FCA to apply “flexibility” on key functions during Covid-19 crisis

14 May 2020

The Financial Conduct Authority (FCA) has issued a statement advising that it recognises it may not be possible for firms to comply fully with requirements for some important functions, such as the post and paper-based processes, “in a timely way” during the current crisis.  

Where this is the case, the regulator said, it expects firms “to notify us as soon as possible” at: [email protected]

Firms should “try to ensure that all customers are not disadvantaged because of delays and make particular efforts to contact customers who do not use online services.”

It added that while obligations for paper documents may be difficult to meet on usual timescales, it will apply “flexibility in how we approach such issues”, but it will we expect firms to send communications “in a timely manner. In particular, we are concerned that vulnerable customers, who are often more likely not to use online services, are still protected.”

Firms will be required to demonstrate what steps they have taken to mitigate the impact of non-compliance with postal and paper processes and then return to full compliance as soon as practical.

As an example, the regulator said firms could collect post and process paper-based work “as frequently as they can, if this is not possible daily; and ensure they return client funds promptly, where they are unable to proceed with a transaction due to a delay and/or change in situation.”

Firms are also expected to provide general updates on how it will treat incoming and outgoing post, and cheques, through its website and other public channels (such as social media). “These communications should update customers on market conditions, explain how customers can check their financial statements (which may arrive late) and invite customers to contact the firm if they wish.”

Suitability assessments/reports

For suitability assessments, as firms do not have the ability to undertake face-to-face meetings, the regulator said it expects firms “to use other methods to conduct a suitability assessment, such as phone calls and relevant due diligence checks online. We would then expect a firm to send out the assessment without delay, whether online (for those customers that use online or email services) or by post.”

Firms should ask those who have sent instructions or cheques which have not been processed to contact the firm urgently by telephone or electronic means.

“Where a customer has made a payment by cheque which has not been processed, we expect firms to consider the potential harm caused by not being able to cash the cheque on a case-by-case basis and ensure, where possible, they receive the services/cover they require (for example, retrospective cover). Where the uncashed cheque represents client money under the Client Assets Sourcebook (CASS) regime and the firm provides the service/cover without cashing the cheque, firms must consider whether proceeding in this way might breach CASS and expose other clients to the risk of a client money shortfall.”

The regulator added that the arrangements will be reviewed as the coronavirus pandemic develops, but “firms should revert to complying with the requirements as soon as reasonably practicable, and not wait on a further statement from us.”

Professional Paraplanner