The FCA consults on its work with six independent statutory panels, which are integral to developing FCA policies and other regulatory decisions. Statutory panels represent the interests of consumers and practitioners, including smaller regulated firms and financial market participants. In responding to the annual reports of these six panels, the FCA has addressed some general themes.
Professional Indemnity Insurance (PII)
The Consumer Panel and Smaller Business Practitioner Panel raised concerns around inadequate and expensive PII cover, which means smaller businesses either cannot get PII at all or cannot get it at an acceptable price. These businesses may also be facing challenges to their ability to continue trading, which in turn has an impact on consumer choice. The FCA responded that it does not currently consider a regulatory intervention appropriate, due to the nature of the supply-side issues affecting the PII market.
The FCA does not currently plan to conduct further discovery or proactive work, although it will continue to monitor the situation.
Environmental Social & Governance (ESG) & Sustainability Disclosure Requirements (SDR)
The panels’ current concerns are:
- The risks from inappropriate disclosure and the greenwashing of products.
- There is a need to bring the activities of ESG ratings agencies within the regulatory perimeter as a lack of standardisation in this area is leading to a multiplicity of metrics and measures, not all of which are geared towards good ESG outcomes.
- Larger firms should take the lead in driving the ESG governance work, to enable best practice examples to feed through to smaller businesses.
The FCA is grateful for the ongoing support to deliver the ESG programme, and the transition to a more sustainable future is a crucial turning point of the ESG programme. In November 2022, the FCA announced the formation of an industry group to develop a voluntary Code of Conduct for ESG data and ratings providers. The final Code was published in December 2023. The FCA expects this will help to encourage the development of consistent global standards in what is currently an unregulated environment.
The Practitioner Panel raised concerns on the potential for retrospective application of the Duty by the Financial Ombudsman Service (FOS). The FCA and FOS are clear that the Duty doesn’t apply retrospectively, and the FCA is working on the basis of firms’ conduct and will judge against the rules and standards that prevailed at the time.
The FCA welcomes further engagement where further dialogue would be helpful on how it should develop the long-term strategy.