Regulation on the Move: Consumer Duty, AR Reform and Staying Scam-Savvy

Rachel MacRae

Hello everyone, and welcome to this week's episode of the B-Compliant podcast. I am not one for preamble, so lets jump straight in shall we? Hi Vicky! so, apparently the FCA has realised you can’t just keep lobbing new rules at every problem forever. Who knew?

Unknown Speaker

Revelatory, isn’t it. Nikhil Rathi’s been very clear: not every issue is gonna be solved by big interventions, bans, or yet another pile of guidance. They’re leaning much more into outcomes, with Consumer Duty as the backbone.

Rachel MacRae

Yeah, that stood out for me. Instead of micromanaging every scenario, they’re basically saying, “We’ve given you Consumer Duty, now use it properly so we don’t have to write ten more rulebooks.”

Unknown Speaker

Exactly. The idea is that if firms really embed Consumer Duty, over time the FCA shouldn’t need to be as prescriptive. And that ties into the wider review of retained EU rules and this whole regulatory modernisation push.

Rachel MacRae

That modernisation bit is interesting, actually. They’re talking about reducing unnecessary burdens, especially around data reporting and compliance. So not a free‑for‑all, sadly, but a bit less box‑ticking if you can prove you’re doing the right thing.

Unknown Speaker

With a big emphasis on the “prove” part. Because the other driver here is tech. Markets are changing quickly, AI’s everywhere – data providers, comparison sites, wealth managers – and the FCA knows static rules can’t keep up with fast‑moving risks.

Rachel MacRae

Yeah, if you write a rule today, some AI‑powered platform’s broken the spirit of it by Tuesday. So they’re shifting to this outcomes‑based lens: what are consumers actually experiencing, rather than “did you follow Rule 4.7 subsection whatever.” - We've never been a firm to throw a rule at people, we like to explain the impact of the outcome, so this is definitely a supervisory shift B-Compliant can get behind.

Unknown Speaker

It really is.... whilst the shift to principle based regulation is not a new one, we are starting to see how the FCA are talking about different markets. Take mortgages: they’re clearly alive to the risk of increased consumer distress if interest rates spike, but they’re also pointing out that recent FCA changes have actually boosted borrowing capacity and helped push up first‑time buyer numbers.

Rachel MacRae

Which is quite a nuanced message for a regulator: “We’re worried, but also, this bit’s working.” Then you’ve got later life lending – they’re flagging research that a lot of retirees will probably need to tap into housing wealth just to maintain living standards.

Unknown Speaker

Yeah, and they’ve basically said it’s not ideal if people’s wealth is just sitting locked up in property while their retirement income isn’t enough. That’s a strong hint about the role of later life lending, but again, framed around outcomes rather than product‑pushing.

Rachel MacRae

Protection’s another one. Instead of blanket crackdowns, they’re talking about targeted, evidence‑based supervision. So they’ll use Consumer Duty to go after outlier firms, where the behaviour stands out, rather than treating everyone as guilty by association.

Unknown Speaker

And the enforcement stats show they’re not getting softer. Forty enforcement outcomes in 2024, up from thirty in 2023, plus six Consumer Duty cases already on the go. Add in record criminal prosecutions and a high rejection rate for crypto firms trying to get money laundering registration – it’s not exactly a chill new era.

Rachel MacRae

No, it’s more “fewer new rules, more attention on what you’re actually doing”. So firms need solid evidence of good consumer outcomes, decent governance, and proportionate decisions they can justify. The days of “we meant well, honest” without data or documentation are pretty much over.

Unknown Speaker

And looking ahead, they’ve said with targeted support due to start in April 2026, they’ll focus on a limited set of markets first, then think about whether to expand. Again, test, learn, adjust – very outcomes‑driven.

Rachel MacRae

So if you’re listening and hoping “fewer rules” means “less work”, I’m afraid it’s more like: fewer pages to read, more scrutiny of your Consumer Duty Board Report.

Rachel MacRae

Right, let’s talk Appointed Representatives, because HM Treasury has clearly decided the regime needed, shall we say, a bit of a refurb.

Unknown Speaker

A polite way of putting it. They’ve put out a consultation aiming to tighten consumer protection and close gaps, but in quite a targeted way. First big change: bringing A Rs directly within the Financial Ombudsman Service remit in some cases.

Rachel MacRae

Yeah, so at the moment, if there’s a complaint involving an A R, FOS goes after the principal firm under SMCR. If the complaint’s upheld, the principal pays the redress. End of story.

Unknown Speaker

And that basic setup would stay. But the Treasury’s saying, look, in those situations where FOS decides the principal can’t actually be held responsible for what the AR did or didn’t do, FOS should be able to look at the AR itself.

Rachel MacRae

Key point: in those specific cases, the redress bill would land with the AR, not the principal. the Treasury’s calling it a targeted tweak and expecting it to apply in a relatively small number of complaints, but it stops that gap where consumers might otherwise have no ombudsman route.

Unknown Speaker

Exactly. Then there’s the proposed FCA “gateway” for principals. At the moment, any authorised firm can just appoint ARs without extra permission, even though being a principal comes with hefty oversight responsibilities.

Rachel MacRae

Which is slightly wild when you say it out loud. The new idea is: you’d need a specific FCA permission before you can act as a principal and appoint ARs. So you pass through this gateway first.

Unknown Speaker

And crucially, the FCA could vary or withdraw that permission if AR activity starts posing risks to consumers. That lets them intervene more quickly and in a more targeted way, rather than waiting for everything to fall over.

