Case studies
The FSA’s Handbook sets out the requirements placed upon firms and authorised persons in carrying out regulated activities.
These requirements are set out in the form of a series of high-level principles augmented by detailed rules which, in many areas, interpret the requirements of the principles in specific circumstances. In addition, guidance – which does not impose requirements on firms but shows one or more ways in which firms can meet the requirements of the rules – is set out in several areas.
Principle 6 specifically requires firms to 'have due regard to the interests of its customers and treat them fairly'. Principles 7 and 9 set out other considerations relating to the communication needs of customers and the suitability of product offerings. While raised here in a regulatory context, 'customer centric' principles such as these are fundamental to good business and marketing practice.
Senior management need to consider what is required to ensure their firms treat
customers fairly and build these requirements into the operating procedures,
systems and controls and management structures of the firm(s) for which they are
responsible.
Why we are publishing case studies
These case studies are not intended to add to the detailed rules and guidance set out in our Handbook. Nor do they impose additional requirements on firms and authorised persons. The case studies are not issued as general guidance. Firms seeking clarification of the Handbook requirements may seek individual guidance in accordance with SUP 9. The case studies will be kept under review and may be revised in the light of experience.
The examples in these case studies are intended to reflect real life scenarios and provide material which firms may find useful as background when considering how best to ensure that they treat their customers fairly. In particular, they are intended to illustrate the kinds of issues that firms should consider in particular sets of circumstances. Inevitably, the issues raised are not exhaustive and as we have always said, TCF is not a 'one-size-fits-all' initiative and it is for senior management to decide what TCF means for their particular firm given their specific – and often unique – activities, strategic objectives and customer base. Generally, the examples of good and poor practice that we refer to here are to help firms and their management make that decision: we think the good practice is likely to help a firm treat its customers fairly and the poor practice is likely to get in the way of a firm doing so. However, some of the good or poor practice in these case studies relates to compliance with or breaches of detailed rules which we think have a significant impact on fair outcomes for customers; where there are detailed rules, firms must comply with those rules.
In some of these case studies, we consider examples of good and poor practice within the industry as well as giving some examples of best practice – i.e. where firms' procedures exceed the minimum standards required in the Handbook.
Each case study considers a specific aspect of a firm’s business. The case studies may also consider issues that are relevant to other case studies. In order to avoid unnecessary duplication, we will not repeat such examples every time they are relevant. So, for example, we will make points about training only once but these are likely to be relevant to the situations we describe in other case studies.
Latest case studies - 2006
Quality of advice
We have developed some case studies which explore TCF issues in the advice process for those firms which give financial advice to retail customers.
Quality of advice - case study 1
Quality of advice - case study 2
Marketing and promotion
This case study uses the example of an investment manager which advertises to boost sales and considers the issues a firm might encounter in its marketing activities.
Marketing and promotion
Designing and selling a new product
This case study concerns an insurer that introduces a new pension term assurance product and how the insurer approaches its TCF obligations in designing and selling the new product.
Designing and selling a new product
Previous case studies - 2005
Product design
Uses the example of a bancassurer launching a new product, to consider safeguards to help ensure the product is fit for purpose and sold to the target market.
Managing strategic change
Explores the issues considered by senior management of a small IFA firm before it decides to 'multi-tie', and as it does business with existing and new customers as a multi-tied adviser. It also outlines how the firm reviewed the impact of the change on its customers.
Information after point of sale
Looks at a bancassurer which encourages staff to keep customers as the focal point of their work. The firm reviews its business processes, its ideas about a range of communications, customers' needs, staff training and handling external changes, for senior management to consider.
Managing conflicts of interest
looks at a stockbroking firm that offers investment advice to private clients as well as undertaking research, to consider how conflicts can be managed.
Controls within networks
uses the example of a network of financial advisers, to consider the measures a firm might implement to ensure that its appointed representatives act in accordance with the firm's TCF obligations.
Managing unexpected events
concerns a small product provider that discovers it has a problem with a legacy system which could have led to an investment product being mis-sold, and reviews how the firm assesses the scale of the problem and addresses it.
Complaints handling
looks at how a firm of independent financial advisers developed a more effective approach to complaints handling.
Remuneration of staff and management
considers how a bank's remuneration structure could incentivise its staff in the wrong way. It suggests reward structures that might encourage more TCF compatible behaviour by staff.
Management Information (MI)
explores how a composite insurer undertakes an assessment of the information it needs and how it will collect and use it.
Closing a with-profits fund
concerns how a life insurer might address the concerns of its with-profits policy holders when it decides to close its with-profits fund.