Clause 37 - Duty to co-operate and consult in exercising functions

Financial Services and Markets Bill – in a Public Bill Committee at 3:00 pm on 27th October 2022.

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Question proposed, That the clause stand part of the Bill.

Photo of Andrew Griffith Andrew Griffith The Financial Secretary to the Treasury, The Economic Secretary to the Treasury

The clause will insert proposed new section 415C into FSMA. The new section introduces a statutory duty for the Financial Conduct Authority, the Financial Ombudsman Service and the Financial Services Compensation Scheme to co-operate on issues that have significant implications for each other, or the wider financial services market.

The FCA is the conduct regulator for the financial services sector; the FOS is an alternative dispute resolution service for financial services complainants, such as consumers and smaller businesses; and the FSCS provides financial protection for eligible customers of financial services firms authorised by the FCA. While each has a distinct role within the UK’s regulatory architecture, the work of each organisation will often be relevant to, or have implications for, the others. When issues with wider implications emerge, it is crucial for the functioning of the UK’s regulatory system and achieving the best outcomes for consumers that those organisations co-operate to determine the most appropriate approach to managing them. The organisations already co-operate voluntarily through the wider implications framework. That voluntary framework was launched in January 2022 to promote effective co-operation on wider implication issues.

Clause 37 will enhance that co-operation and ensure that these arrangements endure over time. It will also ensure that the FCA, the FOS and the FSCS put appropriate arrangements in place for stakeholders to provide representations on their compliance with the new duty to co-operate on matters with wider implications.

I will now set out some of the detail of how the clause will function in practice. Proposed new section 415C(3) requires that each regulator maintains a statement of policy explaining how it will comply with this duty. Proposed new subsection (1)(b) requires that those organisations consult other organisations as appropriate, including other regulatory bodies, on wider implication matters. Proposed new subsection (6)(a) requires that they publish an annual report on their compliance with the duty, and proposed new subsection (7) requires that they outline representations received from stakeholders on their compliance with the duty to co-operate on wider implication issues.

Ultimately, this clause will support better outcomes for financial services firms and consumers by maximising collaboration among the FCA, the FOS and the FSCS on issues with wider implications. I have summarised the effects of the clause, and I therefore recommend that it stand part of the Bill.

Question put and agreed to.

Clause 37 accordingly ordered to stand part of the Bill.