Britain’s financial watchdog on Friday proposed a tougher “duty” on companies to protect consumers from scams and mis-selling, saying it will drive a shift in culture and behaviour.
Retail investors in Britain have suffered cases of mis-sold financial products, including endowment mortgages, pensions and payment protection insurance, dating back decades.
The Financial Conduct Authority said the firms it regulates would have to follow the new duty or face enforcement action.
The watchdog is proposing that a firm would explicitly have to act in the best interest of retail customers when selling products or services, or act to deliver good outcomes, a wording that will be refined in a public consultation that closes in July.
“Our proposals extend to firms that are involved in the manufacture or supply of products and services to retail clients, even if they do not have a direct relationship with the end customer,” the FCA said in a statement.
Firms would have to demonstrate they took “all reasonable steps” to avoid foreseeable harm to their customers, an undertaking that would be backed by a suite of rules and guidance that set more detailed expectations, the FCA said.
Any new rules would be drawn up by July 2022.
The watchdog said it was also consulting on the potential benefits of attaching a private right of action to the new duty.