(3 min read)
Consumer Duty continues to represent a significant shift in regulatory expectations and remains a key focus for the Financial Conduct Authority (FCA). Recent FCA publications have provided further clarity on the expectations for firms involved in the design and distribution of products and services, with a particular emphasis on the requirement to deliver ‘fair value’ to customers. In the article below we break down the FCA’s key expectations for firms and what this means in practice.
On 8 December 2025, the Financial Conduct Authority (FCA) published a statement on firms working together to manufacture products or services under Consumer Duty. In the article below we break down the FCA’s key expectations for firms and what this means in practice.
Background and scope
The FCA’s statement was issued in response to concerns from some firms struggling to apply the Consumer Duty rules in situations where they act as co-manufacturers of a product or service. In particular, firms have faced challenges in determining which parties are subject to the rules and in understanding how the Duty affects their interactions with one another. The statement itself does not outline any new requirements but aims to provide further clarification on the application of PRIN 2A.3 (products and services) and PRIN 2A.4 (price and value) for firms that co-manufacture products or services for retail customers. The statement does not apply to the insurance sector, where PROD 4 rules are applicable. The FCA states that they will be introducing separate changes for the insurance manufacturer rules. The FCA's clarification on its position in respect of the Consumer Duty rules is based on the position where the firms in question are Authorised or subject to comparable regulations for multiple manufacturers under a designated activities regime, such as Consumer Composite Investments. The FCA has indicated within this statement that it will build on this approach in 2026 when it will undertake a review and subsequent consultation on amendments to the Consumer Duty rules.
Key takeaways for co-manufacturers
The FCA requires firms that work together to support good customer outcomes. Where more than one authorised firm is involved in manufacturing a product or service, the FCA expects a written agreement to be in place which clearly sets out the effective and appropriate allocation of responsibilities reflecting the actual role of each firm. In practice, an existing agreement or contract between the firms can fulfil this expectation. The FCA does not think it is necessary for firms to duplicate effort or oversee each other’s activities.
- Decision making: The FCA does not require firms working together as co-manufacturers to engage in joint decision making. Where each firm's role is distinct, it may be appropriate to keep responsibilities and decision making separate. Responsibilities and decision making should be agreed between co-manufacturers and records maintained of the position.
- Allocation of responsibility: Responsibilities do not need to be allocated evenly between co-manufacturers. The allocation should reflect the role played by each firm as a co-manufacturer.
- Liability: A firm is generally only liable for remedial action in respect of harm it has caused. However, in some cases, regulatory requirements or contracts might mean a firm is responsible or liable for harm caused by another firm in the distribution chain, such as:
- Where firms outsource activities to third parties, they remain responsible for compliance under the FCA’s Senior Management Arrangements, Systems and Controls sourcebook (SYSC). In other words, under SYSC the outsourcing firm will be accountable for compliance with the regulatory responsibilities relative to the outsourced activity or service. They should also consider the Duty when deciding to outsource activities. For example, a firm should consider if outsourcing customer servicing could have a negative impact for customers. Where the outsourced firm is also an Authorised entity, both firms will have responsibilities under the Consumer Duty.
- In line with guidance on the use of third-party tools to fulfil part of their own obligations under the FCA’s rules and FG11/05, firms remain responsible for meeting those rules. Firms should use a tool only where they are satisfied that it provides outputs that are appropriate and fit for purpose.
- Under the products and services outcome and the price and value outcome, firms must have regard to the wider distribution chain for products and services. For instance, a manufacturer should consider how it expects a product to be sold and regularly monitor the product and its distribution over time.
- Principal firms are required to oversee the actions of their appointed representatives, as set out in the Supervision Manual of the FCA’s Handbook (SUP), and should check they comply with the Duty when doing so.
- Principal payments and e-money firms are responsible for the actions of their agents and distributors, as set out in the Electronic Money Regulations 2011 and the Payment Services Regulations 2017. FCA expects them to have appropriate systems and controls in place to oversee their agents’ and distributors’ activities effectively. As part of this, they should comply with the Duty.
