Consumer Protection Flashcards

What is the FCA's approach to product governance?

Answer: Manufacturers must design products that meet the needs of an identified target market

Under the FCA's product governance rules (PROD), manufacturers must identify a target market for their products, ensure the product meets that market's needs, and monitor the product throughout its lifecycle.

What is a 'suitability report' in the context of financial advice?

Answer: A document explaining why a personal recommendation is suitable for the client

A suitability report must be provided when a firm makes a personal recommendation. It must explain why the recommendation is suitable based on the client's circumstances, needs, and objectives.

Under the Consumer Duty, what does 'foreseeable harm' mean?

Answer: Harm that a firm could reasonably anticipate might occur to consumers from its products or actions

Foreseeable harm refers to negative outcomes that firms could reasonably anticipate and should take steps to prevent. Under the Consumer Duty, firms must act to avoid causing foreseeable harm to retail customers.

What is 'price and value' assessment under the Consumer Duty?

Answer: Ensuring the total price consumers pay for a product is reasonable relative to the benefits

The price and value outcome requires firms to ensure that their products and services provide fair value, meaning the relationship between the total price paid and the total benefits received is reasonable.

What role does the FCA expect firms' boards to play in consumer protection?

Answer: Boards must have ultimate accountability for consumer outcomes and actively oversee consumer protection

The FCA expects boards and senior management to take ultimate responsibility for consumer outcomes, embedding consumer protection in the firm's culture, strategy, and business processes.

What is 'consumer understanding' under the Consumer Duty?

Answer: Ensuring communications equip consumers to make effective, timely and properly informed decisions

The consumer understanding outcome requires firms to ensure their communications support consumers in making informed decisions, with information that is clear, tailored, and provided at the right time.