Evolution and examples of retail conduct risk
Produced in partnership with Rosanna Bryant of Addleshaw Goddard
Evolution and examples of retail conduct risk

The following Financial Services guidance note Produced in partnership with Rosanna Bryant of Addleshaw Goddard provides comprehensive and up to date legal information covering:

  • Evolution and examples of retail conduct risk
  • Background to the concept of conduct risk
  • What does conduct risk mean?
  • Drivers of conduct risk
  • How has the FCA's approach to conduct risk changed?
  • Examples of conduct risk which require particular supervisory focus

Background to the concept of conduct risk

Conduct risk has been a corner stone of the Financial Conduct Authority's (FCA) regulatory approach since it took over supervision of consumer protection from the Financial Services Authority (FSA). Central conduct risk is the FCA's focus on inherent factors that produce poor choices and outcomes in financial markets.

The FCA began the rhetoric of conduct risk in its Risk Outlook 2013 and has developed its thinking since then. With the FCA's strategic objective being to ensure financial markets function well, the FCA have stated that this means:

  1. consumers get financial services and products that meet their needs from firms they can trust

  2. markets and financial systems are sound, stable and resilient with transparent pricing information

  3. firms compete effectively, with the interests of their customers and the integrity of markets at the heart of how they run their businesses

Understanding conduct risk is central to these objectives.

This regulatory concept of conduct risk has gone hand-in-hand with a new supervisory approach from the FCA based on two main features of regulatory approach, outcomes rather than process based, and a regulator who is seeking to be proactive and intervene early, before consumer interests are harmed.

For more information about the FCA’s supervisory approach, see Practice Note: FCA supervisory approach.

What does conduct risk mean?

The issue however

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