The Financial Conduct Authority (FCA) has published various statements and webpages on COVID-19, focussed on the financial sector's response to the outbreak. It has significant resources and dedicated teams handling the situation and it "stands ready to take any steps necessary to ensure customers are protected and markets continue to function well." In a speech delivered by Nausicaa Delfas, Executive Director of International and a member of the Executive Committee at the FCA, on 6 May 2020, Ms Delfas noted that the FCA has been working with national and international partners to share insights on market developments for the orderly functioning of markets and coordinate responses where necessary. She reminded firms to consider the medium- to longer-term implications and their post crisis recovery strategy including preparing for the end of the Brexit transition period. Similarly, in a podcast interview on 10 June 2020, Christopher Woolard, interim Chief Executive of the FCA, discussed how the FCA has rapidly reprioritised work in light of COVID-19 (for example intervention on Business interruption insurance and mortgages), and talks about future business planning.
As the FCA continues to deal with the challenges from COVID-19, in a speech delivered on 4 June 2020, Megan Butler, Executive Director of Supervision – Investment, Wholesale and Specialists at the FCA, stated that while the industry has responded well to COVID-19 there is a need to transition from the immediate ‘incident response’ towards focusing on longer-term impacts. In this regard, the FCA's key areas of focus include operational resilience, financial resilience (including the preservation of client assets and money) and acting with integrity. Further, on 8 July 2020, the FCA published a speech by Mr Woolard on the role of the FCA in the post-coronavirus era of financial regulation. My Woolard noted the considerable resilience of the fund management industry so far but highlighted the challenges that lie ahead. He stated that the COVID-19 crisis and Brexit have reinforced the need for outcome-based regulation. The FCA now has the opportunity to look at its rulebook, focusing less on tick box compliance and more on promoting outcomes that serve the public interest.
This webpage sets out the measures taken by the FCA and key points firms should be aware of. Please see our separate webpages on the response by the Bank of England and the Prudential Regulation Authority, the measures for the payment services and systems sector and the measures taken by the European financial regulators in response to COVID-19.
- Regulatory change – the FCA published an updated webpage on 1 May 2020 stating it is delaying activity which is not critical to protecting consumers and market integrity in the short-term, to allow firms to focus on supporting their customers. This includes extending the closing date for responses to consultation papers and Calls for Input until 1 October 2020, as well as, postponing publications and other activity. Similarly, on 25 June 2020, the FCA updated its webpage to announce further delays to planned work for 2020 including, the Joint PRA and FCA work with the Climate Financial Risk Forum, consultation papers on the FCA's approach to market integrity and wholesale markets, and on mortgage switching and investment platform exit fees, and the interim report on the FCA's market study on credit information.
- FCA policy work streams – in a 'Dear CEO' letter published on 31 March 2020, the FCA provided an update on the implementation deadlines for a number of initiatives. The rules for two initiatives (investment pathways and platform switching provisions) have already been made and have been referred to the Board for further consideration. Its ongoing work with firms providing defined benefit transfer advice will continue. The policy statement on pension transfer advice has been delayed to Spring 2020. Follow-up work on assessing the suitability of advice, which centred on retirement income advice, has been paused.
- Operational resilience - the FCA's first statement on COVID-19, published on 4 March 2020, focussed on the sector's response to the outbreak and resilience. It noted that the FCA expects all firms to have contingency plans in place to deal with major events and that it is working closely with a wide range of firms to review contingency plans, including "assessments of operational risks, the ability of firms to continue to operate effectively and the steps firms are taking to serve and support their customers". The FCA made clear they expect firms to still meet their compliance and regulatory requirements, although they have no objections if firms meet the standards and undertake the activities from backup sites or staff working from home.
