Consumer Duty View – March 2026

Three years on from its introduction, the Consumer Duty is now firmly embedded - but the FCA is far from standing still. This edition tracks the regulator's ongoing refinements to the redress framework, its evolving expectations for firms across distribution chains, and fresh supervisory insights that reinforce the importance of evidencing good outcomes. With six open enforcement investigations now underway, the message is clear: the FCA expects firms to demonstrate compliance, not just assert it.

This edition covers the landmark joint FCA/FOS consultation on redress, the new CCI regime, fresh supervisory findings on consumer understanding, and targeted workstreams on crypto, complex ETPs and board-level governance.

Read on to discover what these developments mean for your firm.

1. FOS consultation:

In July 2025, HM Treasury, the FCA and the FOS published parallel consultations on modernising the redress framework. The Treasury consultation followed the Chancellor's review of the FOS, which concluded that changes were needed to prevent it acting as a "quasi-regulator" and to provide greater regulatory coherence with the FCA see our article on that here.

On 16 March 2026, the Financial Conduct Authority (FCA) and Financial Ombudsman Service (FOS) published a joint consultation paper (CP26/9) on proposals to modernise the redress framework.

In parallel, the FCA issued Finalised Guidance (FG26/2) on good and poor practice when identifying and rectifying harm. HM Treasury (HMT) also published their response to the July 2025 consultation on reforming the FOS.

Key reforms

Adapted fair and reasonable test

The centrepiece reform: where firms have complied with relevant FCA rules, the FOS must find they acted fairly and reasonably. "Good industry practice" is being removed as a relevant consideration, and only standards applicable at the time of the act or omission will apply. This addresses longstanding concerns about retrospective application of evolving standards.

However, HMT has confirmed that government will take a power to "specify that particular rules are not to be included in the adapted Fair and Reasonable test or should be dealt with in a different way." HMT states this could be "particularly relevant when considering the application of the high-level obligations contained in the FCA's Principles for Business, including the Consumer Duty." There is no further detail on what the alternative test will be for those rules—leaving open the question of whether this carve-out might dilute what otherwise appeared to be an important change for the industry.

FOS-FCA referral mechanism - Where there is ambiguity in FCA rules, the FOS will be required to seek the FCA's views before determining the complaint. The FCA must respond within 30 days (although they may say the case is complex and a response will take longer). Parties to complaints may also request referrals, but it is for FOS to decide whether to refer.

New registration stage - A new pre-registration stage will filter complaints before full investigation, ensuring only "well-formed, appropriately evidenced complaints" proceed. This should reduce the burden of speculative or poorly evidenced complaints — and no (or a reduced) case fee will be charged until a complaint is registered.

Expanded dismissal grounds - The FOS is consulting on reintroducing pre-2015 dismissal grounds for frivolous or vexatious complaints, complaints solely about investment performance, trustee discretion matters, and where the claim exceeds the maximum redress limit.

10-year absolute time limit - A new absolute 10-year backstop will apply to FOS complaints. The FCA will set limited exceptions for longer-term products such as pensions.

Enhanced mass redress powers - The FCA gains new powers for managing mass redress events, including: Pausing complaints handling without consultation; redirecting complaints back to firms for handling under redress schemes; and a simplified threshold for establishing statutory redress schemes under section 404 FSMA.

Governance - Government will directly appoint the FOS Chair, and Treasury approval will be required for the Chief Ombudsman. The Chief Ombudsman will have overall responsibility for FOS determinations.

Enhanced SUP 15 reporting to the FCA - (effective 1 June 2026), requiring firms to notify the FCA of issues that may affect 40% or more of customers, lead to significant redress sums, or cause substantial consumer losses.

The deadline for responses is 11 May 2026.

2. Enforcement:

The FCA are currently investigating six potential Consumer Duty breaches by firms, particularly in relation to fair value for consumers. It is understood that these are all outlier cases. Two of the investigations concern insurance firms, which were the most serious cases identified in their multi-firm work: Enforcement Watch 1 | FCA.

3. FCA review: Consumer understanding:

On 13 March 2026, the FCA published the findings of their review into firms’ approaches to consumer understanding. As well as providing a reminder of key aspects of the Duty, the review also included a number of areas of improvement for firms to consider.

For MI and testing the areas for improvement included:

• Weak (or missing) evidence of testing, with the actual testing often being superficial
• Unclear use of MI and insight – why is the data collected the right MI and what action did the MI drive?
• Insufficient testing with different customer groups, i.e. testing didn’t include people with accessibility needs, language requirements or lower financial capability.
• No follow-up to assess whether changes worked

For innovation and communication the areas of improvement included:

• Cosmetic changes that do not address root causes – the FCA found that some firms made surface level changes, shorter wording, new icons or colour changes without improving clarity, sequencing or prominence of key information. Customers were still missing or misinterpreting core points
• Little or no testing of new designs - several firms did not test communications with customers or relied on very small, unrepresentative groups.
• Failure to adapt communications for different customer needs, in particular presenting different design and formats to customers in vulnerable circumstances who may have accessibility needs, language preferences or lower digital confidence.
• Overlong documents with limited signposting

For vulnerability and accessibility it was noted that a typical improvement firms had made was simplifying accessibility by reordering content to increase visibility of important information, reducing volume, and adding plain language explanations for complex terms.

