PRIN 2A.10 – Redress and Appropriate Action
PRIN 2A.10 ensures that firms take proper action to investigate, assess, and remedy any harm they have identified, whether or not a customer has made a formal complaint. These provisions are designed to create a proactive duty of care, requiring firms to act fairly and transparently when dealing with customer harm.
Rule PRIN 2A.10.1R – Purpose
Rule Reference: PRIN 2A.10.1R
This section sets out what firms must do when they identify that they have caused foreseeable harm to retail customers.
Rule PRIN 2A.10.2R – Appropriate Action Requirements
Rule Reference: PRIN 2A.10.2R
When a firm is deciding what action to take under PRIN 2A.2.5R, they must follow these requirements:
When a Complaint Has Been Received
If a retail customer has already made a complaint (including MiFID complaints), the firm must handle it according to the existing complaint handling rules in DISP.
When No Complaint Has Been Received
If no complaint has been made, firms must still take action following these modified requirements:
Investigation and Assessment Duties
For MiFID Investment Firms (Modified DISP 1.1A.20R):
Once a MiFID investment firm identifies foreseeable harm, they must:
- Investigate thoroughly – Look into what caused the harm in a competent, careful, and unbiased way, gathering any additional information needed.
- Assess the situation fairly by evaluating:
- What the harm actually involves
- What remedial action or compensation might be appropriate
- Whether another firm might be solely or jointly responsible for causing the harm
- Act promptly on any remedial action or compensation that the retail customer accepts.
Assessment Factors for MiFID Firms
Guidance (Modified DISP 1.1A.21G):
When assessing the harm, MiFID firms should consider:
- All available evidence and the specific circumstances
- Similar complaints they’ve received and other instances where they’ve caused harm without receiving complaints
- Relevant guidance from the FCA, other regulators, and the Financial Ombudsman Service
- Analysis of Financial Ombudsman Service decisions on similar cases
General Firm Requirements
For All Other Firms (Modified DISP 1.4.1R):
When any firm identifies foreseeable harm, they must:
- Investigate competently – Examine what led to the harm thoroughly, fairly, and without bias, obtaining additional information as needed.
- Make fair assessments considering:
- The nature of the harm
- What remedial action or compensation would be appropriate
- Whether another firm shares responsibility for the harm
- Offer appropriate redress when they determine it’s warranted.
- Communicate clearly with the customer by explaining:
- That harm has been identified
- Their assessment of what happened
- What action they plan to take
- That the customer has the right to make a complaint if unsatisfied
- Follow through promptly on any remedial action or compensation the customer accepts.
Assessment Considerations for All Firms
Guidance (Modified DISP 1.4.2G):
When assessing harm, firms should take into account:
- All available evidence and specific circumstances
- Patterns from complaints they’ve received and other harm they’ve caused
- Published guidance from regulators and ombudsman services
- Relevant Financial Ombudsman Service decisions on similar cases
Rule PRIN 2A.10.3R – Notification When No Direct Contact
Rule Reference: PRIN 2A.10.3R
When a firm has caused harm to retail customers but doesn’t have a direct relationship with them or means to contact them, the firm must take all reasonable steps to notify those customers about the matters described above.
Rule PRIN 2A.10.4G – Reasonable Steps Guidance
Rule Reference: PRIN 2A.10.4G
“Reasonable steps” for contacting customers might include contacting the distributor of the relevant product and asking them to pass information on to the retail customer.
Rule PRIN 2A.10.5R – Notifying Other Firms
Rule Reference: PRIN 2A.10.5R
When a firm identifies that a retail customer has been harmed but determines that another firm in the distribution chain was solely or jointly responsible for that harm, they must promptly notify that other firm and provide appropriate information about the harm caused.