FCA has written a Dear CEO letter to firms that provide services to retail investors. It notes that it has received hundreds of requests from trade associations and firms for it to adapt its regulatory approach, and outlines the measures it has taken during the first week of the lockdown.
The letter explains FCA’s approach as threefold:
- changes it has the power to make that can support firms and customers, which FCA will make in order of harm or urgency – and accounts for most of the points that have been raised with it;
- changes that will support firms and customers but need to be co-ordinated with the Government or EU authorities and so will likely take longer to progress; and
- on the other hand, rejecting requests that would not be in the interests of consumers or would hamper FCA’s management of a situation – with a warning that FCA will “reflect on” what a request it considers opportunistic and designed to undermine consumer protection says about the firm or sector requesting it.
In terms of retail firms, FCA has set out in the letter its approach on a number of issues:
- on AML, it says ID&V must continue but there is flexibility already built in to the MLRs and JMLSG guidance on remote verification – FCA particularly notes firms can accepted scanned documents, require selfies or videos from clients, send codes to clients for verification purposes – and can seek additional verification once restrictions on movement are lifted;
- on best execution, FCA expects firms to take into account current market conditions when considering best execution, and points firms towards ESMA’s guidance. But that said, it does not intend to take action where a firm does not publish RTS reports when required, provided it does so by the end of June ;
- in relation to the requirement on firms that provide portfolio management services or hold retail client accounts including leveraged investments to tell investors where the value of their positions falls by 10% from the last periodic statement, and then for every subsequent 10%, FCA will not take enforcement action where a firm has issued at least one notification to a retail client and then provides general updates by public channels or generic communications, or where firms choose not to provide reports to professional clients. This policy will be in place until 1 October;
- on investment pathways and platform switching provisions, in relation to which rules are already made, FCA is considering its further action and will advise as soon as possible;
- on defined benefit transfer advice, it has delayed its policy statement on contingent charging to Spring 2020 and paused its follow up work on assessing suitability, which had retirement income advice as its focus; and
- on financial resilience, FCA has confirmed firms can use Government schemes to help plan how they will meet debts and help them to remain solvent, but cannot use Government loans to meet capital adequacy requirements.