FCA speaks on current concerns and crisis response

Megan Butler has spoken to PIFMA on FCA’s response to Covid-19 and its expectations for the rest of the year, with a focus on its actions and expectations in respect of wealth managers.

Generally, she thought the sector has responded well, but it is now important to transition properly to what may be the “new normal”.

FCA has, in particular:

• been pleased that Covid-19 has not caused any significant erosion to services. It notes the regulators’ actions in making interventions, delaying planned activities and giving firms guidance;
• prioritised its focus on operational resilience, and in particular its expectations on firms to have in place strong contingency plans. FCA and BoE are reviewing the plans of a wide range to firms to see how firms are assessing operational risks, their ability to continue to operate effectively and the steps they are taking to serve and support their customers;
• said it wants to see firms map the resources that support their important business services and how the “new normal” may affect this;
• seen the need to focus on financial resilience and how firms are seeing the effects of the virus and how it may make normally financially viable firms become vulnerable. This is one of the reasons for its current survey;
• noted the potential risks to customers if a firm exits the markets – it is imperative to minimise any delay in returning client money and assets.

FCA is focusing on its desired consumer and market outcomes, in particular looking not only at preservation of client money and assets, but also ensuring how firms will continue to provide suitable advice in changed circumstances, and will continue to act with integrity while continuing to prevent financial crime and market abuse through their controls and governance.

She concluded by saying FCA is alert to the pressures on the FSCS and has seen a few firms trying to avoid customer liabilities by phoenixing, or now “life-boating” by setting up new entities and applying for auhorisation before complaints and liabilities at their existing entities have crystallised, or by trying to take over control of authorised firms or by presenting a “clean” individual to front operations.   It is particularly cross when advisers leave firms that have provided poor advice and then join claims management firms to pursue complaints against that same advice.