The FCA’s Enforcement Watch 2 and what it means for the financial services industry

On 7 July 2026, the FCA published its second Enforcement newsletter – ‘Enforcement Watch 2’ (‘EW2’). In this second edition, the FCA focuses in particular on its recent approach to supervising and enforcing the Consumer Duty.

The publication of EW2 emphasises the FCA’s high expectations for firms to identify and prevent harm from occurring and to provide evidence of good consumer outcomes. With three years having passed since the Consumer Duty came into force, the FCA now has live 11 investigations into potential breaches of it (up from the five that were mentioned in  EW1). This suggests that that consumer outcomes are an increasing area of focus for the FCA and that it is prepared to use its Supervisory and Enforcement tools where firms fail to adequately comply with the high standards set by the Duty.

The FCA’s Enforcement Focus

EW1, published on 28 January 2026, covered (i) the FCA’s updated enforcement policy; (ii) the regulator’s case priorities; and (iii) its international partnerships.

EW2 focuses on similar themes, but places additional emphasis on the ever-expanding role of supervisory intervention as both a precursor, and sometimes an alternative, to Enforcement. The FCA explains that interventions are often the starting point for firms to remedy their issues or to exit the market if they cannot. Once an intervention has been carried out, the FCA will typically continue supervisory engagement with the firm, including ensuring that any deficiencies are remedied and that any restrictions put in place are complied with. Within the last financial year alone, the FCA conducted 382 interventions; as such, firms need to be aware of the risk of these and should be taking proactive steps where there are weaknesses in their risk and compliance frameworks. 

In the specific context of the Consumer Duty, the FCA has provided various examples of its recent interventions, including:

• reviewing insurance firms’ valuation of vehicles, with around 270,000 motorists expected to receive up to £200m in redress.
• inviting a financial advice firm to sign an asset restriction voluntary requirement (VREQ) and an undertaking to inform clients who had purchased shares in the firm. It appeared that the firm had not properly considered conflicts of interest, client categorisation and the Consumer Duty. The firm agreed to buy back the shares in line with a Financial Ombudsman Service decision awarding redress to one of the shareholders.
• inviting a wealth management firm to sign a VREQ stopping it from conducting regulated activities due to concerns about the firm’s compliance with the Consumer Duty, among other issues. The FCA were concerned that the firm may not be acting in good faith towards retail customers and that it may not be avoiding causing foreseeable harm.

As with EW1, EW2 stresses the importance of proactivity on the part of both individuals and firms to deal with problems quickly and effectively and to be transparent with the regulator. This is unsurprising given the FCA’s increasingly assertive supervisory approach and clear supervisory expectation that firms properly manage and mitigate risk and maintain an open and constructive relationship with the FCA.

In assessing whether to open an enforcement investigation, the FCA has explained that it considers factors including their regulatory priorities, the seriousness of the misconduct, the harm (or potential harm) it has caused, and whether other regulatory responses might be more effective.

Open Operations

The FCA’s current enforcement portfolio of 11 open Consumer Duty operations covers a wide range of sectors, involving firms in the insurance, pensions, wealth management, consumer investments, peer-to-peer lending and claims management industries, and includes in particular:

• an investigation into an IFA over whether it breached the Consumer Duty by not carrying out or documenting assessments to ensure it provided fair value to its customers. The firm agreed to several restrictions, including remediation steps, and agreed to cease regulated activity.
• two investigations concerning operational and oversight failures. The failures stopped consumers from being able to access their account information and delayed the handling of customer complaints. The FCA’s Supervision team referred these firms to Enforcement because of the ongoing and potentially serious nature of the perceived harm to many consumers. 
• two investigations relating to claims management companies in the motor finance sector. In both cases, the FCA has taken the unusual step of announcing the investigations. This is to allow the respective firms’ customers to consider their options, including whether to complain to the firms and the Claims Management Ombudsman about their individual customer experiences.

In several cases, the FCA has also reported that it is investigating whether consumers received ‘fair value’ for a product or service. In this context, the FCA is clear that value and price are not interchangeable terms and that a product or service that does not meet any of the customer’s needs, which causes foreseeable harm, or frustrates their objectives, is unlikely to offer fair value whatever the price. Similarly, a product or service that has negligible or no obvious benefit for consumers is unlikely to provide fair value regardless of its pricing.

However, it is not just price and value that the FCA is interested in. The broad cross cutting nature of the Consumer Duty means that different considerations often overlap, and a product or service may comply with in some respects but fall short in others. In light of this, the FCA is clear that it will assess a range of factors when considering compliance with the Duty, which include:

• whether the product was designed with its target market in mind;
• whether it delivers fair value;
• whether the features of the product or service, including benefits and exclusions, were made clear to customers before, during and after sale to help them make an informed choice about purchasing or continuing with the product or service; and
• what support was given to customers when things go wrong.

What can we take from this?

It is clear that the FCA is increasingly using supervisory intervention and enforcement in tandem to achieve its operational objectives and the two are symbiotic rather than being an either / or concept.

Whilst the Consumer Duty is certainly not the FCA’s sole supervisory and enforcement focus, it does very much appear to be at the forefront of the regulator’s current operational approach. Any firm that deals with retail customers needs to understand what the Consumer Duty means for them and ensure that they are putting such customers at the heart of their businesses. A failure to do so can have very serious consequences.

Please contact Jill Lorimer and James Alleyne in our Financial Services group if you have questions about the topic raised in this blog. Our team of expert lawyers has an impressive track record of successfully advising regulated firms on supervisory issues as well defending both individuals and institutions facing regulatory or criminal investigations conducted by the FCA.