- Financial resilience – in a 'Dear CEO' letter published on 31 March 2020, the FCA noted that Government schemes to assist firms can be used to help firms plan how they will meet debts as they fall due and remain solvent in the immediate period, but government loans cannot be used to meet prudential requirements. On 17 April 2020, the FCA released an updated statement reminding firms that capital and liquidity buffers are for use at times of stress. Firms should have sound management of their financial resources and plan ahead including maintaining up-to-date wind-down plans. Any steps taken should reduce the harm to consumers and firms should voice any capital requirement concerns with the FCA and, if applicable, the PRA. Firms should carefully consider if any discretionary distribution of capital is prudent in the current climate and the FCA made clear that non-bank lenders must appropriately implement IFRS9's standards to reasonably reflect the potential impact of COVID-19. On 4 June 2020, the FCA also announced that it will be asking around 13,000 firms to complete a financial resilience survey between 4 – 8 June 2020.
- Impact on consumers - on 11 March 2020, the FCA published a webpage expressing their support and guidance for consumers. It warned consumers to be aware of potential scams, for example pensions transfers or high-return investment opportunities and made customers aware of their rights under insurance policies and ongoing efforts to ensure access to cash (see below). Importantly, the FCA provided practical guidance on how consumers can protect themselves against scams and seek further guidance, and emphasised that firms should treat customers fairly during this period. Firms should notify the FCA of the impact of any initiatives going beyond usual business practices to be provided the appropriate support. In a press release on 1 April 2020, the FCA provided further guidance to savers, urging them to carefully consider any decisions about their pensions and long term investments. The FCA will work with The Pensions Regulator (TPR) and Money and Pensions Services (MPS) to tackle any additional risks arising from the current uncertainty. In this regard, on 27 May 2020, the FCA, FSCS, TPR, MPS and other regulators have created a guide to help support pension saver. Further, in an updated webpage published on 19 May 2020, the FCA advised insurance customers facing financial difficulties to contact their insurer who should be able to provide a range of options such as payment deferrals, waiving fees, extending cooling off periods, etc.
- Financial relief for customers – on 9 April 2020, the FCA confirmed the implementation of temporary financial relief measures for customers facing a financial impact from COVID-19. The measures, which applied from 14 April 2020, are intended to complement the government's support to mortgage borrowers and renters, and the assistance to furloughed employees and the self-employed. The FCA expects firms to: offer a temporary payment freeze on loans and credit cards for up to three months, provide at zero interest an overdraft facility of up to £500 for up to three months and ensure overdraft customers are not worse off in overdraft prices for the next 90 days. The FCA announced another package of temporary measures on 24 April 2020 to support customers. The key measures include a three-month payment freeze on motor finance payments (including protecting Personal Contract Purchase balloon payments), buy-now pay-later agreements, rent-to-own agreements and pawnbroking agreements, as well as a one-month interest-free payment freeze to customers of high-cost short-term credit arrangements (including payday loans). The subsequent measures came into force on 27 April 2020. On 19 June 2020, the FCA announced proposals which would provide continued support for users of certain consumer credit product. The proposal outline the support firms will be expected to provide and include the following: firms should contact customers at the end of a payment freeze to agree a plan forward, ensuring customers who continue to need help still receive help, support for overdraft customers, extending the scheme offering a payment freeze or an interest-free overdraft of up to £500 until 31 October 2020 and providing any further temporary support needed to bridge the crisis. This proposed guidance only applies to credit cards and other retail revolving credit, personal loans and overdrafts. The measures came into force on 1 July 2020. Similarly, on 15 July 2020, the FCA confirmed further measures and temporary guidance for firms, which set out the support available for users of motor finance agreements, High-cost high-cost short-term credit agreements, rent-to-own , buy-now pay-later and pawnbroking agreements. The measures came into force on 17 July 2020. Further, on 31 July 2020, the FCA published a call for input on ongoing support for consumers in relation to mortgages and consumer credit. In addition to the various measures put in place by the FCA to support consumers, the FCA wants to gather early views to inform its decision on what current guidance should continue and / or new guidance put into place beyond 31 October 2020. The FCA wants to ensure consumers receive the support they need while understanding the challenges firms face. The deadline for responses is 5pm Friday 7 August 2020.
