The Financial Conduct Authority (FCA) is calling on firms to suggest rules which could be eliminated or simplified if they are already covered by the Consumer Duty.
The call comes as the regulator revealed rules governing financial services could be streamlined to reduce burdens on businesses, following an FCA review.
It is calling on industry to identify rules which could be removed or simplified if they overlap with the duty.
However its call for input cited key insurance sector regulations as some of the specific detailed rules may need to be maintained to ensure consistent approaches and outcomes.
Lower costs for firms
The regulator argued reducing complexity of the FCA’s rulebook could lower costs for firms, encourage innovation and help support the risk appetite needed to support growth, ultimately boosting international competitiveness and the economy over the long-term.
The FCA said it wanted to see where it can refine its retail conduct rules and guidance, though it also invited comments on wider rules and guidance.
“We particularly want to address potential areas of complexity, duplication, confusion, or over-prescription, which create regulatory costs with limited or no consumer benefit,” it said.
“We also want to include appropriate flexibility in our rules to be responsive to future changes and innovation.”
It specifically invited comments on issues including:
- which detailed rules or guidance could be simplified to rely on high-level rules, or have interactions with other rules which could be clarified
- how any steps to simplify rules and guidance affect the FCA’s statutory objectives
- the appropriate balance between high-level and more detailed rules
- the potential benefits and costs from simplifying FCA rules.
Citing the need to protect market competition, the FCA also noted that small firms and new entrants, in particular, benefit from a clear understanding of regulatory expectations to run and grow their businesses.
“We want to understand how different types of firms may be affected by changes to our approach, to avoid any damage to competition,” it said.
Prod and ICOBS rules
However, in its call for input the FCA also noted detailed rules can provide regulatory certainty and support standardisation.
Here it highlighted examples including the Product Governance Sourcebook (Prod) and Insurance Conduct of Business Sourcebook (ICOBS) where this approach was important.
Regarding Prod rules, it said: “There is a risk that the loss of the sector-specific rules may reduce consumer protections or could make it harder for firms to understand our expectations.
“In particular, if we removed the current PROD requirements in sectors with complex manufacturer-distributor chains, it may create further uncertainty.
“We may need to retain some of these requirements, or to amend the requirements in the Duty, if we looked to simplify these rules.”
While for ICOBS rules it added: “While we could modify or remove some ICOBS rules and seek to rely on the duty’s high-level requirements, the duty doesn’t prescribe a consistent approach for firms to follow.
“This could lead to inconsistent outcomes for consumers. The pros and cons of a shift towards relying on high-level requirements would, therefore, need to be carefully considered.”
Launching the review, FCA chief executive Nikhil Rathi (pictured) said: “We are firmly committed to playing our part in supporting economic growth.
“The Consumer Duty marked a major shift for firms and consumers by setting higher and clearer standards of consumer protection and requiring firms to put their customers’ needs first.
“We now want to seize the opportunity of the duty and the move to a clear outcomes-based approach to streamline our rulebook, lowering costs for businesses and supporting the competitiveness and growth of the economy.”