One firm tested all new product communication with a sample of customers in vulnerable circumstances. It captured key insights including comprehension scores, measuring these against its own internal target of at least 80% correct recall of key points. The firm also reviewed live chat transcripts weekly to identify unclear wording and vulnerability cues. Communications were then reviewed and redrafted based on customer feedback. This process was repeated until results met the 80% target and was used to influence future design decisions across different channels.

In contrast the FCA noted that many firms did not provide comprehension measures, acceptability targets or scaling of initiatives beyond pilot schemes. The lack of data weakened auditability and made it more difficult to evidence improving standards.

For financial promotions the areas of improvement included: (i) overemphasis on benefits; (ii) limited or no consumer testing; (iii) inadequate monitoring of promotional outcomes (i.e. did promotions support informed decisions); and (iv) Unclear, inaccessible or unbalanced messaging.

For governance, the FCA was concerned that some firms still rely on approaches that are inconsistent or not well joined up, making it harder to be confident that customer communications are helping people make informed decisions. The areas for improvement included:

• Insufficiently granular data, meaning that senior decision makers may be unaware of how well different groups understand the information
• Limited use of MI in decision-making - firms could look to ensure governance committees receive comprehension driven KPIs, not just compliance, sentiment or activity metrics.

4. Consumer Composite Investments (CCIs): a new regime:

On 8 December 2025, the FCA published its Policy Statement containing the final CCI product information rules that will underpin the regime. While the regime comes into effect this year, firms will have until 8 June 2027 to comply. See our client note on this here: Top 10 things to know about the UK’s new CCI regime | Simmons & Simmons

The new regime makes significant changes to the KIID/KID disclosure requirements under the UCITS and PRIIPs regimes. The key message is a move away from the rigidly templated – and some would say overly prescriptive – PRIIPs KIDs and UCITS KIIDs to a more flexible form of disclosure, that puts the emphasis on delivering information to consumers to empower them to make effective, timely, and properly informed investment decisions.

Firms will now have to stand up an implementation project focusing on the generation of a new retail disclosure document, digest new obligations and requirements, test and adjust customer journeys, engage with manufacturers and distributors up and down the product chain and undergo tech build out, all through the prism of the Consumer Duty.

The learning from the recent FCA findings of their review into firms’ approaches to consumer understanding (item immediately above) will be important for firms to take into account when implementing the new CCI regime in terms of testing the new product summary documents.

5. Consumer duty: scope clarifications and a June CP on the horizon:

In recent industry discussions, the FCA has suggested that a consultation paper on Duty scope, proportionality and the application of the Duty to wholesale-only and early-chain firms may be published in June this year.

The FCA has acknowledged that wholesale-only and early-chain firms, such as custodians, depositories, transfer agents and market makers, often have no direct customer contact yet feel subject to expectations designed for firms closer to the retail customer. The FCA is actively considering lighter expectations for these firms and may tighten the definition of the retail distribution chain accordingly. The FCA also intends to retire the term ‘co-manufacturing’, instead distinguishing between ‘manufacturers’ (subject to full Duty requirements) and ‘supporting firms’ (subject only to Principle 12 and cross-cutting rules applied proportionately). On monitoring and board reporting, the FCA is considering allowing one-off assessments where no foreseeable retail harm exists, permitting more integrated reporting, and accepting risk-based sampling rather than extensive data collection.

The FCA confirmed it will not introduce blanket substituted compliance for MiFID, PRIIPs or PROD-compliant firms, maintaining that the Duty's cross-cutting rules, price and value requirements, and consumer understanding expectations exceed these existing frameworks. Internationally, the FCA plans to disapply the Duty for business conducted exclusively for non-UK customers.

These discussions signal a welcome recalibration of expectations for those earlier in the distribution chain. However, they also confirm that the Consumer Duty remains a step-up from existing regimes. Firms should engage with the consultation process and monitor developments closely, particularly those seeking clarity on material influence, the boundaries of the retail distribution chain, and the extent to which reliance can be placed on other firms in the chain.

6. Consumer duty board reports:

On 24 February 2026, the FCA updated its webpage providing examples of good and bad practice for Consumer Duty board reports to provide guidance on how smaller firms can meet its requirements. The FCA also published a new consolidated Consumer Duty webpage providing useful information about the Consumer Duty, including information on the outcomes the FCA wants to see.