- Consumer debt advice – the FCA's rules already give firms the flexibility to act in the best interests of the customer. In response to the financial pressures' customers may face in the current climate, the FCA has provided greater flexibility "to customers in persistent credit card debt" by relaxing their rules on the suspension of credit cards. On 9 June 2020, the FCA published a statement on the Treasury's new debt advice services funding to assist people struggling with finances due to COVID-19. The service will be funded in part by the debt advice levy and the FCA will consult on collection of the levy in due course.
- Safeguarding customer funds – on 9 July 2020, the FCA published temporary finalised guidance for payment and e-money firms on strengthening prudential risk management and arrangements for safeguarding customers' funds in the light of COVID-19. The guidance also sets out the FCA's expectations of firms to put in place more robust plans for winding down, so that customer funds can be returned in a timely manner. The FCA aims to conduct a full consultation later in 2020/21 on changes to its payment services approach document. On 9 July 2020, the FCA also published a 'Dear CEO' letter to payment services firms and e-money issuers setting out its expectations for them to prevent consumer harm by ensuring regulatory compliance in the following six key areas: (i) safeguarding, (ii) prudential risk management, (iii) financial crime, (iv) financial promotions and consumer communications, (v) governance and oversight and (vi) records management and reporting. The FCA also stated that they may ask firms to demonstrate their compliance with the regulations.
- Mortgages – the FCA is liaising with the industry on the approaches mortgage providers may take to support consumers, for instance lenders should provide a payment holiday of up to 3 months with no resulting additional fee or charge, and has provided guidance for firms. In additional, on 1 May 2020, the FCA published a statement on their support for mortgage prisoners. In it, they extended the window during which they expect firms to contact consumers about switching options by 3 months, to 1 December 2020. The FCA also noted that they have written to some mortgage firms expressing the importance to treat customers on variable rate mortgages fairly. Further, on 2 June 2020, the FCA published its final updated guidance for firms on mortgages outlining the options firms will be required to provide customers coming to an end of a payment holiday and information for consumers. The guidance, which came in force on 4 June 2020, sets out the following measures: customers who can afford to return to full repayment to do so, anyone who continues to need help gets help (including customers in payment shortfall, further payment holidays or other forms of support), extends the time the scheme for payment holidays is available to people who may be impacted at a later date, extends the ban on repossessions of homes to 31 October, ensures customer's credit files are not negatively impacted and, if possible, providing personalised information. On 28 July 2020, the FCA published a statement on mortgage prisoners and a consultation paper with proposals to support some consumers in the mortgage market. The consultation paper sets out in more detail the FCA's proposals to tackle potential harms that may impact borrowers affected by COVID-19. The consultation closes on 8 September 2020.
- Motor insurers – in response to the Department of Transport's six months extension of the MOT expiry (where MOT was due between 30 March 2020 and 31 July 2020), the FCA, on 30 June 2020, stated that it expects motor insurers to continue to provide cover for consumers' car, motorcycle or van insurance due to their temporary situation including renewals.
- Withdrawals from restricted access accounts – the FCA updated its webpage on 5 May 2020 setting out its expectations of firms handling requests from customers to withdraw funds from restricted accounts. The FCA expects firms to treat customers fairly, communicate effectively and consider the needs of vulnerable customers. It does not, however, expect firms to offer access to all customers or unlimited access to funds but rather to consider the impact of COVID-19 on an individual basis.
- Support for borrowers and SMEs – in a letter to the Treasury Select Committee from the FCA published on 21 May 2020, the FCA described its package of support for borrowers and SMEs. The letter address four key areas: (a) the FCA's rules providing temporary financial relief for customers affect by coronavirus including, how customers will avail themselves of the relief and whether the unwinding of the measures will not cause consumers difficulty at the time, (b) the FCA's work to determine what will be needed after the initial three-month period of temporary financial relief, (c) whether the interventions to date have been sufficient to ensure the fair treatment and protection of vulnerable customers, and (d) clarification on the goals of the unit for small businesses to co-ordinate its work on small business issues, and what the unit has achieved to date.
