HM Treasury says it is up to FCA to evaluate duty of care

Maria Nikolova

A duty of care would impose an obligation on financial services companies to exercise reasonable skill and care in the provision of a service to consumers.

HM Treasury is reluctant to evaluate the merits of a proposed duty of care for the financial services industry in the UK. This becomes clear from a question/answer exchange between Labour MP Alex Sobel and Stephen Barclay of the Conservatives.

Alex Sobel has asked Mr Chancellor of the Exchequer, what discussions he has had with the Financial Conduct Authority on the introduction of the duty of care; and what the (a) process and (b) timescale is for introducing the Duty of Care.

Stephen Barclay’s written answer states:

“The government believes that the Financial Conduct Authority (FCA), as the UK’s independent conduct regulator for the financial services industry, is best placed to evaluate the merits of a duty of care for financial services providers. We therefore welcome the FCA’s commitment to publish a Discussion Paper on the subject, which the FCA plans to publish after the UK’s withdrawal from the EU”.

Let’s recall that the proposal for introducing a duty of care for the financial services industry in the UK has been circling around since the start of 2017. A duty of care would impose an obligation to exercise reasonable skill and care in the provision of a service. There are different opinions about the merits of introducing this obligation.

A number of respondents to an FCA consultation on this topic did not consider that a Duty of Care was necessary to help ensure that financial markets function well. These respondents argued that existing common and statute law already provide sufficient protections for consumers, and that bringing a case based on duty of case would translate into significant costs and would be time consuming.

However, a number of respondents either supported a Duty of Care or saw some merit in the proposal:

  • Some respondents stated that a Duty of Care would provide consumers with a legal right to take a case to court. This was supported by some comments that Principle 6 has not worked in practice or is too vague to provide meaningful protection.
  • Some respondents, including some firms, believed that a Duty of Care would improve the culture of financial services markets.
  • Some responses suggested that a Duty of Care would provide a clearer definition of responsibilities between consumers, intermediaries and firms. One firm said a Duty of Care might help shift the focus away from the FCA securing redress and place the emphasis back on the consumer-firm relationship.

Brexit will have a crucial role for any implementation of this duty, the FCA has noted. The UK’s decision to leave the EU is likely to create changes in the legislation which is at the basis of the FCA Handbook rules. The FCA is set to publish a Discussion Paper to explore the Duty of Care issue as part of a future Handbook Review, once the legislative position is clear.

The regulator recognises there are different opinions on the Duty of Care. The concept of a Duty of Care and fiduciary duty are sometimes used interchangeably in this debate, the FCA says. Although the Financial Services Consumer Panel (FSCP) proposes that the FCA should introduce a Duty of Care into its rules, the explanation for this view is based – in part – on concepts that are really part of a fiduciary duty. However, it is important to differentiate between the two. Whereas a Duty of Care imposes an obligation to exercise reasonable skill and care in the provision of a service. There are clearly different opinions about the merits of introducing this obligation. In contrast, a fiduciary duty requires (broadly) that the firm must not put personal interests above those of the client, must avoid conflicts of interest and must not profit from the firm’s position without the client’s knowledge.

Read this next

Retail FX

Banxso announces 8.7% interest rate on deposits in South Africa

“With Banxso, they can enjoy the benefits of both worlds – earning competitive interest and having the freedom to trade, all within the same platform.”

Industry News

FINRA to publish transaction details in U.S. Treasury securities

“Consistent with our longstanding practice, FINRA is introducing greater transparency in a calibrated and careful manner, benefiting liquidity and resilience in this critical market while also mitigating potential information leakage concerns.”

Institutional FX

OpenYield launches “cheap and easy” fixed income trading for brokers

“We’re on a mission to make bonds cheap and easy to trade, and are excited about the opportunity to build generational capital markets infrastructure.”

Digital Assets

Sumsub and Mercuryo publish a guide for VASPs: “Mastering Travel Rule Compliance”

“At Sumsub, we’ve concentrated our efforts on filling the gap in understanding the complexity of Travel Rule regulation and helping organizations find the best solution to stay safe and compliant while minimizing costs and avoiding potential risks of non-compliance. This guide we created with Mercuryo, our trusted partner, is the ultimate navigation tool all VASPs can consult.”

Digital Assets

Bitget Wallet Leads with Record Swap Volume & New Crypto Innovations

This week, Bitget Wallet achieved a milestone by surpassing Metamask with a record 388,757 Swap order transactions, securing the global lead. The significant 7-day trading volume, almost 68,000 more than its rival, underscores its liquidity and user trust. This robust activity signals Bitget Wallet’s prominent role and reliability in the dynamic crypto market.

Digital Assets

Embarking on a Digital Currency Journey

Imagine you’ve stumbled upon a treasure map, leading you to untold riches hidden in the vastness of the internet. Instead of gold coins and jewel-encrusted goblets, this treasure comes in the form of digital currencies, the modern-day loot coveted by many.

Reviews

Traders Union Experts Share The Trading Analyst Review For 2024

Navigating options trading in rapidly shifting markets poses a considerable challenge. This is where options trading alert services become invaluable. They aid traders in keeping abreast of evolving opportunities and market trends. In this assessment, Traders Union experts scrutinize The Trading Analyst alert service to ascertain its efficacy. 

Digital Assets

BlockDAG’s Presale Achieves $9.9M: Aiming For A 5000-Fold ROI As Cardano’s Price Rises And Fantom Launches Sonic

Explore Cardano’s surge, Sonic’s efficiency, and why BlockDAG’s growth makes it the top crypto choice. A deep dive into the future of blockchain investments.

Digital Assets

US, UK probe $20 billion Tether transfers tied to Russian exchange.

U.S. and UK authorities are investigating the movement of $20 billion in the USD-pegged stablecoin tether (USDT) through Moscow-based exchange Garantex.

<