Following consultation and feedback on smarter consumer communications, the FCA has recently announced it is doing away with the templates for the initial disclosure document, the combined IDD and the services and costs disclosure document.
These were the key documents in the regulator’s approach to making the disclosure of vital information more effective in the interests of raising consumer awareness of cost and service.
In October 2015, FCA director of strategy and competition Christopher Woolard said: “We would like to see firms changing the way they interact with customers. We have been encouraged to see a number of firms are already doing this.”
He also stated: “[this] announcement reflects our commitment to sustainable regulation and addresses disclosures that are not working for consumers, giving firms the freedom to communicate with their customers in a more flexible and open way.”
This is something the intermediary community has long thought necessary and, at first glance, it is potentially good news.
However, the abolition of these templates, which will happen towards the end of March, does not mean the information contained within them need not be disclosed. It just means the use of the IDD, CIDD or SCDD will not be permitted in their present format.
The template documents themselves will disappear, although firms will still be able to use the same layout but without using a Keyfacts logo. The FCA’s desire to avoid a “box-ticking” exercise and duplication of information (which is what it fears has happened with a number of firms) means there will be no ready-made checklist of information that needs to be disclosed.
This all sounds very sensible but, of course, the devil lies in the lack of detail. The FCA’s ultimate objective is for firms to develop better ways of giving consumers critical information. However, with no checklist to follow, firms that have previously relied on the CIDD or SCDD will need to fully understand the Cobs (and Icobs and Mcobs) requirements and ensure all the information the FCA expects to be disclosed is disclosed, and in a format likely to be understood by the consumer.
So will this lead to consumers not receiving all the information they require? Hopefully not. But there is a risk it could be spread around various communications. This could lead to firms being accused of hiding key details among other information provided. With this in mind, the format in which the required disclosures are set out must be considered carefully by each firm.
Another potential consequence of the FCA’s drive to provide more effective communications is the ability of firms to be able to deliver information in innovative ways, using new technologies and communication platforms and forums.
The removal of these specified disclosure document templates could open the door to other media. However, at present, this is largely restricted to the current “durable medium” interpretation, potential changes to which (within the confines of the EU legislation that gave rise to the term) the FCA expects to consult on in 2017.
As ever, the regulatory responsibility pendulum swings more towards the firm and away from the regulator. Who is to say a particular disclosure format is in fact clear, fair and not misleading if it is not in the format of a SCDD or CIDD? Who is to say the disclosure is full and comprehensive, covering everything needed? Well, the FCA for one. Firms must tread carefully once released from the restrictions of these disclosure documents.
Simon Collins is managing director, regulatory, at Eversheds Consulting