On 29 October Lord Sharkey introduced a Private Members’ Bill into the House of Lords, which proposed amending the Financial Services and Markets Act 2000 (“FSMA”) to empower the FCA to introduce a duty of care owed by authorised persons to consumers in carrying out regulated activities under FSMA (the “Bill”).
The Bill proposed that a duty of care be defined as an obligation to exercise reasonable care and skill when providing a product or a service. Whether or not this statutory duty would provide a private cause of action for customers to pursue claims against financial institutions would depend on how the duty was introduced by the FCA (if the proposed amendments to FSMA were made). This is because the FCA determines which rules, if breached, are actionable by a “private person” under section 138D FSMA. For example, there is currently no right of action for breach of the FCA’s Principles for Business, whereas breach of certain rules in the Conduct of Business Sourcebook may be actionable under section 138D FSMA. Accordingly, the effect of the proposed Bill on any future civil liability risks for financial institutions would be dependent on the position adopted by the FCA. In this regard, it is noteworthy that most respondents to the FCA’s previous Discussion Paper (18/5) did not support a new statutory duty of care (see blog post for further details).
Our Financial Services and Regulatory colleagues have considered and commented on the proposed Bill in their recent FSR blog post.