How do the Consumer Duty & SMCR tie in together? Know Your Compliance Limited already offer the UK’s leading SMCR Policy Toolkit with over 25 policies, checklists and tools for complying with the Senior Managers & Certification Regime (SMCR). However, the introduction of new regulatory rules and guidance from 31st July 2023 under The Consumer Duty Instrument 2022 (“the Duty”) add an additional conduct rule and more requirements for senior managers.
We have already updated our COCON and SMF templates within the toolkit to comply with the forthcoming rules. However, this article provides some guidance and information on which parts of the Duty apply to the SMCR and what the new conduct rule means.
What is the Consumer Duty?
The FCA have already published the Consumer Duty final rules and non-handbook guidance under PS22/9 and FG22/5 respectively. These publications set out what firms and Senior Managers are obligated to comply with in regards to retail customers. The Duty only applies to customers in retail financial markets and focuses on the standard of care and level of protection that firms should give such customers. Also included cross-cutting rules and four main outcomes that firms must comply with, alongside a new principle in the FCA’s Principles for Business (PRIN) module.
Consumer Duty Rules, Principles & Outcomes
Principle 12 will be added to the PRIN section of the Handbook from 31st July 2023 onwards. The new Principle states that a firm “must act to deliver good outcomes for retail customers”. In addition to this Principle, COCON will receive an additional conduct rule. Conduct Rule 6 states “You must act to deliver good outcomes for retail customers”. Both additions utilise the same wording and provide the overarching aim of the Duty. The focus is on good outcomes and protection for retail consumers, with the addition of section PRIN 2A to the Handbook providing the rules and guidance firms will be expected to adhere to.
Alongside Principle 12 and Conduct Rule 6, the Consumer Duty encompasses cross-cutting rules. These develop the FCA’s expectations for behaviour through three overarching requirements that explain how firms should act to deliver good outcomes and that apply across all areas of firm conduct. The rules also help to inform firms and enable them to interpret and understand the four outcomes.
The Consumer Duty & SMCR
With Conduct Rule 6 asking Senior Managers to ensure that they act to deliver good outcomes for retail customers, the Duty also puts a higher expectation on Senior Managers and those performing certified functions to focus on the protection and treatment of retail customers. The FCA state in the Duty cross-cutting rules that apply to Rule 6, that an employee must: –
• Act in good faith towards retail customers.
• Avoid causing foreseeable harm to retail customers.
• Enable and support retail customers to pursue their financial objectives.
As part of the FCA’s objectives to ensure that businesses comply with the Consumer Duty, firms’ should ensure that their board or equivalent governing body takes full responsibility for ensuring that the Duty is properly embedded within the firm, and senior managers are accountable for the outcomes their customers are experiencing. This should be done in line with their existing accountability under the Senior Managers and Certification Regime (SM&CR).
Consumer Duty & SMCR Templates
If you are just going through your FCA authorisation application or already have your policies and controls in place, Know Your Compliance Limited can help you to gain and maintain compliance with the regulations.
Our SMCR Template Toolkit is used by hundreds of FCA regulated firms to ensure compliance with the SMF, FIT and Skills Gap Analysis requirements. We have also updated the toolkit to cover the COCON Conduct Rule 6 training guidance and content relative to Principle 12.