UK: FCA updates guidance on when to make a notification

Why should I read this?

The FCA’s recent consultation on modernising the redress system (CP26/9, discussed in our recent briefing) includes a policy statement which makes important changes to the notifications guidance in chapter 15 of the Supervision module of the FCA Handbook (SUP 15).  The FCA is introducing new guidance on when firms should consider notifying the FCA of potential recurring or systemic redress issues.

The effect of the changes is to expand the circumstances in which firms will need to consider making a Principle 11 notification in relation to customer loss and redress issues.  The new guidance comes into force on 1 June 2026, which gives firms little time to prepare for the change.

What does the new guidance say?

Principle 11

SUP 15 sets out guidance on making notifications to the FCA.  This includes notifications under Principle 11, the broad obligation on firms to deal with the FCA in an open and cooperative way and to disclose to the FCA appropriately anything relating to the firm of which the FCA would reasonably expect notice.

Existing guidance

Existing guidance in SUP 15.3.8 G states that compliance with Principle 11 includes giving the FCA notice of (i) significant issues relating to a firm’s restructuring, reorganisation or business expansion, (ii) significant failures in a firm’s systems and controls, and (iii) changes which would have a material impact on a firm’s capital adequacy or solvency.

New guidance

The FCA is expanding these categories to include customer loss and redress issues.  From 1 June 2026, new guidance in SUP 15.3.8(4) G means that, to comply with Principle 11, firms will also need to consider giving the FCA notice of any circumstances that, in the firm’s view:

• may adversely impact at least 40% of the customers of a financial service or product that the firm provides or may provide to those customers;
• may lead to the firm paying a significant total financial sum in redress if the firm or the Financial Ombudsman Service upholds a complaint made against the firm, or a court upholds a claim relating to a complaint made against the firm;
• may lead to the firm paying financial sums in redress that will negatively impact the firm’s capital adequacy or solvency;
• has led, or may lead, to a comparatively high number of complaints received by the firm in relation to a financial service or product; or
• may lead to substantial financial loss for two or more consumers of a financial service or product.

Definitions

Key terms in the new guidance are defined as follows:

• ‘significant total financial sum’ means it appears a firm will need to pay either (i) £10 million or more, or (ii) 50% of its annual revenue for the last financial year in respect of the relevant financial service or product (SUP 15.3.8A G);
• ‘comparatively high number of complaints’ means where, taking into account the firm’s size and number of customers in relation to any financial service or product:
• the firm records an increase in the number of complaints received in respect of that service or product as compared to the number of such complaints received in the firm’s previous report to the FCA in accordance with the complaints reporting rules in DISP 1.10; and
• the increase, in the opinion of the firm, demonstrates potentially recurring or systemic problems in its provision of, or failure to provide, a financial service or product (SUP 15.3.8B G);
• ‘substantial financial loss’ means it appears that an individual consumer would lose more than £10,000 (SUP 15.3.8C G).

What does this mean for firms?

Regulatory notifications can be a complex area for firms to navigate, and the new guidance will only add to this complexity.  When dealing with customer complaints or redress issues, firms will need to consider whether the Principle 11 notification thresholds in SUP 15.3.8(4) G have been or are likely to be met.  Where the issue has or may have a serious regulatory impact, an immediate notification will be required in accordance with SUP 15.3.1 R.

The threshold for notifying ‘substantial financial loss’ (two or more customers losing more than £10,000 each) will have a material impact on firms in the asset management, wealth management, and pensions sectors, as individual customer losses in those sectors are generally higher due to the nature of the products and services involved. This will inevitably lead to an increase in Principle 11 notifications by firms in those sectors.

The FCA also expects firms to consider making a notification “even where the associated threshold is not met, for instance any borderline issues or issues that otherwise fall below the threshold”.  This is to ensure that the FCA is made aware of issues that may indicate a recurring or systemic problem.  In such cases, firms will need to exercise careful judgment and seek advice if they are unsure of whether to notify.

The new guidance has been finalised and will take effect from 1 June 2026.  The FCA has stated in CP26/9 that it will “continue to collect evidence from SUP 15 notifications to help indicate if additional guidance for specific sectors may be needed in future”. Given that the FCA appears open to the idea of further guidance in this area, firms and trade associations should consider engaging in dialogue with the FCA about introducing further, more practical guidance tailored according to firm size, business model, and sector.

How ES can help

Eversheds Sutherland’s Financial Services sector teams have specialist knowledge of FCA and PRA regulation.  We can advise firms on:

• your regulatory obligations;
• compliance with regulatory requirements;
• how to manage your relationship with the regulators; and
• what to do when things go wrong.

Further reading on financial services regulation

FOS Reform: From Review to Action

Policy Statement 26/3 – Motor Finance Consumer Redress Scheme

Year 2 Consumer Duty Board Reports: progress and what comes next

Consumer Duty: FCA review of the consumer understanding objective