FCA Principles: The 12 Rules, Consumer Duty, and Who Must Comply

The Financial Conduct Authority sets twelve principles for businesses that sit at the top of the FCA Handbook and apply to every authorised firm in the UK. They are found in PRIN 2.1 and cover how firms run themselves, how they treat customers, and how they behave in the markets. Unlike detailed technical rules, the principles are written as outcome-focused standards, and the FCA can take enforcement action against a firm for breaching one even when no specific rule was broken.¹

The Twelve Principles in Plain Terms

The Handbook lists them in order. Each has the force of a rule.

Principle 1, Integrity. A firm must conduct its business with integrity.
Principle 2, Skill, care and diligence. A firm must act with due skill, care and diligence.
Principle 3, Management and control. A firm must organise and control its affairs responsibly and effectively, with adequate risk management systems.
Principle 4, Financial prudence. A firm must maintain adequate financial resources.
Principle 5, Market conduct. A firm must observe proper standards of market conduct.
Principle 6, Customers’ interests. A firm must pay due regard to the interests of its customers and treat them fairly.
Principle 7, Communications with clients. A firm must pay due regard to the information needs of its clients and communicate in a way that is clear, fair and not misleading.
Principle 8, Conflicts of interest. A firm must manage conflicts of interest fairly, both between itself and its customers and between one customer and another.
Principle 9, Customers: relationships of trust. Where a customer is entitled to rely on the firm’s judgement, the firm must take reasonable care to ensure the suitability of its advice and discretionary decisions.
Principle 10, Clients’ assets. A firm must arrange adequate protection for clients’ assets when it is responsible for them.
Principle 11, Relations with regulators. A firm must deal with its regulators in an open and cooperative way, and disclose anything the FCA would reasonably expect notice of.
Principle 12, Consumer Duty. A firm must act to deliver good outcomes for retail customers.

The first eleven have been in place since the framework was established under the FCA’s predecessor, the Financial Services Authority. Principle 12 was added in 2022.¹

Why a Principle Breach Can Cost a Firm Millions

Because the principles are enforceable in their own right, the FCA does not need to prove that a technical rule was broken to take action. A firm that follows every line of a detailed regulation but still causes harm to customers, mismanages its operations, or fails to cooperate with the regulator can be fined for breaching a principle on its own.²

The 2025 fines give a sense of scale. Nationwide Building Society was fined over £44 million for failures linked to management and control under Principle 3. Barclays was penalised £39 million over inadequate anti-money laundering controls, tied to Principle 2. Monzo received a £21 million fine for similar organisational failures.³

Fines are not the only tool. The FCA can also publicly censure a firm, vary or cancel its permissions, prohibit individuals from working in regulated financial services, and seek court injunctions to freeze assets or halt ongoing misconduct.²

Principle 12 and the Consumer Duty

Principle 12 goes further than the customer-facing principles that came before it. Principles 6 and 7 asked firms to “pay due regard” to customers’ interests and information needs. The Consumer Duty requires firms to actively deliver good outcomes. That shift matters in practice, because “due regard” allowed firms to argue they had considered the customer even when the customer ended up worse off. Under Principle 12, the outcome itself is the measure.¹

Where the Consumer Duty applies to a retail customer relationship, Principle 12 has broader application than Principles 6 and 7, and it is the standard the firm will be judged against. Three cross-cutting rules sit under it: firms must act in good faith toward retail customers, avoid causing foreseeable harm, and enable customers to pursue their financial objectives. Compliance is then assessed across four outcome areas: products and services, price and value, consumer understanding, and consumer support.

The FCA’s existing guidance on customers in vulnerable circumstances (FG21/1) sits alongside the Duty. The regulator has said it is not relaxing expectations here, and has found that consumers with multiple characteristics of vulnerability still experience worse outcomes than others.⁴

Who the Principles Apply To

PRIN applies to every firm authorised by the FCA, with only narrow exceptions for specific activities such as auction regulation bidding. That reach covers banks, building societies, insurers, investment firms, payment processors, electronic money institutions, and authorised fintech businesses.⁵

Firms that are not directly authorised can still carry out regulated activities as Appointed Representatives, working under the authorisation of a principal firm. The principal firm is responsible for making sure its representatives comply with FCA rules, and if an Appointed Representative breaches a principle, the principal firm faces the regulatory consequences.⁶

Territorial reach varies by principle. Principle 4 (financial prudence) applies to a firm’s activities worldwide. Principles 1 to 3 apply worldwide in a prudential context but are otherwise limited to activities carried out from a UK establishment. Principle 5 (market conduct) applies worldwide where activities could undermine confidence in the UK financial system.⁵ The Consumer Duty generally applies to activities involving retail customers located in the UK, with the exact reach for overseas firms depending on the activity. Firms in the Temporary Permissions Regime are subject to the Duty whether they operate from a UK or cross-border basis.

Personal Liability Under the Senior Managers Regime

The principles do not stop at the firm as a legal entity. Through the Senior Managers and Certification Regime, the FCA holds named individuals personally accountable. Every person holding a Senior Management Function must have a written Statement of Responsibilities setting out exactly which parts of the business they oversee.⁷

Under the statutory duty of responsibility, if the firm breaches an FCA requirement, the senior manager responsible for that area can face personal enforcement action unless they can show they took reasonable steps to prevent or stop the breach. Claiming they did not know about the problem is not enough on its own; they need to show the systems, oversight, and controls they had in place.⁷

Nearly all employees within regulated firms are also subject to individual conduct rules. They must act with integrity, act with due skill, care and diligence, be open and cooperative with regulators, pay due regard to customers’ interests and treat them fairly, observe proper standards of market conduct, and, where the Consumer Duty applies, act to deliver good outcomes for retail customers. Breaches can lead to personal fines, public censure, or a ban from working in regulated financial services.⁸

Where Customers Go When a Firm Breaches a Principle

Enforcement action punishes the firm, but individual customers who suffer harm have separate routes to compensation.

The Financial Ombudsman Service handles complaints between consumers and regulated firms. For complaints referred on or after 1 April 2025 about events that occurred from 1 April 2019 onward, the FOS can award up to £445,000. For older events, the cap is £200,000. The Ombudsman can also recommend that a firm pay more than these limits if fairness requires it.⁹

When a firm fails entirely, the Financial Services Compensation Scheme provides a backstop. For firms that failed after 30 November 2025, the FSCS covers deposits up to £120,000 per eligible person, per institution. Investment claims are covered up to £85,000 per eligible person, per firm. The limits apply per institution, so spreading deposits across separate banks increases the total protection available.¹⁰

1
Financial Conduct Authority. FCA Handbook PRIN 2.1 The Principles
2
Financial Conduct Authority. Enforcement
3
Financial Conduct Authority. 2025 Fines
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Financial Conduct Authority. Firms’ Treatment of Customers in Vulnerable Circumstances – Review
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Financial Conduct Authority. FCA Handbook PRIN 3 Rules About Application
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Financial Conduct Authority. FCA Confirms New Rules to Improve Oversight of Appointed Representatives
7
Financial Conduct Authority. Senior Managers Regime
8
Financial Conduct Authority. Conduct Rules
9
Financial Ombudsman Service. Compensation
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FSCS. What We Cover