The Financial Conduct Authority is warming to the idea of a regulatory duty of care in the financial services industry and is approaching the issue with a "spirit of open discussion", a spokesperson has said.
Speaking at a symposium hosted by the Transparency Task Force in London yesterday (14 November), Sarah McKenzie, head of consumer strategy and policy at the FCA, said the issue of duty of care was not a "binary subject" and the regulator was "genuinely in listen mode" for feedback.
Earlier this year the FCA published a discussion paper (DP18/5) to explore whether a legal duty of care was needed in the industry.
The paper defined this new duty as a positive duty to promote a customer's best interests and as a fiduciary duty to not cause harm to a customer's financial interests or create or exacerbate conflicts of interest.
Ms McKenzie said it was still too early to determine the next steps in the process, with the broad debate in response to the discussion paper not providing a clear consensus as to the form a duty of care could take.
Ms McKenzie said whilst some stakeholders had demonstrated a "strong mood for the need for change to better protect customers", others had shared concerns that adding another level of regulatory complexity would complicate matters further and risk creating unnecessary cost.
In its formal response to the FCA discussion paper, the Transparency Task Force had suggested the current regulatory framework failed to provide "adequate protection" for consumers.
The body said a firm’s legal duty of care to customers would help achieve better outcomes and suggested an FCA initiative of this nature had the potential to initiate "widespread positive reform of financial regulation in the UK".
A Transparency Task Force statement said: "We believe the FCA should now move forward with introducing a new duty - we propose that the new duty should be a fiduciary duty as that would provide the consumer with the greatest protection from a sector that has been predisposed to malpractice and a profit before principle mindset for decades."
Earlier this week adviser trade body the Personal Investment Management & Financial Advice Association (Pimfa) criticised the proposals for being confusing and representing a "one size fits all" approach to banks and others in the sector.
Pimfa also had practical concerns, including whether a "duty of care" would affect firms' ability to obtain professional indemnity insurance at an economic cost and whether more complaints would be found against firms by the Financial Ombudsman Service because of the additional obligation.
rachel.addison@ft.com