- Lending to SMEs - the FCA published a 'Dear CEO' letter on 15 April 2020, to banks on lending to SMEs. The letter acknowledges the efforts by the banking sector in accommodating the Government initiatives, in particular the CBILS. While the activity of lending to a SME sits outside the FCA's scope, the SMCR defines the responsibilities and accountability of Senior Managers in banks and their responsibilities in the activity of lending to SMEs. In the letter, the FCA also announced the establishment of a new small business unit to coordinate the management of small business issues including: ensuring regulated firms are providing adequate support, gathering market information on their treatment by financial services firms, and responding to any issues identified. In a subsequent 'Dear CEO' letter, dated 28 April 2020, the FCA stated that it expects financial firms to continue to provide strong support to customers and ensure fair treatment of corporate customers preparing to raise equity finance. If banks fail to meet their obligations to treat customers fairly and act in the best interests, distort competition, undermine market confidence or call into question a firms and individuals integrity, they risk breaching the FCA's rules and principles. The FCA will not hesitate to take action and it urged firms to review the current systems and controls.
- Insurance products – Mr Woolard said, "[w]e expect all firms to be clear and not misleading whenever they communicate and be fair and professional in how they deal with their customers." Insurance providers should make consumers aware of the scope of their cover and any exemptions, with information "on firms' websites in a clear, concise way". The FCA has provided specific information for consumers and expectations of firms. Further, the FCA published a 'Dear CEO' letter on 15 April 2020, to insurance firms reminding them of the essential service they provide to customers and the need for clear, accurate and timely information being provided. It encouraged firms to assess and settle claims quickly, including part payment of a claim, and reminded firms of the option to use the Financial Ombudsman Service (FOS) for faster decisions in some cases. On 29 June 2020, the FCA provided further guidance on handling consumer claims and refund requests. Insurers must treat customers fairly and take into account that this a stressful time for customers. The FCA has stated that regulated firms can agree a convention to work together to settle claims efficiently without having a negative impact on consumers. Further, on 31 July 2020, the FCA published a consultation aimed at credit and debit card firms and insurance providers, with guidance on handling cancellations and refunds enquires and claims from consumers. The FCA requests all comments by 13 August 2020.
- Business interruption (BI) insurance – on 1 May 2020, the FCA announced its intention to seek a judgment from the courts to resolve some contractual uncertainty in BI insurance policies (see our detailed article here). The FCA also provided some general guidance and expectations of general insurance firms. It expects them to still meet their obligations when handling claims and any complaints.
- Product value (insurance products) – the FCA published its final guidance on 3 June 2020 for insurers and insurance intermediaries to consider the value of their products. The guidance sets out the FCA's expectations of what firms should be doing to identify material issues with their product value which, due to COVID-19, provides little or no utility to customers and not just where claims are no longer possible, and their ability to deliver good customer outcomes where these need to be reassessed in light of coronavirus. The guidance comes into immediate effect and firms have until 3 December 2020 to review their product lines.
- Insurance and premium finance firms – on 14 May 2020, the FCA published its finalised guidance for insurance and premium finance firms in dealing with customers in temporary financial difficulty. Firms should re-assess the risk profile of the consumer, consider if there are better suited alternative products that can be offered, work with the consumer to avoid the need for cancellation of necessary cover and waive associated fees including cancellation fees. The measures come into force on 18 May 2020. On 24 July 2020, the FCA announced its proposal to extend these temporary measures until 31 October 2020 and is currently consulting on them. Firms should continue to consider what options they can offer customers including premium reductions, offering an alternative product, waiving fees and payment deferrals.
- Financial system to support recovery – in a speech on 16 June 2020, Charles Randell, Chair of the FCA and PSR, discussed the need to reassess our approach to consumer debt, high risk retail investments and financial exclusion to support the recovery from COVID-19. Consumer and business debt are becoming unsustainable and COVID-19 has reinforced Mr Randell's concerns about risky investments for retail customers.
