring that that i) the Duty is being raised regularly in all relevant discussions, and ii) the Board is challenging the firm’s governing body/management on how it is embedding the Duty and focusing on consumer outcomes.
This is not a prescribed responsibility under the Senior Managers & Certification Regime (SM&CR). The FCA has not been prescriptive about this role and firms can set it up in a way that fits with existing roles and responsibilities on their Boards.
Some firms have asked if the Board champion role can be fulfilled by the Chair itself, rather than an Independent NED. As set out in FG22/5, in general the FCA envisage the Board champion working with the Chair, but this will depend on the characteristics of the firm and its Board. In some cases, it may work well if the Chair of the Board is also the Board champion for the Duty. They expect firms to apply judgement and set up the role in a way that is effective for their organisation.
This does not affect the Board’s collective responsibility in relation to the Duty or alter the respective roles of the Board and the executive in ensuring compliance with the Duty under existing governance procedures. The Board champion is not an executive role and they are not responsible for the firm’s implementation of the Consumer Duty but for ensuring it is discussed at the Board.
Throughout the guidance in FG22/5, the FCA has included examples of the types of questions the Board champion, or other members of firms’ governing bodies, could ask to assure themselves the firm is meeting expectations under the Duty. These questions are indicative and designed to illustrate the outcome focus of the Duty. They are also the sorts of questions the FCA will ask firms.
- Definition of closed products
The Duty comes into effect on:
- 31 July 2023 – for new and existing products or services that are open for sale or renewal
- 31 July 2024 – for closed products or services
Closed products are those that are no longer marketed or distributed to retail customers or open to renewal.
Where existing customers can continue to make payments under the existing product terms this would still be considered closed, as long as the product or service is not open to new customers. For example, a pension product which is no longer sold to new customers, but where existing policyholders can continue to pay in contributions, would be considered closed.
It is up to firms to consider each product and determine whether is closed.
Related: Consumer Duty Final Guidance
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