Conduct of business rules and consumer protection
Conduct of business rules and consumer protection tests how firms must treat customers throughout the product lifecycle. The exam focuses on the FCA Handbook, ICOBS, the Consumer Duty and complaints routes.
Core conduct rules
- ICOBS requires fair, clear and not misleading communications, adequate product disclosure and suitable advice where advice is given.
- The Consumer Duty requires firms to act to deliver good outcomes for retail customers across products, price and value, consumer understanding and consumer support.
- Treating Customers Fairly remains a cultural and supervisory expectation: customers must receive clear information, suitable products and fair treatment after the sale.
- Product governance requires manufacturers and distributors to define target markets and review products.
Disclosure, advice and claims
- Demands and needs statements help show why a product was selected; a recommendation must be suitable.
- Customers must be told about cancellation rights, complaints procedures and compensation arrangements.
- Complaints must be handled promptly and fairly; eligible complainants may refer to the Financial Ombudsman Service after the firm's final response or eight weeks.
Worked example
A firm sells travel insurance with a medical exclusion buried in a long policy summary. A customer with a heart condition buys it and later finds the condition is excluded. The firm has breached clear-disclosure expectations and likely the Consumer Duty's consumer understanding outcome. The customer may complain; if the firm does not resolve it, the Financial Ombudsman Service can consider what is fair and reasonable. The remedy may be to treat the policy as if the exclusion had been explained, depending on what the customer would have done.
Traps that cost marks
- Treating TCF as a slogan rather than a supervisory expectation.
- Assuming the Consumer Duty applies only to sales, not servicing and claims.
- Confusing the Financial Ombudsman Service with the Financial Services Compensation Scheme.
- Ignoring the eight-week complaint handling period.