‘ Principal 12’ – Consumer Duty requiring firms to focus on consumer outcomes.
Action: Monitor output from the tool, including accuracy and outcomes experienced by consumers( including those with characteristics of vulnerability) arising from the use of AI tool. This should be recorded as part of ongoing outcomes monitoring under Consumer Duty.
Accountability
Senior managers in a business will be accountable for the safe use of AI. AI tools can produce information that is very convincing, but they do make errors. In all cases, the firm and senior management will be liable for the correctness and where applicable, suitability or appropriateness of all information.
Action: Where an AI tool has been adopted in a way that could impact upon client outcomes, it is our view that a Senior Manager Function( SMF) holder should take accountability, and this should be added to their Statement of Responsibility.
Data Protection
Whenever client data is being processed by a third party it is extremely important to understand what data protection safeguards are in place. The Information Commissioner’ s Office( ICO) has responsibility for overseeing compliance with data protection requirements and has produced helpful Guidance on AI and Data Protection to clarify how the law should be interpreted and applied in this area available on its website. their first steps in the targeted support space, as well as a consultation process around simplified advice and ongoing advice reforms. Targeted support is intended to offer tailored nudges or suggestions to groups of consumers with similar characteristics, while simplified advice provides a personal recommendation based on essential information relevant to a specific single need. These models aim to address the“ advice gap” where many consumers lack access to affordable, suitable financial advice. It’ s likely that AI will have an important role to play in making these models efficient, scalable and effective.
There is no doubt that the effective use of AI can result in good consumer outcomes and boost productivity in the workplace. However, it is important that firms adopting AI tools both harness its potential but also ensure it is adopted in a safe, responsible and compliant way.
Regulation of Artificial Intelligence
For further information on the Regulation of Artificial Intelligence along with tips for due diligence and embedding the tool compliantly in your business – access our Guide below.
LEARN MORE HERE
Action: Never include personal identifying data in AI prompts, unless the tool has been approved for use by the firm’ s management and IT support. Keep clients informed, including by updating your Customer Privacy Notice where necessary.
In fact, a recent update to the FCAs own privacy notice, provided insight around how the regulator is embracing AI. The regulator indicates that they may use AI powered transcription, including for call recording and transcription as well as via various analytical tools, with a view to using their resources more efficiently.
Looking forward into 2026, a key regulatory development will be the ongoing Advice Guidance Boundary Review. This includes some larger financial service firm taking
May 2026 | 9