The regulator has published a 37-page discussion paper today (17 July) on the prospect of a duty of care, following the publication of its mission in 2016 when it first raised the idea.
Since then, the FCA said the idea has had a mixed response from the financial services sector so the regulator will now consult on the proposal to get a better idea of whether it should go ahead with it.
The FCA's paper stated: "Some stakeholders have raised concerns that our current regulatory framework does not provide adequate protection for consumers. They have called for the introduction of a 'duty of care' on firms when dealing with consumers.
"It has been suggested by some that the extent and longstanding nature of consumer detriment indicates that cultural change is required within firms and the market as a whole. They consider that current regulation has not yet delivered the change required, and that a duty of care would do so."
But the FCA has also said some in the industry have disagreed with this idea, saying existing FCA rules around treating customers fairly, combined with the law and the senior managers' regime, collectively already do the job of a duty of care requirement.
These people also suggested the definition of what would constitute a reasonable duty of care could be difficult to achieve.
The FCA said it could introduce a duty of care by extending the client's best interests rule, which currently only covers non-regulated activity, to cover all regulated activities.
As an example of how this would work in practice, the FCA stated it could change its principles for businesses, so principle nine, which currently states a firm must take reasonable care to ensure the suitability of its advice for any customer who is entitled to rely upon its judgment, would require firms to act in the best interests of customers when providing advice.
Among the questions the FCA asked is how a duty of care would impact the redress system, including the Financial Ombudsman Service.
For example, the regulator has asked whether such a duty would lead to consumers relying on redress more or less.
The FCA has said the legal and medical professions already have similar duties, but it has stressed that any proposed solution must be suitable for the financial services sector.
The watchdog stated: "We are keen to understand further what benefits additional duties for firms currently provide in other sectors or internationally, and whether these deliver outcomes in those regulatory regimes that the current UK regime for financial services does not."
The FCA's look at duty of care comes as a number of cases are going through the legal system that deal with the issue of Sipp provider responsibility.
A spokesman for the FCA spoke at a case against Carey Pensions in March and is due to present at the Berkeley Burke judicial review in the autumn.
The watchdog is arguing acquiring the assets in a Sipp forms part of operating the Sipp.
As such, under section 22 of the Financial Services and Markets Act 2000 establishing and operating a Sipp as well as buying and selling securities are regulated activities, therefore Principles two and six apply.
This means Sipp operators must conduct their business with “skill, care and diligence” (Principle two) and “pay due regard to the interests of its customers and treat them fairly” (Principle six).
But the courts are still to decide whether execution-only agreements are binding and effectively relief providers of these regulatory duties.
Scott Gallacher, director of Rowley Turton, said: "I don't dispute that doing this is a good thing but it seems somewhat unnecessary. We are part of the PFS so we already have a code of ethics anyway."
damian.fantato@ft.com