- Corporate Insolvency and Governance Act 2020 – in a statement published on 14 May 2020, the FCA discussed the new insolvency and corporate governance measures designed to help businesses weather COVID-19. The measures came into force on 26 June 2020 as the Corporate Insolvency and Governance Act 2020 (Act). The Act introduces both permanent and temporary amendments to the current UK insolvency regime with certain of the temporary measures taking effect from 1 March 2020. Some measures, for example the company moratorium (during which legal proceedings cannot commence without permission of court) and the temporary suspension of wrongful trading provisions, will not apply to all financial services firms including banks, investment firms, insurers, payments and e-money institutions and certain market infrastructure bodies. The new Restructuring Plan is available to all firms through the appropriate safeguards. To read more about the Act, please see our detailed article here.
- Senior Managers and Certification Regime (SMCR) - on 3 April 2020, the FCA and PRA set out their expectations relating to the SMCR for solo-regulated and dual-regulated firms, which are summarised in our special two-part alert: Part 1 (solo-regulated firms) and Part 2 (dual-regulated firms). Further, on 17 July 2020, the FCA published a consultation paper seeking views on an extension of the SMCR certification deadline for solo-regulated firms (see our detailed SMCR alert here).
- Approved persons regime (APR) – the FCA published a statement on 30 June 2020 setting out its expectations to help benchmark administrators and firms using Appointed Representative (AR) arrangements apply the APR during the COVID-19 pandemic (in addition to their expectations relation to the SMCR above). The FCA issued a direction relating to a modification by consent to the 12-week rule, which will allow temporary arrangements for controlled functions for up to 36 weeks. Additionally, furloughed staff, unless leaving their post permanently, can retain their approval during their absence and will not need to be re-approved by the FCA. In this regard, the FCA does not expect firms to notify it under Form D of the temporary arrangements set out in its statement but, it does expect the arrangements to be clearly documented internally.
- Continuing Professional Development (CPD) – on 27 May 2020, the FCA published a webpage in which it stated that firms, in exceptional circumstances, will be allowed to defer individuals' uncompleted CPD hours to the next CPD year in the light of the COVID-19 pandemic. The FCA still expects individuals to stay up to date with developments and firms will need to consider various circumstances. This applies to CPD years ending before 1 April 2021.
- Professional qualification exams – while firms are still expected to ensure that all employees have the relevant qualifications, on 21 April 2020, the FCA stated that the obligation to ensure an employee has attained the appropriate qualifications within the required 48 months, pursuant to TC 2.2A.1R, will be extended by an additional 12 months if the examinations were cancelled or postponed by the provider or the employee. The FCA will adopt this approach until 31 October 2020 and firms will need to record their reasons for granting any extension to an employee.
- Key workers in financial services - following the UK Government's advice on maintaining educational provisions for key workers, both the FCA and PRA have provided guidance on the roles that may be considered essential for the provision of financial services to avoid the disruption of the "real economy or financial stability". The regulators have recommended that the Chief Executive Officer SMF1 is accountable for ensuring an adequate process so that only roles meeting the definition of 'key financial workers' are designated. Where a firm does not have a SMF1, the most relevant member of the senior management team should be responsible for this process. The FCA also published a statement on 27 March 2020, stating it was the responsibility of the relevant Senior Manager, or equivalent person, to identify which employees are unable to perform their jobs from home and have to travel to the office or business continuity site.
- Digital sandbox – the FCA published an updated statement on 16 July 2020, announcing its plans to bring forward a digital sandbox. The proposed digital sandbox, in collaboration with the City of London Corporation, will provide innovative firms enhanced regulatory support for the challenges posed by COVID-19. The FCA is currently seeking expressions of interest to participate in a DataSprint event in July/August 2020. The FCA will provide further information on their webpage in due course and invites stakeholders to express their interest. Applications to the digital sandbox will open later in the summer.
