The Scope of the New Consumer Duty | Resources
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The Scope of the New Consumer Duty


In this edition, Xcina Consulting reviews the background of the Duty, critical points for firms to consider, and the scope of the Duty.

Firms should note that the Duty is the most significant change to Retail (with wholesale implications) in 10 years.

The FCA regards the Consumer Duty as a shift to an outcomes-focused approach and an opportunity for competition, growth, and innovation. While the Duty is not yet formally in place, the regulator expects firms to be stepping up to support consumers in these challenging times to ensure good outcomes are achieved.

The Duty also brings responsibilities to boards and senior management for overseeing the firm’s implementation of the Duty, and the FCA is focused on ensuring this is managed well.

This heralds the most sweeping shift in a decade in the FCA’s expectations around the firm’s treatment of retail customers and will capture activity by retail and wholesale firms.


A few Key Highlights:

  • Final implementation deadlines are July 2023 for existing products and July 2024 for closed products.
  • Expanded rules and guidance around governance and senior management accountability.
  • New section setting out the FCA’s expectations concerning redress payments.
  • Rules and guidance covering the application of the Duty along the distribution chain have been clarified, and definitions tightened.
  • Existing PROD and COLL rules will be equivalent to the products and services and price and value outcomes, respectively.
  • Firms must notify other firms in the distribution chain that they think are causing customers harm and notify the FCA if another firm is not complying with the Duty.


Who is impacted?

Wholesale firms and firms in the distribution chain

The Duty will now not apply to the manufacture of a product which is only marketed and approved for distribution to non-retail customers if this is not provided to another firm as part of a distribution chain for a retail product or service.

The definition of nonretail financial products has been amended such that this will cover products where the marketing materials make it clear that the product is:

  • not intended for retail, and a firm takes all reasonable steps to prevent sales to retail; or
  • the product has a minimum investment or denomination of £50k.

The investment threshold has been decreased; however, the above conditions were initially cumulative and are now alternatives.  Where a wholesale market activity is within the scope of the Duty, this will apply to the extent that a firm is able to “determine or materially influence outcomes for retail customers”.

There is now additional guidance on what constitutes “material influence” intended to help firms without a direct relationship with clients to understand the scope of their obligations.  

The Duty will apply to firms that make decisions which directly impact or otherwise determine material aspects of one of the four outcomes.

The Duty would be unlikely to apply where a firm has a limited role, for example, operating within a framework determined by another firm. The FCA has helpfully clarified that a portfolio manager managing assets according to a mandate set by an independent professional client (e.g. the manager of part of the portfolio of a defined benefit pension scheme) may not be in scope. In contrast, a portfolio manager for an investment company with the ability to materially influence the design, branding or promotion of the product probably would be in scope.

The more remote a firm is from the retail client, the more limited its obligations are likely to be. The FCA stresses that firms’ obligations are to be interpreted proportionately relative to a firm’s actual ability to influence.

Pension Schemes

The FCA has amended the definition of “retail customer” to clarify that it includes beneficiaries of trust-based pension schemes, where an FCA-authorised firm provides services to an occupational pension scheme trustee. This is likely to impact many wholesale firms, bringing them within the scope of the Duty, notwithstanding other changes clarifying exemptions from the Duty (as described above).

Cross Border Application

The FCA’s position here is as per CP 21/36. The Duty will apply to FCA-regulated and TPR firms conducting regulated business with retail consumers in the UK unless a relevant rule or obligation has a wider territorial scope, in which case that wider scope will prevail.

As a UK firm will be within the scope of UK conduct and PROD rules when selling to non-UK customers/investors, this puts the latter within the scope of the Duty in this context. The FCA has followed scoping triggers in its sourcebooks to ensure that the perimeter for the Duty is the same as the perimeter for existing rules.

The FCA acknowledges that firms selling a fund manufactured overseas, or operating in a chain with an overseas distributor, will not be able to require the relevant overseas firm to comply with the Duty (as it will be out of scope). The FCA emphasises that firms are only expected to take reasonable steps to comply with their obligations under the Duty. There are limits to the information they can require or expect from overseas firms in the distribution chain.

For firms subject to PROD dealing with non-UK distributors or selling products manufactured overseas, compliance with these existing rules constitutes compliance with the products and services outcome, so minimal additional work should be required here once the Duty comes into effect.

Agent as Client

The FCA has confirmed that firms relying on the “agent as client” principle will need to “look through” to the end retail investor and assess whether they can determine or materially influence outcomes for them.

If they can, they must consider that end retail customer when developing their target market or assessing value, but the agent-as-client contract can be maintained for other FCA regulatory rules, for example, suitability.

Vulnerable Customers

Feedback suggested that many respondents were unclear about the FCA’s attempted distinction (if any) between vulnerability and protected characteristics. The final rules are amended to require firms to focus on customers’ needs in vulnerable circumstances and those with protected characteristics under the Equality Act 2010, acknowledging that these will often overlap.

In respect of the potential clash with the requirements of data protection legislation, the FCA confirms that firms must continue to comply with these and even cautions them to take extra care with sensitive special category data. Firms will not need to collect data about protected characteristics systematically. However, where data is already being collected, this should be used in outcomes testing where possible, though the FCA acknowledges that firms will not always be able to use it in that way.

In practice, firms may need to focus on having appropriate systems to capture information about customer vulnerabilities and protected characteristics if these are provided by a customer rather than being required to actively seek such information themselves.

The FCA suggests that additional insight into outcomes for customers with protected characteristics or vulnerabilities could be obtained by working with consumer organisations and charities, using focus groups and auditing specific customer journeys.

Redress and Remediation

New rules and guidance bolster DISP by requiring a firm to proactively consider remedial action where it becomes aware that customers have suffered foreseeable harm as a result of its action or inaction.

Firms will be required to investigate and promptly assess whether harm has occurred, what redress or remedial action might be appropriate, and promptly redress if a redress offer is accepted.

The FCA lists factors as relevant to assessing any foreseeable harm, including FCA and FOS guidance and FOS decisions concerning complaints with a similar fact pattern or outcomes. This underlines the importance of the FCA, FOS and industry working together to ensure that the Duty is interpreted consistently.

Where a firm without a direct retail client relationship concludes that it has caused retail customers foreseeable harm, it must take all reasonable steps to notify them of this and offer redress or other appropriate remediation.


Conclusion on the Scope

As discussed, the new Consumer Duty applies to a wide range of areas and firms.  For further information and commentary on Consumer Duty, please visit the regulatory calendar at Also, be sure to look out for the next article in the series.

Should you require any assistance on Consumer Duty or other regulatory issues, don’t hesitate to contact Xcina Consulting.


Helpful Resources on Consumer Duty

FCA PS 22/9: New Consumer Duty

FCA FG22/5: Final Non-Handbook Guidance for firms on the Consumer Duty

FCA PROD 3 – Product Governance – What you need to know

FCA COLL 6.6.20 – Assessment of Value

FCA DP18/5: Discussion Paper on a Duty of Care and potential alternative approaches




We’d love to hear from you

To discuss how the areas highlighted in this post, or any other aspect of risk management, information governance or compliance impact your business, speak with our team, tell us what matters to you and find out how we can help you navigate complex issues to help you deliver long term value.

If you have any questions or comments, or if there’s anything you would like to see covered, please get in touch by emailing Xcina Consulting at We’d love to hear from you.

Neil Bolton

Regulatory Consultant

Speak to me directly by Email, or
Telephone: +44 (020) 3745 7842

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