Acknowledging "longstanding concerns from firms about the length and complexity of [its] rules and guidance", the UK's FCA published a call for input in July 2024. It invited firms to comment on whether some FCA rules may be unnecessary following introduction of the outcomes-based Consumer Duty. It has now outlined its proposed approach in a Feedback Statement, explaining that its aims are to achieve more flexibility, more predictability, and improved efficiency. The approach includes:
Reviewing the foundations:
- Examining whether rules should apply to UK based firms providing products or services to customers outside the UK.
- Reviewing consistency in definitions used in the Handbook (e.g. the definition of a "retail customer"), aiming to reduce compliance costs.
Future-proofing disclosure:
- Potentially streamlining prescriptive disclosure rules in mortgage, consumer credit and retail banking sectors, to compliment existing work on retail disclosure in the funds sector.
Reducing the administrative burden
- Engaging with stakeholders to clarify how rules relating to the product governance and fair value outcomes of the Consumer Duty interact with other Handbook rules.
- Engaging with firms to consider how the FCA can provide more certainty on its expectations for firms in retail distribution chains, particularly those that do not interact directly with retail customers.
Streamlining Requirements
- Providing tailored guidance for small firms.
- Retiring over 100 pages of outdated guidance, and reviewing and (subject to exceptions) withdrawing all Dear CEO letters and portfolio letters pre-dating the FCA's 2022-2025 strategy.
An in-person summit is planned for summer 2025 to discuss proposed changes and the FCA will publish a comprehensive statement outlining the full programme of work in September 2025.
Given growing international competition, the FCA's shift away from a more rule-based or prescriptive regulatory framework and towards an outcomes-focused approach is unsurprising. Smaller firms are cautiously optimistic but will remain watchful as implementation unfolds.
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