- Information security – the FCA updated its webpage on 6 May 2020 to provide guidance to firms on information security. The FCA noted the increase in cyber criminals, and the related disruption of essential services and potential harm to consumers and market integrity. While alternative ways of working from home are required for business continuity, the FCA expects firms to ensure adequate controls are in place and prioritise information security.
- Financial crime – on 6 May 2020 the FCA published guidance on firms applying their systems and controls to prevent the increase in financial crime during the coronavirus. In light of the operational challenges from COIVD-19 firms should change their risk appetite, and while this may involve the need to re-prioritise or reasonably delay some activities firms must not weaken their controls and ensure there is a clear plan to return to the regular review processes.
- Market trading and reporting – the FCA expects firms to consider the broader control environments in these new working circumstances and satisfy ordinary recording and reporting standards and requirements. While the FCA understands there may be difficulties in doing so, firms should consider steps they could take to mitigate outstanding risks and liaise with the FCA as necessary.
- Regulatory reporting - on 10 July 2020, the FCA published an updated webpage with further temporary measures extending the submission deadline (by 2 months) for certain regulatory returns up to and including 30 September 2020. In addition, the FCA has waived the administrative fee for late returns for SMEs (paying less than £10,000 in fees and levies in 2020/21) until 30 September 2020.
- Payment Accounts Regulations (PAR) reporting – on 7 May 2020, the FCA extended the deadline to receive the reporting submissions under the PAR for the reporting period 1 March 2018 to 29 March 2020, until 30 June 2020 (originally 30 April 2020).
- Supervising reporting under the Securities Financing Transactions Regulations (SFTR) – following a statement by the European Securities and Markets Authority (ESMA), the FCA updated its SFTR webpage on 26 March 2020. The FCA will not prioritise supervision of the SFTR reporting obligations between 13 April 2020 and 13 July 2020 (including securities financing transactions under the Markets in Financial Instruments Regulation). The FCA has also concurred with the recent statement from the European Securities and Markets Authority (ESMA) (as revised on 26 March 2020) regarding upcoming changes to the tick size regime for certain firms. Consistent with its approach in the market during this period, the FCA will "not prioritise supervision of the new requirements at this time" and "expect[s] firms to focus on minimising the potential for operational disruption."
- Short selling – against the background of a series of temporary short selling prohibitions brought in by certain European regulators, the FCA published a statement on 23 March 2020 in which it announced that it had decided not to introduce short selling bans as it had no evidence that short selling had been the driver of recent market falls. The FCA said "[w]e will continue to co-ordinate with our international partners and take all actions within our power where necessary to safeguard orderly markets." Nonetheless, in line with an ESMA decision, the FCA has amended its threshold for notifying net short positions from 0.2% to 0.1% of issued share capital and confirmed on 31 March 2020 that the required systems changes have now been made. On 19 May 2020, the FCA announced that there are no short selling prohibitions or restrictions currently in place following the expiration of such restrictions in other Member States.
- Property fund suspensions – the FCA agreed with the decision of managers of open-ended commercial real estate (CRE) funds to temporarily suspend dealing. "In such situations, a fair and reasonable valuation of CRE funds cannot be established," and continued dealing will not in the best interests of fund investors, the FCA said in a statement.
- LIBOR transition – in a statement made on 25 March 2020, the FCA, BoE and Working Group on Sterling Risk-Free Reference Rates (RFRWG) discussed the impact of COVID-19 on the transition from LIBOR to SONIA. The current assumption is that LIBOR will still be phased out by the end of 2021 and in a subsequent joint statement published on 29 April 2020 this was reiterated. To ensure stability in the credit markets during the transition, the RFRWG recommends that by the end of Q3 2020 lenders should be able to offer non-LIBOR products, by the beginning of Q4 2020 any LIBOR-referencing loan products should have clear conversion contractual arrangements and all new LIBOR-referencing products that expire after 2021 should cease. Additionally, the FCA, BoE and RFRWG will continue to assess the impact of COVID-19 and provide further updates in due course.
