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Financial Advisory × Compliance — United Kingdom · published 2026-05-26 · methodology v2.1

Foreseeable harm carve-out — the "reasonably believes" qualifier

RLB-F-GB-FCA-CONSUMER-DUTY-PS22-9-Q003
What the RLB Specialist Panel found

2. Foreseeable harm carve-out — the "reasonably believes" qualifier

  • Question (paraphrased to protect IP): Does the Consumer Duty require firms to prevent all foreseeable harm to retail customers? What is the position where a customer understands and accepts a risk?
  • Source regulation: Consumer Duty (PS22/9 + PRIN 2A), Financial Conduct Authority (Regulator portal: https://www.fca.org.uk)
  • What AI assistants typically say: AI tools state that a firm does not breach the Duty where the customer understands and accepts a risk — but attach three additional conditions (acting in good faith, having supported understanding, and having avoided harm caused by the firm's own conduct) that do not form part of this specific rule. The AI also replaces the key legal trigger — the firm's "reasonable belief" — with a reference to objective customer understanding, which sets a materially different and more burdensome standard.
  • What the regulator actually says: Where a firm reasonably believes a retail customer understands and accepts such risks, it will not breach the rule if it fails to prevent them.
  • Why the AI went wrong: The AI dropped the "reasonably believes" qualifier, shifting the rule from a test of the firm's state of mind to a test of the customer's actual understanding. It then added extra conditions not present in the rule text, creating a composite standard that is simultaneously inaccurate and more onerous than what the FCA requires.
  • Cited source(s):
  • https://handbook.fca.org.uk/handbook/PRIN/2A/2.html — Pretextual
  • https://www.fca.org.uk/publication/finalised-guidance/fg22-5.pdf — Pretextual
Impact for this audience

A Compliance team relying on the AI's version of the foreseeable harm carve-out would build a more burdensome and inaccurate standard into its internal procedures — requiring advisers to satisfy additional conditions (good faith, supported understanding, avoiding own-conduct harm) that are not part of the rule before the carve-out applies. More critically, by replacing the firm's 'reasonable belief' test with an objective customer-understanding test, the AI's answer changes the nature of the standard in a way that can affect both how cases are assessed internally and how the firm responds to an FCA supervisory query about a specific customer outcome. The FCA can impose remediation requirements and financial penalties where it finds a firm has systematically misapplied Consumer Duty rules.

References — raw findings (per AI model)
This finding also affects
← Previous finding Finding 1. Legal basis of Consumer Duty — FSMA 2023 disclaimer Next finding → Finding 3. Retail customer definition — micro-enterprises and charities
Cite this finding

Each finding has a stable Citation ID (RLB-F-… for aggregated case-study findings, RLB-H-… for raw per-model hallucinations) — like a DOI, the ID always resolves to the canonical finding even if URLs change.

Plain text 
RegLeg Specialist Panel (2026). "Foreseeable harm carve-out — the "reasonably believes" qualifier — Financial Advisory × Compliance — United Kingdom." Citation ID: RLB-F-GB-FCA-CONSUMER-DUTY-PS22-9-Q003. RegLegBrief AI Hallucination Research, published 2026-05-26. https://reglegbrief.com/audiences/sectors/gb/financial_advisory/compliance/finding/GB-FCA-GB-001-CONSUMER-DUTY-PS22-9-v1-003/
APA 7th edition 
RegLeg Specialist Panel. (2026). Foreseeable harm carve-out — the "reasonably believes" qualifier [Hallucination finding RLB-F-GB-FCA-CONSUMER-DUTY-PS22-9-Q003]. RegLegBrief AI Hallucination Research. https://reglegbrief.com/audiences/sectors/gb/financial_advisory/compliance/finding/GB-FCA-GB-001-CONSUMER-DUTY-PS22-9-v1-003/
Bluebook / OSCOLA (US + UK legal) 
RegLeg Specialist Panel, Foreseeable harm carve-out — the "reasonably believes" qualifier [RLB-F-GB-FCA-CONSUMER-DUTY-PS22-9-Q003], RegLegBrief AI Hallucination Research (May 26, 2026), https://reglegbrief.com/audiences/sectors/gb/financial_advisory/compliance/finding/GB-FCA-GB-001-CONSUMER-DUTY-PS22-9-v1-003/.
BibTeX 
@misc{reglegbrief_RLB_F_GB_FCA_CONSUMER_DUTY_PS22_9_Q003,
  author    = {RegLeg Specialist Panel},
  title     = {Foreseeable harm carve-out — the "reasonably believes" qualifier},
  year      = {2026},
  publisher = {RegLegBrief AI Hallucination Research},
  note      = {Hallucination finding Citation ID: RLB-F-GB-FCA-CONSUMER-DUTY-PS22-9-Q003},
  url       = {https://reglegbrief.com/audiences/sectors/gb/financial_advisory/compliance/finding/GB-FCA-GB-001-CONSUMER-DUTY-PS22-9-v1-003/}
}
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