Authors: Jenny Stainsby, Jon Ford and Cheryl Jones

The FCA has published its Feedback Statement on ‘A duty of care and potential alternative approaches’ (FS19/2). This contains a summary of responses to its Discussion Paper on this subject which was published in July 2018 (DP18/5). For more information on the Discussion Paper, see our briefing here.

In the Feedback Statement, the FCA does not put forward any specific options for change but confirms that the “quality of responses received have given us a strong foundation on which to advance our consideration of the issues”.

So where does this take us and what can we expect next?


A New Duty of Care

In the Feedback Statement, the FCA reports that most respondents considered that the level of harm to consumers was high and changes were needed to better protect them. However, most respondents – from both the industry and some consumer groups – did not support a new statutory duty of care.

The reasons given include:

  • difficulties in being able to consistently apply a single duty to the huge variety of firm/consumer relationships in financial services;
  • legal uncertainty and duplication of existing obligations, creating legal complexity and confusion;
  • loss of regulatory agility;
  • cost, delay and stress of litigation for consumers; and
  • whether an actionable statutory duty would have any greater deterrent effect than the current regulatory regime, particularly for firms which are already non-compliant

Use of the existing regulatory framework

Most respondents felt the FCA should consider changes to the way it uses the existing regulatory framework, with calls for the FCA to:

  • apply its Principles more broadly by acting more readily, particularly in its supervisory function where misconduct which results in poor consumer outcomes may be in breach of a Principle, even if not of a detailed rule;
  • be more transparent about what the FCA’s standards for good customer treatment are and how it can act to secure them; and
  • drive and sustain the debate about culture change in financial services firms to ensure real change to consumer outcomes.


From the feedback, the FCA has identified the options that are, alone or in combination, most likely to deliver a higher degree of consumer protection and will be the FCA’s primary focus going forward. These are:

  • reviewing how the FCA applies the current regulatory framework – particularly the Principles and how they communicate with firms about this
  • new/revised Principles to strengthen and clarify firms’ duties to consumers, including consideration of the potential merits and unintended consequences of a potential private right of action for Principles breaches

The feedback that “words alone would not be enough” suggests that these options go hand-in-hand, at least to the extent that any changes to the Principles must be closely linked to how the FCA applies the regulatory framework.

The FCA will publish a further paper in the autumn of 2019 seeking detailed views on specific options for change.


The FCA has recognised that these issues are complex. It notes that a key part of its consideration will be understanding the different forms of consumer harm and how any changes may address them. Such a consideration will also include how existing protections might already address some of the perceived gaps in consumer protection.

We agree that this is a critical step: it is difficult to assess the right response on a theoretical basis, and some examples should help test the likely effectiveness of potential changes. It is also, as the FCA notes, unlikely that there will be a “one-size-fits-all” solution.

With regard to the continuing consideration of whether (existing or revised) Principles should be actionable, it is not clear that the position has changed since this was considered (and rejected) by the FSA in its Consultation Paper 13 of 1998 and further considered by the Law Commission’s 2014 report on Fiduciary Duties of Investment Intermediaries.

The FSA’s rationale for not making the Principles actionable would still appear to stand today:

  • The Principles were meant ‘as a statement of regulatory expectations’, and they were not meant to provide legal rights.
  • Civil litigation based only on the Principles might make the interpretation of Principles inconsistent with other FCA rules. By making sure that the FCA is involved in the enforcement of the Principles, the consistency of the whole regulatory regime can be preserved.
  • Consumer protection could be achieved by using section 138D FSMA in the context of more specific rules.

The Law Commission made some additional points, notably pointing out that the ability to seek redress would not necessarily prevent misconduct in the first place. This comes back to the important distinction between reducing harm in the first place and methods to seek redress for harm done.