The Financial Conduct Authority’s proposal to introduce a "duty of care" for financial advisers may be dropped.
In July last year the regulator published a discussion paper on a potential duty of care — a legal obligation on advisers to act in their clients' best interests — and received a mixed response from those in the industry.
In a feedback statement published today (April 23), the FCA said it did not think there were sufficient grounds for making changes to primary legislation, which would have to go through parliament, but said it would consider supporting a statutory duty, as doctors have, if there was substantial support for it.
But the watchdog said the best way to address the gap in consumer protection was to review how the regulatory framework was applied to the industry and revise the principles themselves.
In particular, the FCA said it will look at how it authorises, supervises and enforces the principles and how transparently it communicates this with firms.
Any new or revised principles would aim to strengthen a firm's duty to consumers and could include a potential private right of action for a breach of principles.
The regulator said many stakeholders who provided feedback thought the roll-out of the senior managers and certification regime, due in December 2019, would provide a significant shift which could yield real improvements in culture and governance.
According to the FCA, many of those who responded to the consultation thought the regulator should wait until the full effects of the SM&CR were felt in the industry before deciding how to proceed on its proposals.
Many were also concerned a statutory duty would prove difficult to apply to the large variety of firm and consumer relationships in the financial services.
Others were worried it would simply be a duplication of existing obligations which would create legal complexity and delays.
But those in favour of a ‘new duty’ — in whatever form — said it could trigger fundamental cultural change within firms by creating a standard of care that means firms would ask ‘is this right?’ rather than ‘is this within the rules?’.
Those in favour of a ‘new duty’ also said it would encourage firms to anticipate and evaluate harm at every level of business and every stage of the consumer journey, and to take better preventative action.
Andrew Bailey, the FCA's chief executive, said: "I'm pleased so many people shared their views with us as part of this process. Inevitably, there were a range of opinions about what would secure the right level of protection for consumers.
"Given their long-lasting impact, we now want to weigh-up possible changes, including whether reworking our principles of business is the right way forward. I will continue to push this forward as getting the right answer on this question is essential to the FCA delivering on its mission."
The FCA said it would continue to examine the options and outline next steps in the autumn.
imogen.tew@ft.com