Rachel MacRae

So principals can’t just treat ARs as a side hustle. You’d have to demonstrate you’ve got the systems, controls and resources to supervise them properly – and keep doing so, or risk losing the permission.

Unknown Speaker

Then we’ve got the SM&CR piece. Principals are already under SM&CR, but ARs are still on the old Approved Persons Regime, which Treasury’s calling inconsistent and administratively clunky.

Rachel MacRae

Different standards for similar activities, extra admin, and none of it particularly elegant. So they’re consulting on moving both principals and ARs onto the same regime – SMCR – to boost accountability and streamline supervision.

Unknown Speaker

For firms, that means thinking about AR roles through the same lens as everyone else under SM&CR: clear accountability, certification where needed, and a consistent expectation of conduct and competence.

Rachel MacRae

And for regulators, it should be simpler to supervise: one framework, not a patchwork. Where it all lands will depend on the consultation, but the direction of travel is obvious – if you’re in the AR chain, the bar is going up, not down.

Unknown Speaker

Yeah, this is not the moment to assume “I’m only an AR, this won’t touch me.” If these proposals go ahead, the whole regime tightens, and the excuses list gets a lot shorter.

Rachel MacRae

Okay, tough love section. Let’s start with the Upper Tribunal case, because it’s basically a checklist of what not to do with pensions.

Unknown Speaker

Yeah, the Tribunal upheld the FCA’s decision to ban Stephen Joseph Burdett and James Paul Goodchild from financial services and confirmed the fines – £265,071 for Burdett and £47,600 for Goodchild. So, not a gentle slap on the wrist.

Rachel MacRae

All stemming from switching 232 personal pension funds, worth over £10 million, into high‑risk portfolios that were just plainly unsuitable for the customers. And some of those portfolios were labelled “cautious” or “balanced”, which the Tribunal was… unimpressed by.

Unknown Speaker

Yeah, they were crystal clear: it’s the underlying asset allocation and risk concentration that matter, not whatever cosy label you stick on the front. In this case, around 38% of the portfolios were in a single offshore property development. That’s not cautious by any sane definition.

Rachel MacRae

Suitability was the big failing throughout. Customers were led to believe they were going into low or medium‑risk strategies, even though the investments were high‑risk. Due diligence was described as cursory and inadequate, and there weren’t reasonable steps to check suitability for different risk appetites.

Unknown Speaker

And then you’ve got the governance and regulatory breaches. Burdett acted as a director of Synergy without having the required FCA approval, and he didn’t cooperate properly with the FCA’s investigation. So you’ve got misconduct plus weak governance plus ignoring the approval regime.

Rachel MacRae

The FCA actually stepped in back in 2016 and stopped the pensions business of both firms, and they later went into liquidation. The Financial Services Compensation Scheme’s already paid out over £1.4 million to affected customers.

Unknown Speaker

And the Tribunal’s view of their conduct was pretty damning – saying they showed little regard for clients’ interests and put personal gain ahead of regulatory and professional responsibilities. That’s about as far from Consumer Duty thinking as you can get.

Rachel MacRae

So, lessons: honest, accurate client communications; real suitability assessments, not tick‑box; proper oversight of portfolio construction; and absolutely no one doing controlled or senior roles without the correct FCA approvals. None of that is optional.

Unknown Speaker

Which links neatly to the FOS warning this week on scams. They’ve reminded everyone that scams are still everywhere, but the big change is how sophisticated and hard to spot they’ve become.

Rachel MacRae

Yeah, it’s all about trust now. It’s not just bad spelling in an email; fraudsters are willing to put in the effort, build credibility, exploit relationships. Vulnerable clients, or anyone not confident with tech, are especially at risk.

Unknown Speaker

And while long‑term adviser‑client relationships can be a protective factor – it’s harder for a scammer to impersonate someone the client actually knows – firms can’t get complacent. We’ve already seen cloned websites, spoofed email and phone details, and now AI’s in the mix.

Rachel MacRae

The AI bit is honestly a bit chilling – voice cloning, image cloning, even live video using someone’s likeness in extreme cases. FOS is realistic: that level of scam would probably need a serious data breach and isn’t everyday stuff, but it shows how fast the landscape’s shifting.

Unknown Speaker

More commonly, clients might be targeted elsewhere – romance scams, social media, “business opportunities” – and then they come to access their investments. That’s where advisers need to stay professionally curious if the behaviour looks out of character.

Rachel MacRae

Exactly. Clients do have the right to access their money, but there’s still that duty to act in their best interests, especially where there might be vulnerability. Sometimes just pausing and having a calm conversation can be enough to make them think twice.

Unknown Speaker

And don’t forget the paperwork. Remaining alert, talking openly with clients and documenting concerns properly – that’s all part of good practice in this fraud environment, not an optional extra.

Rachel MacRae

Right, we should wrap up before we depress everyone completely. So, headline messages: outcomes over endless rules, ARs under a tighter spotlight, suitability is non‑negotiable, and scams are getting smarter.

Unknown Speaker

But the flip side is, firms that take this seriously and evidence what they’re doing are in a strong place. We’ll keep picking these things apart in future episodes so you don’t have to read every page yourself.

Rachel MacRae

Speak for yourself, I quite like the reading. But yeah, we’ll leave it there. Thanks for listening.

Unknown Speaker

Cheers everyone, thanks Rachel, and we’ll catch you next time.