February 17 – Understanding the supply chain

The FCA’s Responsibilities of Providers and Distributors (RPPD) paper sets out guidance for firms around the fair treatment of customers. Although introduced in 2007, it articulated responsibilities already set out in the regulatory Principles, Rules and Guidance, financial services legislation and case law. During the consultation period there was broad consensus from the industry that the RPPD was accurate.

It makes clear that when designing a product, a provider should identify the target market and give sufficient information to distributors. When providing this information they are advised to consider, for each distribution channel, what information distributors already have, their likely level of knowledge and understanding, and their information needs. Where more than one firm is involved in product design, it is likely to be appropriate for them to apportion responsibility between themselves. A firm cannot contract out of, or delegate, its regulatory responsibilities.

The AMI, CML and IMLA Working Together guide, first published in 2010, used the RPPD as a starting point. An industry guide to lender and intermediary accountabilities and responsibilities in mortgage sales and servicing, its third iteration was agreed September 2016. We also saw the European Banking Authority’s guidelines on product oversight and governance arrangements for retail banking come into effect last month. The FCA Handbook remained unchanged as these requirements were already enshrined mainly through the RPPD.

Throughout the last decade there has been no fundamental change in the expectations between providers and distributors. The Senior Persons Regime only reinforces these roles. It is therefore difficult to understand any argument that providers bear no responsibility for the effective distribution of their products. Provider contributions disappeared from the Financial Services Compensation Scheme structure at the time the FSA split in 2013. Its reintroduction will only accurately reflect the existing regulatory landscape and will hopefully focus all minds more clearly on their respective responsibilities and accountability.

Aileen Lees
Senior Policy Adviser