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FCA Updates: September 2023
As we leave summer behind and autumn rolls in, we usually expect a flurry of action from the FCA. To help you keep up we’re going to bring you a series of short updates.
Application of the Consumer Duty
We recently brought you an article Empowering Consumers: The FCA's commitment to executing the Consumer Duty highlighting the action the FCA has taken following a review of the cash savings market. They identified that savings rates offered by some Banks and Building Societies had not risen as quickly as the base rate and thus consumers are receiving poor value. What really stood out to us was the fact the FCA required those firms to immediately provide copies of their Fair Value Assessments, to be reviewed by the FCA and action taken where they believe fair value is not being provided.
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In our work we are also seeing the FCA consistently refer back to the Duty, asking for copies of product reviews and value assessments in every information request we have seen since the Consumer Duty came into force. This is even the case where the request has nothing to do with the value of the product.
We therefore encourage firms to re-check their Fair Value Assessments and other Consumer Duty documentation to ensure they stand up to scrutiny.
Remuneration: Ratio between fixed and variable components of total remuneration ('bonus cap')
On 23 September 2022, the former Chancellor announced the Government’s intention to remove the bonus cap applying to Banks, Building Societies and PRA designated investment firms. The aim being to allow firms to adjust costs and absorb losses.
The bonus cap does not limit total remuneration, but limits the proportion of remuneration that can be adjusted by risk and performance measures. This is achieved through the core elements of the variable remuneration framework, including:
linking payment of awards to risk-adjusted performance
payments in instruments
deferral
application of risk adjustment - including the use of malus and clawback.
The FCA consulted on the removal of the cap between December 2022 and March 2023 and had intended to release their feedback and policy statement by now, however this has been slightly delayed. Firms to which the rules apply should watch for an update.
New Regulatory Framework for Firm’s Approving Financial Adverts
Firms approving financial marketing for unregulated firms will have to demonstrate they have the necessary skills and expertise to approve adverts. Those signing them off must understand the product, to ensure the promotion is accurate and fairly balances risk and reward.
Previously, any firm authorised by the FCA could approve promotions on behalf of firms not regulated by the FCA. The FCA have identified this has caused harm, with firms approving adverts for products they don’t understand, as well as adverts that are unclear, unfair or misleading.
Firms will need to apply to the FCA between 6 November 2023 and 6 February 2024 to continue approving adverts ahead of the new rules coming into force on 7 February. Firms who have submitted an application can continue to approve adverts after this window until they receive a decision on their application.
Firms approving financial promotions will also be required to report regularly on what they sign off and on any concerning adverts they cancel approval for, helping the FCA to move faster to crack down on rogue adverts.
Account Closures due to Political Views
Those following the news can’t have missed the furore around the closure of Nigel Farage’s bank account, with claims that he has been ‘de-banked’ due to his political views. The FCA has understandably been investigating the claims and has released their preliminary findings here.
Now is the time to review Consumer Duty documentation. To help, our popular range of Consumer Duty resources are designed to help firms embed the Duty. We offer product review templates, free webinars, plans and process templates.
