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FCA responds to the independent panels’ annual reports

Link(s):FCA response to the independent panels’ annual reports | FCA

Context

FCA consult on their work with 6 independent statutory panels. These statutory panels are integral to developing FCA’s policies and other regulatory decisions. Statutory panels represent the interests of consumers and practitioners, including smaller regulated firms and financial market participants.

Key points to note and next actions

Professional Indemnity Insurance (PII):

The Consumer Panel and Smaller Business Practitioner Panel raised concerns around inadequate and expensive PII cover which means smaller businesses either cannot get PII at all or cannot get it at an acceptable price.  These businesses may also be facing challenges to their ability to continue trading, which in turn has an impact on consumer choice. FCA responded that they do not currently consider a regulatory intervention appropriate, due to the nature of the supply-side issues affecting the PII market.

The FCA do not currently plan to conduct further discovery or proactive work, although it will continue to monitor the situation.

Environmental Social & Governance (ESG) & Sustainability Disclosure Requirements (SDR):

The panel’s current concerns are;

  • The risks from inappropriate disclosure and the greenwashing of products.
  • There is a need to bring the activities of ESG ratings agencies within the regulatory perimeter as a lack of standardisation in this area is leading to a multiplicity of metrics and measures, not all of which are geared towards good ESG outcomes.
  • Larger firms should take the lead in driving the ESG governance work, to enable best practice examples to feed through to smaller businesses.

FCA are grateful for the ongoing support to deliver the ESG programme, and the transition to a more sustainable future is a crucial turning point of the ESG programme. November 2022, FCA announced the formation of an industry group to develop a voluntary Code of Conduct for ESG data and ratings providers. The final Code was published in December 2023. FCA expect this will help to encourage the development of consistent global standards in what is currently an unregulated environment.

Consumer Duty:

The Practitioner Panel raised concerns on the following:    

The potential for retrospective application of the Duty by the Financial Ombudsman Service (Ombudsman Service). Beyond implementation of the Duty, further dialogue is needed between industry and the regulator about the medium and longer-term strategy for shaping the market and making the UK more competitive. FCA and Financial Ombudsman Service are clear that the Duty doesn’t apply retrospectively. FCA are working on the basis of firms’ conduct and judge against the rules and standards that prevailed at the time.

The FCA welcome further engagement where further dialogue would be helpful on how FCA should develop the long-term strategy.