PRIN 2A.8 Governance and Culture
The PRIN 2A.8 rules establish how financial firms must embed good customer outcomes into their corporate governance, leadership structures, and staff incentives. These regulations ensure that treating retail customers fairly becomes a core part of how firms operate at every level, from boardroom strategy to frontline staff performance management. The rules require firms to demonstrate through regular reporting and board oversight that they are consistently delivering positive outcomes for their retail customers.
The Rules Explained
PRIN 2A.8.1R – Governance, Strategy and Policies
Firms must make sure that Principle 12 (treating retail customers fairly) and all the obligations in this chapter are built into their:
- Strategic planning and decision-making processes
- Corporate governance structures
- Leadership approaches and management systems
- People policies, including how staff are incentivized at every level of the organization
Additionally, firms must ensure that achieving good outcomes for retail customers becomes a central focus of their business operations.
PRIN 2A.8.2G – Staff Incentives
Firms should not design or use staff incentive schemes, performance management systems, or pay structures in ways that work against their duty to treat retail customers fairly under Principle 12 and PRIN 2A.
Firms need to recognize that poorly designed incentive structures can actually cause harm to retail customers. Therefore, they should carefully design these systems to support and encourage good customer outcomes rather than undermine them.
PRIN 2A.8.4R – Governing Body Report (Annual Requirements)
At least once every year, a firm’s governing body (typically the board of directors) must:
- Review and approve the firm’s comprehensive report on what outcomes retail customers are actually receiving from the firm’s products and services
- Confirm their satisfaction that the firm is properly complying with its obligations under Principle 12 and all the requirements in PRIN 2A
- Assess and evaluate whether the firm’s future business strategy aligns with and supports its obligations under Principle 12 and PRIN 2A
PRIN 2A.8.5R – Action Planning Requirements
When the governing body approves the customer outcomes report required under PRIN 2A.8.4R(1), they must also formally agree on:
- Risk mitigation actions – Any steps needed to address identified risks that could prevent retail customers from receiving good outcomes
- Remedial actions – Any measures required to fix situations where retail customers have already received poor outcomes
- Strategic amendments – Any necessary changes to the firm’s business strategy to ensure it continues to support the firm’s obligations under Principle 12 and PRIN 2A