- Business loans pursuant to the Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Bank Loan Scheme (BBLS) - the FCA has stated that in assessing the creditworthiness of a customer applying for a regulated credit agreement for business purposes, a lending firm may take a range of income and expenditure information into account. In an updated statement on 4 May 2020, the FCA provided further guidance on the relationship between their rules and the loan schemes, as well as managing financial crime by relaxing the customer due diligence requirements (see our detailed business loan support insight article here and further Government guidance here). On the same day it also released correspondence between Mr Woolard and Caroline Wayman, Chief Ombudsman and Chief Executive of the FOS, discussing the approach to dealing with complaints concerning the CBILS and the BBLS.
- Business cooperation under competition – in a statement released by the FCA and PSR on 27 March 2020, the regulators confirmed they will take a consistent approach to their competition law enforcement activity in the financial services sector pursuant to the Competition Act 1998 and/or the Treaty on the Functioning of the European Union.
- Lloyd's of London market update – in a press release on 26 March 2020, Lloyd's confirmed that the market is in a strong position to weather the impact of COVID-19 and support its customers and business partners. On 14 May 2020, Lloyd's predicted it is set to pay out up to US$4.3 billion to customers and the overall cost to the global insurance industry is likely to be far in excess of any historical event.
- Certified and assessed persons directory – on 25 March 2020, the FCA updated its webpage on its directory of certified and assessed persons. The directory, which was due to be published by the end of March 2020, will be delayed by at least a month. Additionally, until the data is published, dual-regulated firms can either regularly update their information or provide a bulk update once the new launch date is confirmed.
- Client assets – on 6 April 2020, the FCA published a webpage relating to compliance with the Client Assets sourcebook (CASS). It provides guidance on, among other things, handling cheques, CASS audit reports, physical asset reconciliations, depositing client money, notification of CASS breaches, a firm's CASS classification and firms' delays to improvement projects.
- Communications to customers – the FCA published two webpages on 7 April 2020 providing guidance to firms on the financial advice they can provide to consumers. The FCA is concerned that some firms, that do not provide investment or life assurance advice, or pensions advice, may be contacted by customers seeking advice. In these circumstances it recommends that firms be prudent, consider the customers background information if appropriate, act in their best interests and communicate clearly and fairly. The FCA goes on to provide examples of communications that would not constitute personal recommendations, which can help firms develop their own approach, and provides risk factors in the current climate. Crucially, firms must avoid providing regulated advice and should consider referring customers to the appropriate advisers.
- Handling of complaints – the FCA published an updated webpage on 31 July 2020 clarifying their position of firms complaint handling. Handling complaints remains an important function and the FCA expects firms to prioritise the following: customers who have been offered redress should be paid promptly, prompt and fair resolution of complaints, and sending timely holding responses if necessary. Firms should, in particular, take account of vulnerable customers in these circumstances and maintain the quality of complaint handling. The FCA expects firms to cooperate with the Ombudsman Service and respond to requests for information in a timely manner. Claims management companies should also give firms extra time to give a final response to complainants before referring them to the FOS to handle the complaint. If firms are experiencing any difficulties, they should contact their supervisory contact or the FCA directly.
- Pensions reforms – in its updated webpage, on 6 April 2020 the FCA stated that they expect firms to implement the rules on communicating certain pension information to consumers as soon as possible. While firms may be experiencing minor delays in implementing the rules, which came into force on 6 April 2020, any delay later than 31 May 2020 should be communicated to the FCA. Further, on 7 April 2020, the FCA published the COVID-19: Deferral of Commencement (Pension Transfers, Investment Pathways, Platform Switching, Access to Insurance) Instrument 2020 (FCA 2020/15), which delayed implementation of various other pensions related policies.