For smaller firms, the message is to focus on substance over form, on clear outcome based MI, explicit identification of issues and actions, and ownership with timelines, rather than narrative process summaries.

7. Crypto asset activities:

On 23 January 2026, the FCA published a second consultation paper setting out its proposals on the application of FCA Handbook for regulated crypto asset activities (CP26/4), as well as a Guidance Consultation (GC26/2) on application of the Consumer Duty to Crypto asset Firms. The FCA published part one of its proposals in September 2025 (CP25/25), see our Crypto View on that here. CP26/4 and GC26/2 form part of the FCA's wider Crypto Roadmap and should be read together.

The key proposals in CP26/4 from a Consumer Duty perspective include:

• the full application of Principle 12 and PRIN 2A to crypto asset firms in the same manner as other FSMA-authorised firms, supplemented by sector-specific non-Handbook guidance; the application of relevant COBS provisions (including conduct of business, client categorisation, financial promotions, and appropriateness testing);
• new safeguarding rules under CASS 17 requiring firms to hold client cryptoassets on trust and act compatibly with Consumer Duty obligations when doing so.

Importantly, distributors will bear significant responsibility where manufacturers are unregulated or unknown (as is common with unbacked crypto assets like Bitcoin)—they must take ‘all reasonable steps’ to understand the product, define an appropriate target market, assess fair value, and ensure distribution delivers good outcomes for retail customers.

GC26/2 provides detailed guidance on how the Consumer Duty's cross-cutting rules and four outcomes apply in practice to the crypto asset sector. The guidance emphasises that firms must not exploit customers' lack of understanding or behavioural biases, must avoid targeting high-risk products at vulnerable customers, and must provide clear, timely communications, including prominent risk warnings and comprehension testing for complex products such as lending and borrowing. Firms are expected to embed good faith into governance, proactively monitor customer outcomes, and provide accessible, responsive support throughout the product lifecycle.

These proposals make clear that the Consumer Duty will be the cornerstone of consumer protection in the new crypto asset regime, with firms expected to deliver good outcomes across all four Duty outcomes, particularly for customers in vulnerable circumstances and those unfamiliar with crypto asset products. For firms, the message is clear: crypto asset firms entering the UK regulatory perimeter will be held to the same high standards as traditional financial services firms, and those already authorised must ensure their crypto asset activities are fully integrated into their existing Consumer Duty frameworks—with particular attention to target market definition, fair value assessments, consumer understanding, and robust support for vulnerable customers

8. FCA review: complex exchange-traded products (ETPs):

On 12 January 2026, the FCA published a webpage setting out the findings of a multi-firm review into the distribution of complex exchange-traded products (ETPs).

Key areas requiring attention include:

• Target market definition: many firms adopted manufacturers' assessments without refinement, describing target markets generically as 'retail consumers' without adequate consideration of product complexity or vulnerability.
• Appropriateness testing: most firms deployed generic tests that failed to cover ETP-specific risks such as leverage and holding periods; some relied on binary self-declarations with pass rates reaching 100%.
• Fair value assessments: some firms focused narrowly on their own distribution fees without evaluating product-level costs or manufacturers' assessments holistically.
• Risk communication: firms often relied solely on manufacturer KIDs without tailored explanations; critically, 82% of trades were held longer than the recommended one-day period, yet few firms highlighted or monitored this risk.

9. Overhaul of client categorisation rules (FCA CP25/36):

On 8 December 2025, the FCA published CP25/36 on client categorisation and conflicts of interest reforms, see our article on this here. These reforms represent a dramatic overhaul aimed at unlocking opportunities for sophisticated investors whilst strengthening consumer safeguards.

Key client categorisation proposals include:

• Introducing a wealth-only route allowing individuals with at least £10 million (although this threshold is being challenged!) in investable assets to opt out of retail protections without a qualitative assessment, subject to informed consent;
• Removing the current quantitative test (covering portfolio size, trading frequency and financial sector experience) for all other clients except local authorities;
• Requiring an enhanced holistic qualitative assessment based on relevant factors including professional experience, trading history, risk understanding, financial resilience and investment objectives;
• Strengthened safeguards prohibiting firms from incentivising or pressuring clients to opt up, requiring clients to actively request professional status and provide informed (not basic) consent by signature after receiving clear warnings about lost protections.

Crucially, re-categorisation must be compatible with the Consumer Duty and the client's best interests rule. The FCA also proposes simplifying per se professional criteria and harmonising thresholds across MiFID and non-MiFID business.

On conflicts of interest, the FCA proposes rationalising SYSC 10 by consolidating requirements into core obligations applicable to all firms, removing duplicative provisions and unnecessary distinctions between rules for different firm types—without changing the substance of obligations or imposing additional burdens.

