All FCA regulated dealers must prepare for their Consumer Duty Annual Board Report
July 31st is approaching rapidly, and with it comes the critical need to ensure timely compliance with the first Consumer Duty Annual Board reporting deadline.
The FCA has repeatedly reminded firms that complying with Consumer Duty and the Annual Board Report is "not a tick box" or "once and done" exercise. Firms must be able to provide evidence in their annual report that they’re continuously learning and improving outcomes for customers.
All in-scope firms (including FCA-regulated dealers) must demonstrate, through an Annual Board Report, why or how they think they comply with Principle 12 (deliver good outcomes for retail customers) and PRIN 2A of the FCA Handbook. The report will be used by the FCA to assess and evidence how firms have provided good outcomes for consumers under the Duty. The FCA has advised that it may ask firms for a copy of its Board report.
Board reporting requirements
To comply with the requirements, each firm must provide a report to its governing body (typically its board of directors) setting out the results it has collated over the year in monitoring the outcomes retail customers are experiencing from its products and services.
The FCA’s four outcomes and the associated supporting evidence should be reflected in the report:
- Whether customers are being sold products that meet their needs
- Whether the products being purchased provide fair value
- Whether customers are being equipped with the correct information to make informed decisions
- Whether customers are receiving the support they need
The report should explain any risks arising that would prevent the firm from complying with the Duty and whether any remedial actions are required. The report should include a focus on vulnerable customers.
The firm’s appointed Board Consumer Duty Champion must then:
- Review and approve the firm's report on the outcomes being received by retail customers.
- Confirm whether it is satisfied that the firm is complying with its obligations under Principle 12 and PRIN 2A; and
- Assess whether the firm's future business strategy is consistent with its obligations under Principle 12 and PRIN 2A.
What might the board report look like
The FCA has not provided a template board report, so it’s up to firms to prepare a report proportionate to the risk they pose to customers and the market, but a one-pager is unlikely to be sufficient! However, the FCA has given a steer on what it will expect to see in the report namely: an Executive summary; overview of any outcome testing that has taken place, a focus on vulnerable customers and future strategy.
Our best guidance is to work with your compliance support to ensure you are on track and to put its importance in focus.