- Expectations for funds – the FCA published a webpage on 6 April 2020 with its rules and guidance on the operational and financial challenges funds are facing. The FCA has stated it does not have a supervisory concern about virtual general meetings although firms should consider their own arrangements and obligations to unitholders, agreed to accept electronic signatures on applications to authorise funds or approve changes to funds during this period and expects firms to ensure compliance with limits on value at risk. On 22 April 2020, the FCA also agreed to temporarily relief to certain fund managers and funds, by providing an extra two months to publish their annual reports and an extra month for half-yearly reports (the FCA must be notified to take advantage of this forbearance).
- Portfolio management services or holding retail client accounts with leveraged investments - in a 'Dear CEO' letter published on 31 March 2020, the FCA stated it will provide supervisory flexibility over the mandatory 10% portfolio depreciation notifications until the end of September 2020 (subject to certain client safeguards).
- Listed Companies - for more information on listed companies including Market Abuse Regulation (MAR) announcement obligations, shareholder meetings and delays in corporate reporting and transactions notifications see our detailed insight article here.
- Cross-border payments regulation – on 16 April 2020, the FCA updated its webpage to remind firms of its expectation that they comply with the currency conversion transparency requirements for both card-based transactions and credit transfer arising out of the revised Cross-border Payments Regulation, which applied from 19 April 2020. However, the FCA will adopt a reasonable approach to how it enforces compliance.
- Business plan – the FCA published its 2020/21 business plan on 7 April 2020. The business plan has a chapter dedicated to the FCA's priorities, objectives and actions in dealing with the COVID-19 pandemic. The FCA stated that, going forward, it will focus on ensuring efficient market functioning, protecting the vulnerable in society, minimising the impact of firm failure, tackling scams and ensuring consumers and small firms are fairly treated.
- Annual Report and Accounts 2019/20 – on 10 July 2020, the FCA announced a delay in publishing its Annual Report and Accounts for 2019/2020 as a result of unprecedented challenges faced by the National Audit Office. The Annual Report and Account, ordinarily published in July, will not be published in September followed by a virtual Annual Public Meeting.
- Client identity verification - the FCA expects firms to continue to meet their verification obligations but can be flexible in how this is achieved (e.g. a firm can ask a client to submit a 'selfie' or video).
- Wet-ink signatures – on 20 April 2020, the FCA published a webpage stating that their rules do not explicitly require wet-ink signatures in agreements and that the FCA would accept electronic signatures for fund-related and mutual societies applications/forms. Firms should, however, consider the validity of electronic signatures as a matter of law.
- Best execution - in a 'Dear CEO' letter published on 31 March 2020, the FCA stated that firms should still be considering the various factors, venues or brokers used to achieve best execution. The FCA will not take enforcement action for a failure to publish RTS 27, RTS 28 and Article 65(6) reports before the end of June.
- Professional indemnity insurance for financial advisers – on 21 April 2020, the FCA stated that professional indemnity insurance (PII) cover remains available in the market and firms need to have PII policies in place to maintain operational resilience.
- Handling of post and paper documents – in a statement published on 13 May 2020, the FCA stated that it expects firms to comply with the requirement for post and paper-based processes and if firms are not able to comply they must notify the FCA. It also provided guidance for firms; for instance, they must try to ensure that customers are not disadvantaged by any delays, take steps to mitigate the impact of non-compliance, and use other methods to conduct a suitability assessment.
- Innovation Hub – the FCA continues to provide support innovative firms looking to launch financial services products and services meeting the criteria. It is particularly interested in firms who want to help people and the financial systems they rely on deal with the effects of the coronavirus outbreak.
- Open access regime – in an updated statement published on 6 July 2020, the FCA stated that in light of COVID-19, EU co-legislators have agreed to amend the Markets in Financial Instruments Regulation (600/2014) (MiFIR) to provide for an additional year for trading venues and central counterparties offering the trading and clearing of exchange traded derivatives (ETDs) to start applying the open access regime for trading and clearing ETDs under MiFIR. Accordingly, the relevant provisions will not apply until 4 July 2021 (previously 4 July 2020.
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