This follows the FCA's 2025 Mansion House commitment to the Chancellor to address concerns about the Duty being applied to firms with limited impact on retail outcomes.

Importantly, this isn't a narrowing of the Duty's purpose. The FCA is clear it still wants strong outcomes for retail customers, just applied more proportionately and predictably.

As always, we've taken a deep dive into the paper. So here's what the FCA's proposal on Consumer Duty scope & proportionality (CP26/23) means for firms, and what to do next. ‍

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What does CP26/23 cover?

The proposals bring together several strands aimed at giving firms greater clarity and confidence about when the Duty applies and how far their obligations extend.

The consultation proposes:

• Limiting the Duty's territorial scope to retail customers usually resident in the UK, mirroring the approach in CP26/22 for insurance, with some exceptions remaining

• Clarifying core scope concepts including "retail market business" and "material influence", and introducing a clearer distribution chain framework with new principal and secondary manufacturer categories, replacing the unclear "co-manufacturing" concept

• New exclusions for activities judged too remote from retail outcomes to warrant Duty application, including market making, merchant acquiring, ESG ratings provision, most custody and depositary roles, safeguarding accounts, and Lloyd's itself (though managing agents remain in scope)

• Clarifying proportionate application for firms further along distribution chains: firms are only responsible for their own role, can reasonably rely on other firms' information, and can take a more streamlined approach to information-gathering and board reporting

• Clarifying how the Duty interacts with PROD 3 and the CCI disclosure regime for retail investment products, largely maintaining the current framework but easing the reporting and duplication burden

• Several technical clarifications and corrections to existing Duty rules and guidance, including removing the outdated "Board champion" requirement and restating the £50k-per-investment wholesale exclusion

The FCA is consulting on these proposals until 18 September 2026, with final rules expected in Q1 2027. ‍

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What do firms need to do?

Throughout the paper, the message is one of proportionality: firms should focus their compliance effort on the areas where they genuinely influence retail customer outcomes, and review where they may have been applying the Duty more widely than necessary.

Firms with retail customers or business outside the UK should start by mapping which parts of their business would fall outside the Duty's territorial scope under the new rules, while those in multi-party distribution chains should review their role against the new principal and secondary manufacturer definitions. ‍

In short, actions for firms on the back of CP26/23:

• Map your business against the new territorial scope for UK-resident retail customers

• Review your role in any distribution chains against the new principal/secondary manufacturer definitions, and update manufacturer agreements accordingly

• Review current information-gathering and monitoring practices with other firms in the chain, looking for opportunities to streamline rather than duplicate

• Review Board Duty reporting and consider whether a standalone report is still necessary or can be folded into existing governance reporting

• If you manufacture retail investment products, check how you're currently evidencing the price and value outcome against PROD 3 and CCI requirements to avoid unnecessary duplication

• Consider responding to the consultation by 18 September 2026 if the proposals affect your business model
  

In practice, this could mean firms updating documentation, and stepping back to reassess where their influence over retail outcomes lies, and scaling back processes that go beyond what the Duty actually requires. ‍

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Key takeaways

This is about proportionality, not deregulation. The FCA is doubling down on Consumer Duty outcomes for UK retail customers while cutting the compliance overhead for firms with limited or remote influence on those outcomes.

Firms that have been erring on the side of caution, with wide Duty application, heavy board reporting, or extensive information requests, stand to gain the most from reviewing their approach now.  

Getting the distribution chain mapping and manufacturer classification right early will save considerable rework once the Policy Statement lands in Q1 2027. ‍

Need a hand?

As always, our expert team is here to help, and we love to talk compliance.

If you have questions about how the FCA's proposals on Consumer Duty scope may affect your firm, or need guidance reassessing how the Duty applies to your business, book a call now.  

Let’s chat!

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