The IRSG UK Regulation Committee submitted its response to the FCA CP26/23 ‘Consumer Duty: scope and proportionality’. We support the FCA’s intention to address concerns about applying the Duty to firms primarily engaged in wholesale activity. Some firms expect the changes to have little effect on how they interpret and apply the Duty, given that the FCA’s expectations remain largely unchanged. The FCA could therefore do more to provide certainty and demonstrably reduce compliance burdens for firms that conduct predominantly wholesale business
The FCA’s stated aim was to ‘make the Duty more precise, proportionate and workable in wholesale markets’. Subject to a firm’s sector, business model and customer base, there are some enhancements and improvements, for example, the revisions to the territorial scope and the exclusions in the definition of retail market business. However, introducing new concepts, such as co-manufacturing, could add unintended complexity and uncertainty, reducing the potential benefits. The introduction of new concepts is likely to require firms to re-scope their entire retail customer business, contrary to the FCA’s intention.
The industry would benefit from clarity on whether the revised rules are intended to apply retrospectively to existing products and services. The FCA must be explicit about its intended approach and, if the rules will apply retrospectively, work with firms to identify an appropriate time period for them to review their retail customer business. The FCA should confirm, before publishing the final rules, whether they will take effect immediately in Q1 2027 or after an implementation period.
Addressing the points outlined in the IRSG’s consultation response would clarify the scope and proportionate application of the Consumer Duty, strengthen the distinction between retail and wholesale activity, and reduce unnecessary compliance costs and complexity.
