Divergence between FCA regulations & guidance?

To the extent there is any divergence or tension between FCA regulation and guidance, it is generally better understood as a practical feature of the regulatory system rather than as a conflict between the two.

First, firm-specific guidance will necessarily be shaped by the particular facts, business model and risk profile of the firm in question, whereas FCA rules and regulations have to be broad enough to apply across a wide range of financial services firms and products.

Second, in fast-developing areas such as cryptoassets and the incorporation of AI, market practice can move faster than any regulator’s ability to provide fully proactive guidance on every emerging use case. In those circumstances, insurers and other financial service firms often need to apply broad, outcomes-based frameworks, including the Consumer Duty and SM&CR, while the FCA consults, reviews market developments and refines its supervisory expectations.

The practical task for firms is therefore to translate rules, guidance, consultations, speeches and enforcement signals into a documented, risk-based governance framework, with a clear record of why the firm’s interpretation was reasonable in light of the information available at the time. This can be a significant practical burden, particularly when firms are approving AI tools, digital distribution models, cryptoasset-related activity or new claims processes, but liability risk usually arises from weak governance, poor controls or adverse customer outcomes rather than from regulatory uncertainty alone.

These issues are routinely discussed with regulators and government through consultations, reviews and industry engagement, including the FCA’s AI work and insurance-sector review of AI in underwriting, claims and consumer services.