It’s been just over a week since the UK Government imposed strict lockdown measures across the country, forcing businesses to quickly adapt to new ways of working while continuing to effectively serve consumers.
This week the FCA released definitive guidance for firms providing services to retail investors, laying out its expectations for firms during the coronavirus pandemic, plus, what it’s doing to support firms during this challenging time.
If you haven’t had time to read it in full, here’s a quick summary.
As the true extent of the crisis revealed itself over the past few weeks, the FCA has shifted its priorities to focus only on the issues that will have the most impact on consumers. They’ve also been considering a number of requests for changes to the regulatory framework. Be warned though – any request that the FCA deems ‘opportunistic’ or not in the interest of consumers will be denied. Not only that, but any interactions like this give the FCA insight into where culture and conduct is prioritised within your business.
In this week’s Dear CEO letter, sent on 31st March, the regulator reiterated that you should continue supporting consumers with clarity and transparency, while actively managing your firm’s financial liquidity. As part of that, the FCA has said that while government loans can be used to meet debts and support firms financially at this time, they can’t be used to meet capital adequacy requirements.
Other key developments include:
Verification of a customer’s identity can be done remotely
While you still need to comply with your obligations under the MLRs, identity verification can be done remotely as long as there are appropriate safeguards and checks in place. For example, you could:
- Accept scanned documentation sent by e-mail, preferably as a PDF;
- Seek third party verification of identity to corroborate that provided by the client, such as from its lawyer or accountant;
- Ask clients to submit ‘selfies’ or videos;
- Place reliance on due diligence carried out by others, such as the client’s primary bank account provider, where appropriate agreements are in place to provide access to data;
- Use commercial providers who triangulate data sources to verify documentation provided;
- Gather and analyse additional data to triangulate the evidence provided by the client, such as geolocation, IP addresses, verifiable phone numbers;
- Verify phone numbers, e-mails and/or physical addresses by sending codes to the client’s address to validate access to accounts; and
- Seek additional verification once restrictions on movement are lifted for the relevant client group.
Supervisory flexibility over best execution until the end of June
You’re still expected to meet your obligations around client order handling. This includes taking into account different execution factors, the venues or brokers you rely on, and different types of orders in light of the current market conditions.
But, the FCA will show leniency if you don’t publish RTS 27, RTS 28 and Article 65(6) by the usual deadlines, provided they are published no later than 30 June 2020.
Supervisory flexibility over 10% depreciation notifications until the end of September
In response to concerns about how the 10% depreciation notifications will impact consumer confidence in today’s volatile market, the FCA has said it won’t take action against firms that have:
- Chosen to cease providing 10% depreciation reports for professional clients, or
- 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 then provided general updates through its public channels. Those updates should cover current market conditions, how the client can check their portfolio value and your contact details.