The FCA has highlighted that this is key conduct risk for firms and hence key risk firms run, but not having a product governance review process.
What is the Risk?
Products – developed or sold, through poor design or incorrect identification of target market, causes customer detriment.
The Financial Services and Markets Act 2000 (FSMA) sets out the FCA’s objectives. The over-riding strategic objective is to ensure that the markets it regulates function well. To advance this strategic objective, the FCA has three operational objectives, to:
Protect consumers ('the consumer protection objective') To secure an appropriate degree of protection for consumers.
Protect financial markets ('the integrity objective') To protect and enhance the integrity of the UK financial system.
Promote competition ('the competition objective') To promote effective competition in the interests of consumers.
The FCA has rule-making, investigative and enforcement powers that it uses to protect and regulate the financial services industry. The FCA’s wide-ranging powers include:
overseeing the design of financial products
banning products immediately for up to a year while it considers a permanent ban, and
forcing firms to withdraw or change misleading promotions with immediate effect.
The FCA regulates firms and financial advisers so that markets and financial systems remain sound, stable and resilient. The FCA encourages transparent pricing that is easy for everyone to understand and aims to help firms put the interests of their customers and the integrity of the market at the core of what they do.
Underlining the FCA’s regulations are the following three broad outcomes that it seeks:
Consumers get financial services and products that meet their needs from firms they can trust.
Firms compete effectively, with the interests of their customers and the integrity of the market at the heart of how they run their business
Markets and financial systems are sound, stable and resilient with transparent pricing information.
Once established, a firm’s governance process will be responsible for ensuring the relevant risks and issues are identified, acted upon and escalated if required. A robust escalation process must be established to ensure that the right committee is aware of and accountable for resolving issues of significance.
(FCA) All firms need to produce some form of MI to help manage their business, identify key risks, monitor the quality of advice given and ensure that the fair treatment of customers is evident throughout the whole customer experience – not individual elements of it.
For further information and a paper on Product Governance please get in touch.