Consumer Duty: FCA consults on scope and proportionality

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Jul 24 2026

On 29 June 2026, the Financial Conduct Authority (FCA) published its consultation paper CP26/23 (CP), proposing a package of targeted amendments to the FCA Handbook and the non-Handbook Guidance to the Consumer Duty (FG22/5) (the Duty) to clarify the scope of the Duty and allow the Duty to be applied in a more proportionate way, particularly for wholesale firms.

We explore the key proposals in our briefing but the key points are as follows.

Narrowing the territorial scope of the Duty – the proposals would limit the scope of the Duty to retail market business carried on in relation to retail customers who are “usually resident” in the UK, unless an exception applies.
Refining the scope of the Duty – the CP proposes to restructure the scope of the Duty by revisiting the core concepts of the Duty:
- The definition of “retail market business” is updated to refer to specific activities that cover the lifecycle of a retail product or service and other activities that have a clear connection with retail products or services. There are new exclusions covering activities that would not involve retail market business or direct engagement with retail customers.
- “Distribution chain” would be defined in the FCA Handbook, and the FCA intends to clarify that the application of the Duty would depend on the actual role of a firm, such that a firm would not be required to comply with a rule if that is not relevant to that firm’s role.
- The FCA would clarify that the Duty should not apply if a firm’s role is “so limited or remote that it cannot determine or materially influence outcomes for retail customers”. The FCA would like to move away from the concept of “material influence” and firms to focus more on their role and the extent of their involvement in providing retail products and services.
- The FCA proposes to simplify the definition of “product” to remove ambiguities as to how certain limbs of the current definition should be interpreted.
Firms working together to manufacture products – the FCA wants to remove references to “co-manufacturing” and introduce the concepts of principal and secondary manufacturers. The application of the Duty would be focused on principal manufacturers, while secondary manufacturers would be subject to more limited obligations under the Duty.
Proportionate application of the Duty – the FCA proposes to clarify the concept of proportionality and other current rules to help firms apply the Duty proportionately. These proposals cover a range of matters, including: the ability to rely on information provided by other firms, diligence on firms in the distribution chain, collection of information for the Duty, obligations with respect to vulnerable customers, simplified governance requirements and notification to the FCA on the conduct of other firms in the distribution chain.
Clarifying the interaction with other product governance and disclosure requirements – no change is intended for Chapter 3 of the Product Intervention and Product Governance Sourcebook (PROD), but the FCA would clarify that the processes for complying with PROD 3 could inform firms’ assessments for the Duty. Separately, compliance with the disclosure requirements under the Consumer Composite Investments (CCI) regime should help satisfy but may not completely discharge the Duty requirements, which are broader than the CCI requirements.

Responses to the CP are due by 18 September 2026. The FCA expects to publish a policy statement and make final rules in Q1 2027.

It is clear that the FCA’s intention is to provide a more consistent and proportionate framework to support firms in determining (and limiting) how and when the Duty applies. This may be particularly helpful where the firm’s role in relation to the retail product or service is more limited or indirect. However, certain interpretative challenges are likely to remain as there is an inherent element of judgment when applying key concepts in practice.

Authors

London

Jul 24 2026

We explore the key proposals in our briefing but the key points are as follows.

Narrowing the territorial scope of the Duty – the proposals would limit the scope of the Duty to retail market business carried on in relation to retail customers who are “usually resident” in the UK, unless an exception applies.
Refining the scope of the Duty – the CP proposes to restructure the scope of the Duty by revisiting the core concepts of the Duty:
- The definition of “retail market business” is updated to refer to specific activities that cover the lifecycle of a retail product or service and other activities that have a clear connection with retail products or services. There are new exclusions covering activities that would not involve retail market business or direct engagement with retail customers.
- “Distribution chain” would be defined in the FCA Handbook, and the FCA intends to clarify that the application of the Duty would depend on the actual role of a firm, such that a firm would not be required to comply with a rule if that is not relevant to that firm’s role.
- The FCA would clarify that the Duty should not apply if a firm’s role is “so limited or remote that it cannot determine or materially influence outcomes for retail customers”. The FCA would like to move away from the concept of “material influence” and firms to focus more on their role and the extent of their involvement in providing retail products and services.
- The FCA proposes to simplify the definition of “product” to remove ambiguities as to how certain limbs of the current definition should be interpreted.
Firms working together to manufacture products – the FCA wants to remove references to “co-manufacturing” and introduce the concepts of principal and secondary manufacturers. The application of the Duty would be focused on principal manufacturers, while secondary manufacturers would be subject to more limited obligations under the Duty.
Proportionate application of the Duty – the FCA proposes to clarify the concept of proportionality and other current rules to help firms apply the Duty proportionately. These proposals cover a range of matters, including: the ability to rely on information provided by other firms, diligence on firms in the distribution chain, collection of information for the Duty, obligations with respect to vulnerable customers, simplified governance requirements and notification to the FCA on the conduct of other firms in the distribution chain.
Clarifying the interaction with other product governance and disclosure requirements – no change is intended for Chapter 3 of the Product Intervention and Product Governance Sourcebook (PROD), but the FCA would clarify that the processes for complying with PROD 3 could inform firms’ assessments for the Duty. Separately, compliance with the disclosure requirements under the Consumer Composite Investments (CCI) regime should help satisfy but may not completely discharge the Duty requirements, which are broader than the CCI requirements.