Twelve Days of Consumer Duty #12: dealing with out-of-scope firms

We have reached the end of our Twelve Days of Consumer Duty exploring key questions midway through firms’ implementation journeys.  

Our final question

“What do I do if there is an out of scope firm in my distribution chain and they won’t give me any of the information I need?”

The answer

The FCA says that it expects you “to do what is reasonable”, having regard to your role in the distribution chain, to obtain information from such firms.

It’s likely that the FCA will have higher expectations on information sharing where the distribution chain includes vertically integrated firms. In theory it ought to be easier to get information from say an overseas manufacturer, where they are part of your group. However, overseas firms may not be legally permitted to make certain disclosures to you.  This in turn may be relevant to what it is “reasonable” for you to do in that circumstance.

If you’re working with an unregulated firm, then the FCA’s guidance is that you should “consider whether including an unregulated entity in the distribution chain leads to too great a risk of poor outcomes”.  And you should “consider whether it is necessary to introduce additional steps to guard against risks materialising”, for example further due diligence or monitoring.

And where you’re a UK distributor of a non-UK product or service to UK retail customers, the FCA’s expectation is that you should take “all reasonable steps to understand the product or service, the target market it would serve and the value it provides so that it will be distributed appropriately”.

Ultimately the question for you is whether you feel comfortable that you can comply with the Consumer Duty on the basis of the information you are able to obtain.

Want more?

Thank you for following this series – we hope you have found it useful.

Visit our webpage for all our insights on the Consumer Duty including our entire Twelve Days series, webinar recordings, publications, podcasts and other blog posts from us, or reach out to us to continue the conversation.

Wishing you a very merry Christmas!