taking advantage of a retail customer or their circumstances, for example any characteristics of vulnerability, in a manner which is likely to cause detriment;
1Acting in good faith does not mean a firm is prevented from pursuing legitimate commercial interests or seeking a profit, provided it does so in a manner which is compliant with Principle 12 and PRIN 2A. Acting in good faith does not require a firm to act in a fiduciary capacity where it was not already obliged to do so.
1If a firm identifies through complaints, its internal monitoring or from any other source, that retail customers have suffered foreseeable harm as a result of acts or omissions by the firm, it must act in good faith and take appropriate action to rectify the situation, including providing redress where appropriate.
1Whether such a belief is reasonable will depend (among other things) on the nature of the product offered by the firm; the adequacy of the firm’s product design, communications and customer services; the needs and characteristics of retail customers or the relevant retail customer (as the context requires); and the extent to which the firm is compliant with applicable law in relation to the sale of that product, including the rules set out in PRIN 2A.
ensuring all aspects of the design, terms, marketing, sale of and support for its products avoid causing foreseeable harm;
ensuring that no aspect of its business involves unfairly exploiting behavioural biases displayed or characteristics of vulnerability held by retail customers;
responding to emerging trends that identify new sources of harm, including FCA supervisory action and/or communications; and
taking appropriate action to mitigate the risk of actual or foreseeable harm, including for example by:
updating or otherwise amending the design of the product or distribution strategy;
a product may have inherent risks which retail customers accept by selecting that product. Where a firm reasonably believes a retail customer understands and accepts such risks, it will not breach the rule if it fails to prevent them;
whether such a belief is reasonable will depend (among other things) on the nature of the product offered by the firm, the adequacy of the firm’s product design, communications and customer services; and the extent to which it is compliant with applicable law in relation to the sale of that product, including the rules set out in PRIN 2A; and
examples of risks which are inherent to a product include that a mortgage carries a risk of repossession and most investments carry a risk that the market may move resulting in capital loss.
1Information a firm must obtain under a provision of law (including, but not limited to, information required by COBS 9.2.1R, COBS 9A.2.1R, COBS 10.2.1R, COBS 10A.2.1R, ICOBS 5.2.2R, MCOB 4.7A.6 R, MCOB 11.6.2R and CONC 5.2A.5R) is relevant to whether a firm knew or could reasonably be expected to know that a customer has different financial objectives for the purposes of PRIN 2A.2.16G and PRIN 2A.2.17G.
making sure retail customers have the information and support they need, when they need it, to make and act on informed decisions;
taking account of retail customers’ behavioural biases and the impact of characteristics of vulnerability in all aspects of customer interaction.
1Enabling and supporting retail customers to pursue their financial objectives may include the proactive provision of information or offer of support when a firm declines to provide a particular product to a retail customer. In particular:
firms should consider in light of the financial objectives of that retail customer whether it would be appropriate to provide information to enable and support that retail customer to achieve those objectives, and where appropriate should provide it; and
they should take reasonable steps to ensure any information they provide to a retail customer which is produced by an external third party such as a money advice charity, to which the retail customer is signposted, is independent and reliable.
1Enabling and supporting retail customers to pursue their financial objectives does not mean that a firm is expected to go beyond what a prudent firm carrying out the same activity in relation to the same product, taking appropriate account of the needs and characteristics of retail customers, including in particular as set out in PRIN 2A.7.4G to PRIN 2A.7.5G, would do. For example, it does not require firms to go beyond what is reasonably expected by retail customers in the delivery of the product.
1The obligations in PRIN 2A.2 apply at all stages of the customer journey and during the whole lifecycle of a product. Firms will therefore need to keep products under regular review and consider the impact of any changes they make to those products.
Where a firm is not interacting with an individual retail customer, for example in the design of a product, when making pricing decisions or designing communications, the obligations in PRIN 2A.2 apply at the level of that target market.