On 29 April 2021, the Financial Services Act 2021 received royal assent. The Act is a milestone in implementing the UK Government’s wider Future Regulatory Framework initiative and represents the first major step towards HM Government’s objective of maintaining the competitive position of the UK financial services industry whilst capitalising on new opportunities following the end of the Brexit transition period.
This is the first significant piece of UK primary legislation in the financial services sector following the end of the Brexit transition period; it introduces wide-ranging reforms to the current UK regulatory regime which include significant amendments to the Financial Services and Markets Act 2000 and various other ‘onshored’ EU financial services regulation. Many of these provisions are designed to recalibrate the UK regulatory architecture towards a more regulator-led approach and to correct various functional issues with rules introduced under former EU regimes.
For more a detailed overview of the Act and its substantive reforms, please see our briefing.
Our Financial Services Regulatory colleagues have published a blog post considering the latest developments in the possible introduction of a new “duty of care” owed by authorised persons to consumers in carrying out regulated activities under FSMA.
In particular, the article considers the legislative and regulatory developments since the FCA first published a Feedback Statement in 2019, summarising responses to its July 2018 Discussion Paper on the proposed introduction of a “duty of care”. It also looks at the timetable set out at section 29 of the Financial Services Act 2021, which requires the FCA to carry out a further consultation about whether it should make general rules providing that authorised persons owe a “duty of care” to consumers.
The new FCA consultation is expected to be published later this month, although it seems unlikely that this will suggest a new statutory duty of care.
For a more detailed analysis, please see our FSR Notes blog post.
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.