PRIN 2A.9 – Monitoring Consumer Outcomes
PRIN 2A.9 sets out how financial firms must monitor the outcomes their retail customers receive. The rules ensure that firms actively track whether they’re delivering good results for customers and take action when they’re not. These monitoring requirements are designed to be proportionate to each firm’s role in the distribution chain and the products they offer.
General Principles
Purpose of Monitoring The monitoring obligation exists to help firms identify whether they might be failing to meet their cross-cutting obligations and retail customer outcomes. This enables them to spot risks early and ensure they’re acting to deliver good outcomes for retail customers.
Tailored Approach How often a firm monitors, and what information they collect, depends on several factors: the type of firm, their role in getting products to customers, the nature of the products themselves, and who the target customers are.
Proportionate Application (Rule 2A.9.1) The monitoring rules apply proportionally based on where a firm sits in the distribution chain. If a firm doesn’t deal directly with retail customers, they should still monitor the outcomes of the services they provide, taking into account any information they have about what retail customers experience at the end of the chain.
Reasonable Information Gathering (Rule 2A.9.2) Firms that don’t have direct customer contact should make reasonable efforts to obtain information about the outcomes experienced by retail customers of the products they’ve distributed.
Integration with Other Requirements Where firms are already required to carry out specific monitoring or reviews under other outcome rules (PRIN 2A.3 to PRIN 2A.6), these activities count towards the general monitoring required here. Firms can use information gathered through these existing processes for their reporting under PRIN 2A.8.3R.
Communications Monitoring For communications specifically, rules PRIN 2A.5.10R to PRIN 2A.5.14R set out detailed requirements for testing and monitoring communications with customers.
Using Existing Compliance Work Where a firm’s compliance with other rules either replaces or demonstrates compliance with PRIN 2A provisions, the firm can use any monitoring or reviews carried out under those other rules to meet their monitoring obligations here.
Core Monitoring Requirements
What Must Be Monitored (Rule 2A.9.8R) Firms must regularly monitor the outcomes retail customers receive from:
- The products the firm manufactures or distributes
- The communications the firm has with retail customers
- The customer support the firm provides to retail customers
Key Assessment Areas (Rule 2A.9.9R) The monitoring must enable firms to determine at least whether:
- Retail customers are being sold products designed to meet their needs, characteristics and objectives
- The products customers purchase provide fair value, and appropriate action has been taken to address products that don’t provide fair value
- Retail customers have the right information to make effective, timely and properly informed decisions
- Retail customers receive the support they need
Additional Identification Requirements (Rule 2A.9.10R) The firm’s monitoring must also identify:
- Whether the firm is complying with Principle 12 and the cross-cutting obligations in PRIN 2A.2
- Whether any group of retail customers is experiencing different outcomes compared to another group of retail customers for the same product
- Whether any retail customers have suffered harm as a result of the firm’s actions or failures to act
Required Actions
Root Cause Analysis (Rule 2A.9.11R) Firms must have processes in place to identify the root causes of any failure to deliver the outcomes listed in PRIN 2A.9.9R for retail customers.
Corrective Action (Rule 2A.9.12R) Where a firm identifies any of the following, it must take appropriate action to address the situation:
- Retail customers are not receiving the required outcomes, or there’s a risk they won’t receive these outcomes
- Any group of retail customers for a product are receiving worse outcomes than another group of retail customers for the same product
- The firm is not complying with Principle 12 and the cross-cutting obligations in PRIN 2A.2
Limitation on Action Required (Rule 2A.9.13R) However, PRIN 2A.9.12R doesn’t require firms to take action to remove the effects of risks that are inherent in a product, provided the firm reasonably believed the retail customer understood and accepted these risks.
Guidance on Appropriate Action (Rule 2A.9.14R) When considering what constitutes appropriate action under PRIN 2A.9.12R, firms should refer to the guidance in PRIN 2A.10.