10. Expanding consumer access to investments (FCA DP 25/3):

On 8 December 2025, the FCA published Discussion Paper (DP25/3) on expanding consumer access to investments, seeking industry and stakeholder views on the future of the UK's retail investment regulatory framework. See our article on this here.

The paper reflects the FCA's ambition to help consumers take informed investment risks, recognising that significant investible assets remain held in cash whilst a persistent mismatch exists between consumers' stated risk appetites and their actual investment choices. Key areas under review include:

• Trading apps and digital engagement practices (DEPs): design features may blur the line between investing and gambling-like behaviours.
• Fractional investments: differing structures may expose consumers to additional risks not immediately apparent.
• Model portfolio services (MPS): inconsistent disclosure requirements make comparison with authorised funds difficult.
• Speculative products (CFDs, leveraged ETPs, margin lending, SCARPs): the FCA is considering a more risk-centred, product-agnostic approach to regulation.
• COBS financial promotion and distribution rules: the FCA is reviewing appropriateness testing and its interaction with the Consumer Duty to simplify and future-proof the framework.

The deadline for responses was on 6 March 2026, however firms should review their consumer journeys, product disclosures, and communications to ensure clarity, transparency and compliance with the Consumer Duty. Those offering MPS should prepare for potential changes to disclosure requirements and product governance standards. The FCA has signalled that inconsistent standards of appropriateness testing and excessive reliance on DEPs that do not support good outcomes would be inconsistent with the Duty.

11. FCA statement on co-manufacturing:

On 8 December 2025, the FCA published a short statement setting out its expectations for firms working together to manufacture products or services, particularly in the context of the Consumer Duty. See our article on this here.

The statement reinforces that co-manufacturing does not dilute individual Consumer Duty obligations. Firms must actively engage in product governance and cannot treat their role as passive or administrative. The statement represents a prompt to review existing co-manufacturing arrangements and ensure written agreements, data-sharing processes, and governance structures are sufficiently robust to demonstrate compliance with PRIN 2A.3.

12. Targeted clarifications of handbook material (FCA CP25/37):

On 9 December 2025, the FCA published Consultation Paper CP25/37, ‘Targeted Clarifications of Handbook Material’, as part of its ongoing Consumer Duty Requirements Review. See our article on this here.

The FCA’s proposals are designed to reduce the administrative burden on firms by streamlining compliance requirements, removing duplication, and allowing firms to focus their resources more effectively on delivering good consumer outcomes.

Whilst the proposed changes are relatively limited in scope, they nonetheless reinforce the importance of firms ensuring that their practices, particularly in relation to client money, custody assets, and product governance, remain fully compatible with the Consumer Duty's higher standards.

13. Risk warnings:

On 11 December 2025, the FCA published a new webpage on risk warnings due to widespread misunderstanding on the need to include ‘capital at risk’ disclosures. The guidance supports an ongoing review led by the Investment Association and backed by the Treasury and the key takeaways are:

• No prescribed format: The FCA does not require a separate standalone risk warning, and does not require risks to be stated before benefits. But, the FCA’s behavioural testing indicates that customers often don’t read the "capital at risk" statement (as such it has become ‘wallpaper’). So firms should think about how they can get customers to engage with important information. (This may mean that standard risk statements require regular review).
• Contextualised risk communication: the FCA encourages firms to introduce contextualised risk statements explaining both potential benefits and risks, rather than generic warnings that may confuse consumers or obscure relevant risks; fair cash comparisons are permitted provided balanced information is given on both products.

14. FCA review: price and value:

On 13 November 2025, the FCA published a webpage on the findings of a multi-firm review on contracts for difference (CFD) providers' provision of price and value. See our article here. The review underscores the FCA's continued focus on ensuring fair value for retail clients in the CFD sector under the Consumer Duty. Key findings from the review include:

• Narrow fair value assessments (FVAs): many FVAs focused solely on spread costs, neglecting other significant charges such as overnight funding; there was inadequate justification for wide variations in overnight funding charges and insufficient disclosure of their impact on overall value.
• Hedged positions and interest asymmetry: applying overnight funding charges to both sides of matched positions results in substantial charges for clients with no net market risk; most firms do not pay interest on margin deposits despite charging clients significant interest on long positions—an asymmetry the FCA encourages firms to review.
• Vulnerable client monitoring: whilst onboarding monitoring is widespread, some firms rely solely on reactive measures; firms reporting few or no vulnerable clients should review the effectiveness of their arrangements.

The FCA will engage directly with selected firms and continue to assess ongoing compliance. All CFD firms should review and enhance their FVAs to cover all costs holistically, improve fee disclosures, and consider whether not paying interest on client margin deposits is consistent with delivering fair value under the Consumer Duty.