FCA's Control Over the Wholesale Trading Sector Discussed by LMA
The Financial Conduct Authority (FCA) is currently in the midst of an ongoing consultation regarding the alignment of its Consumer Duty with the Financial Ombudsman Service (FOS) eligibility criteria. This move, supported by the Lloyd's Market Association (LMA), is seen as a sensible approach that mirrors the LMA's viewpoint, although the LMA advocates for a simplification in the definition of "consumer" to enhance clarity and implementation.
In a notable development, Nikhil Rathi, the head of the FCA, has pledged to be clearer about jurisdictions where the Consumer Duty applies. This pledge aims to facilitate the Lloyd’s market in serving international clients more effectively. The LMA hopes this commitment will soon be formalized into clear policy.
However, the international scope of these rules for the Lloyd’s market has been a notable omission from formal FCA consultations so far. While the issue was only discussed rather than formally consulted on, there are positive signals from FCA leadership regarding this matter.
The LMA, for its part, has expressed disappointment that the international scope of rules was not part of the formal consultation. They hope that this can be turned into formal policy as soon as possible.
In addition to these developments, the FCA, the Financial Ombudsman Service, and HM Treasury are reviewing whether the Ombudsman’s existing rules and powers remain fit for purpose amid fast-changing market and social conditions, indicating ongoing modernization efforts. There are also government considerations to give the FCA greater authority over ombudsman decisions, including possible mechanisms for financial firms to appeal Ombudsman rulings, which could affect consumer redress processes.
To support the implementation of the FCA Consumer Duty, the LMA has published a guidance document and established a Consumer Duty Working Group to support Managing Agencies in the Lloyd's market. The LMA also supports the publication of the FCA's non-financial misconduct survey.
The LMA believes further improvements could be made to the wider proposals without increasing the risk to consumers. They encourage the FCA to make the definition of consumer much simpler, which they believe will enhance clarity and implementation.
In summary, the FCA is actively working to align Consumer Duty with Ombudsman eligibility, with positive engagement from market associations like the LMA, while clarifications on international application for the Lloyd’s market are expected soon but have not yet been formalized. Modernization of the ombudsman framework and potential changes in FCA authority over complaints are also in progress.
- In light of the ongoing modernization efforts, the LMA advocates for the simplification of specialty insurance regulations related to the definition of "consumer" to ensure clarity and smooth implementation of the FCA's Consumer Duty.
- Acknowledging the need for clarity, Nikhil Rathi, the head of the FCA, has pledged to provide more explanation about the international events and finance implications that fall under the Consumer Duty, aiming to facilitate the effective servicing of international clients in the Lloyd’s market.
