Opinion  

New FCA regime to focus on consumer

Simon Lovegrove

So what should FSA-regulated firms be doing to prepare for the new FCA regime? It could be argued that there are certain common failings that can be identified in recent FSA enforcement action. Such common failings include:

• Failure in firms’ systems and controls to ensure that risks of customer detriment are measured and monitored. This might be considered a breach of Principle 3: A firm must take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.

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• Failure to understand TCF obligations and to understand what good conduct looks like. This might be considered a breach of Principle 6: A firm must pay due regard to the interests of its customers and treat them fairly.

• Poor quality customer literature and information about products which means that customers fail to understand what they are buying and whether it is suitable for them. This might be considered a breach of Principle 7: A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading.

• Products are not suitable for the customer and fail to meet their demands and needs. This might lead to a breach of Principle 9: A firm must take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who is entitled to rely upon its judgment.

Simon Lovegrove is a lawyer with the financial services group at Norton Rose LLP

In April 2013 the Financial Conduct Authority is expected to take over the supervision of all conduct related matters in FSA authorised firms

Products should be stress-tested and potential risks for consumers identified before the product reaches the market

Early intervention in the product life-cycle will enable the FCA to prevent harm to customers.