Communications with customers - out with floppy disks and CD-ROMS and in with websites, emails and apps.
In recently issued guidance, the FCA has updated the forms of media that can be used to provide certain information to customers, termed 'durable medium'. The concept of durable medium was first introduced in the Distance Selling Directive 1997 and the definition has not been updated to reflect the potential use of innovative new media, such as videos or sophisticated internet websites.
Following feedback from the Smarter Consumer Communications Discussion Paper, which also considers the effectiveness of innovative communication techniques, the FCA found that the current definition of 'durable medium' lacked clarity and was out of date.
The concept of durable medium appears in a number of regulations but most pertinent for the insurance market in ICOBs, which provides that certain information can be provided to customers via a durable medium, which in summary is proposed to be defined in the FCA Handbook as paper, or any media which contains information addressed personally to the recipient, if the medium enables the recipient to store information in a way that is accessible for future reference and for a period of time adequate for the purposes of the information (storability) and if the medium allows the unchanged reproduction (reproduction).
References to CD-ROMs and floppy-disks will be deleted from the Handbook definition, although this does not impact the ability of these media to be durable medium.
The guidance then goes on to helpfully explore a number of media forms and their ability to constitute durable medium, specifically mobile and tablet apps, video, interactive and secure websites, emails and PDFs - the overall message is that they are all capable of being a durable medium if the elements of the definition are met.
In truth, the new definition, as stated by the guidance on its own, does not represent a significant change from the previous definition. A more significant revision to durable medium is set out in proposed changes in the FCA's consultation paper on the implementation of the IDD, which we blogged about in April and June. In this paper, the FCA propose that the use of a durable medium other than paper to provide information to a customer will require the customer's consent who be must be given the option to receive the information through a medium other than paper. The requirement to provide the customer with a choice already exists in relation to the use of durable medium in MiFID.
The new guidance on the durable medium concept provides flexibility in the provision of information to customers and acknowledges technological developments and the option to shift away from paper. It also maintains the aim to protect the customer by ensuring that the medium used does not allow firms to unilaterally modify information given to customers. We will have to wait and see on the feedback to the FCA consultation paper on the IDDas to whether the customers will be further protected by the requirement for consent to be obtained.
Note that the definition of durable medium has not yet been updated in the FCA Handbook. We expect that the definition will be updated once the FCA has completed its consultation on the IDD.