The Financial Conduct Authority's (FCA) interim CEO, Christopher Woolard, has written to CEOs of firms that provide services to retail customers in the context of the COVID 19 pandemic. The FCA recognizes that this is a challenging time for all firms but notes the continuing need to protect retail consumers.
Client Identity Verification
The FCA notes that client identity verification needs to continue for anti-money laundering purposes, but firms have flexibility within the Money Laundering Regulations on how to verify a customer’s identity. Steps can be taken to verify client identity remotely and the FCA gives guidance on additional checks and safeguards which firms can use to assist with verification.
Best Execution and Client Order Handling
The FCA has been working with the ESMA who has issued further information on best execution. The FCA expect firms to continue to meet their best execution obligations, including their obligations on client order handling. However, the FCA has no intention of taking enforcement action where a firm:
- does not publish RTS 27 by 1 April 2020, provided it is published no later than 30 June 2020
- does not publish RTS 28 and Article 65(6) reports, provided they are published by 30 June 2020
10% Depreciation Notification
Firms providing portfolio management services, or holding retail client accounts that include leveraged investments, are currently required to inform investors where the value of their portfolio or leveraged position falls by 10% or more compared with its value in their last periodic statement, and for each subsequent 10% fall in value. The FCA has no intention of taking enforcement action where a firm:
- has issued at least one notification to a retail client within a current reporting period, indicating their portfolio has decreased in value by at least 10%; and
- subsequently provides general updates through its website, other public channels (such as social media) and/or generic, non-personalized client communications; or
- chooses to cease providing 10% depreciation reports for any professional clients.
The FCA will adopt this approach for six months (to 1 October 2020).
The FCA also took the opportunity to remind firms of their obligation to maintain adequate financial resources, capital and liquidity. This applies to all firms, not just those subject to specific prudential provisions, such as BIPRU or CRDIV and ICAAP, and those which have been set buffer requirements. This means that appropriate resources should be held in order to ensure firms are able to weather precisely these events.
Read the letter here.