Legal development

Thought for the Week: Regulating in the key of 'C': Conduct, Culture and the Consumer Duty

Thought for the Week: Regulating in the key of 'C': Conduct, Culture and the Consumer Duty

    In a recent speech, Emily Shepperd, COO and Executive Director of Authorisations at the FCA, said that "…strong, healthy cultures help to foster good conduct" which translates to "healthy, stable, and competitive markets and good outcomes for customers".

    In this Thought for the Week, we examine the regulator's aspirations to make far-reaching changes to the culture and conduct of firms in conjunction with its Consumer Duty campaign and predict where it will focus its immediate attention in an enforcement context. 

    Culture and Conduct

    The FCA is on a campaign to transform culture within firms. In her speech, Shepperd argues that firms that succeed with diversity and inclusion are more likely to create healthy, psychologically safe cultures, which foster better decision making and ultimately lead to improved outcomes for consumers. 

    In reality it is difficult to propel cultural change. The regulator cannot make rules to prescribe this. But it can use its tools to influence culture, including by combatting misconduct (which, in most instances, stems from a poor culture).

    Part of the FCA's approach to improving culture will involve targeting non-financial misconduct through the proposals outlined in its recent consultation relating to D&I (see our briefing here). 

    Consumer Duty

    The regulator is also seeking to accelerate cultural change through its enforcement of the new Consumer Duty, which pushes firms to ensure that achieving positive customer outcomes is at the heart of their business. 

    The FCA has already signalled that it intends to intervene in relation to certain products over the coming months. In particular:

    1. GAP insurance products

    In September 2023, the FCA identified that some Guaranteed Asset Protection (GAP) products were failing to provide fair value to customers. The FCA has seen examples where 70% of the value of the insurance premiums are being handed out to parties in the distribution chain and only 6% of the amount customers pay is being paid out in claims. The FCA issued an ultimatum – take immediate action to prove customers are getting a fair deal, or it will intervene. 

    2. Funeral Plans

    In its September 2023 'Dear CEO' letter, the FCA reported its concerns regarding the Funeral Plans sector. There are instances where funeral planning firms are not disclosing information fairly during sales processes to customers and are publishing misleading financial promotions. The regulator plans to test how funeral firms are implementing the Consumer Duty through a combination of data and mystery shopping. 


    The FCA is keen to strike the key of C: that good culture leads to good conduct, which leads to compliance with the Consumer Duty. However, in practice, and with limited resources, and a high compliance burden, firms may find themselves trying to juggle which 'C' they focus on. It is clear that positive cultural change won't be achievable overnight and will take sustained management and board focus over a period of years. As Andrew Bailey said (when CEO of the FCA) "Culture change in itself is a challenge, and we know it takes time. This is because culture comes from the past and is embedded in the legacy of a business. ... As a result, culture can be remarkably resilient in the face of attempts to change it".

    Authors: Adam Jamieson, Eleanor Robinson and Laura Bell 

    The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
    Readers should take legal advice before applying it to specific issues or transactions.


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