The FCA has published a webpage setting out its expectations for solo regulated firms under the Senior Managers and Certification Regime (SM&CR). In light of the COVID-19 pandemic, the FCA recognises there may be temporary arrangements to cover absences or a change in senior manager responsibilities. The regulator has decided that it does not intend to enforce the requirement on firms to submit updated Statement of Responsibilities (SoR) if the changes:
- are made to cover multiple sicknesses, or other temporary changes in responsibilities in direct response to the pandemic
- are temporary and expected to revert to the firm’s previous arrangements
The FCA expects allocations to be documented clearly to ensure a clear understanding of the allocated responsibilities. The record should be available when the FCA requests such information.
Temporary Arrangements for Senior Management Functions
The FCA intends to use a Modification by Consent to the 12-week rule to support firms using temporary arrangements by extending the arrangements up to 36 weeks.
Firms are expected to keep clear documentation of the individuals’ responsibilities including on SoRs and responsibilities maps where applicable. The FCA expects firms to allocate prescribed responsibilities to another senior manager if possible but firms may assign it to the individual standing in for the absent senior manager.
Where a senior manager has been furloughed, unless the individual is permanently leaving their post, they will continue to retain their approval with the FCA and will not be required to be re-approved on their return. Firms must however continue to ensure they are fit and proper.
For advice and support with the any SM&CR matters, please contact us.
The FCA has published a webpage setting out the recent queries it has received regarding client assets (CASS) compliance during the current COVID-19 disruption. The webpage summarises some of the queries received and the FCA’s position regarding the issues.
The received queries are with regards to the following:
- Handling cheques
- CASS audit report
- Physical asset reconciliation
- Depositing client money
- Notification of CASS breaches
- CASS firm classification
- Delays to improvement programmes
For advice and support with the any CASS matters, please contact us.
The FCA has outlined its expectations of firms in light of the COVID-19 crisis on its webpage. Firms have asked the FCA for its rules and guidance on funds of which some are set out on the FCA’s website.
The queries set out are as follows:
- Delaying annual and half yearly fund reports
- Virtual general meetings
- Ensuring compliance with limits on value at risk
- Electronic signatures
- MiFID – 10% portfolio value reporting
- Repo use for liquidity management
- Client assets
- Paper based and manual processes
- AIFMD transparency reporting
For advice and support with the any matters relating to compliance for funds, please contact us.
The FCA has published a webpage explaining what firms can do to avoid straying into making a personal recommendation when raising the implications for customers of realising their investments.
The guidance provided by the FCA is intended to only apply during the current circumstances arising out of the pandemic. It is not intended for longer term application.
The FCA recognises that customers may contact firms for advice in situations where the individual may find themselves in an economically vulnerable position, and the webpage sets out what firms can do in such situations in order to avoid providing a personal recommendation whilst helping its customers.
The guidance provides useful examples of communication that would not amount to personal recommendations. The FCA notes that the examples provided are examples and firms may develop their own approach on the matter.
If you would need advice or support with client communication requirements, please contact us.
The FCA has published a webpage setting out its expectations of firms when dealing with the need for ‘wet-ink’ signatures. The webpage is set out under two parts: agreements and forms.
The FCA rules do not explicitly require wet-ink signatures in agreements, nor do they prevent firms from using electronic signatures. The regulator notes that the validity of electronic signatures is a matter of law and firms should consider the legal position for themselves. Firms should also consider any related requirements set out in their Principle of Business and general rules.
The FCA has recently stated it would accept electronic signatures for fund-related applications and on all applications from mutual societies. The regulator further confirms that firms may use electronic signatures for all interactions with the FCA.
The FCA has updated its webpage on information for firms during the COVID-19 crisis and relates to the FCA’s view on professional qualification exams.
Since the occurrence of the pandemic, accredited bodies and other professional qualification providers have cancelled exams and have no specific arrangements for a rescheduled date. The FCA expects this may impact firms subject to the professional qualification obligation for its staff.
In light of this, the FCA has no intention of taking action against a firm or individual who is not able to ensure an employee has an appropriate qualification within the required time limit (TC 2.2A.1R) due to relevant exams being postponed or cancelled.
In such circumstances the FCA will treat the time limit as ‘within 48 months or, where necessary, as soon as reasonably practicable afterwards, up to a further 12 months’. The extension of 12 months will allow firms extra time to ensure its employees complete the requisite qualifications and where the extension is taken, a firm must record the reasons for this.
This approach will be adopted for 6 months until 31 October 2020.
The FCA has published a webpage detailing changes to regulatory reporting during the COVID-19 crisis. The regulator has introduced temporary measures in light of the pandemic and will allow flexibility to the submission deadlines. A list of the regulatory returns allowed by this extension can be found here.
The FCA still expects firms to submit their returns as soon as possible and where a deadline has been missed, reminders will continue to be sent out.
The PRA has released a statement outlining its approach to regulatory reporting and pillar 3 disclosures in response to the current COVID-19 crisis following the European Banking Authority’s (EBA) statement. The statement released provides an update to the previously released document.
The statement was updated to include the following reports for which the PRA has accepted a one-month delay:
- Credit risk return
- High earners report.
The European Securities and Markets Authority (ESMA) has released a public statement clarifying the publication of RTS 27 and 28 during the current COVID-19 crisis.
Execution venues and firms are due to publish their best execution reports on the following dates:
- For execution venues, 31 March 2020 (RTS 27)
- For firms, 30 April 2020 (RTS 28)
ESMA recognises that under the current crisis, execution venues and firms may need to deprioritise efforts to publish these reports concerning 2019. Taking into account this consideration, ESMA recommends that National Competent Authorities (NCAs) consider the following in light of the concerns:
- Execution venues unable to publish RTS 27 reports due by 31 March 2020 may only be able to publish them as soon as reasonably practicable after that date and no later than by the following reporting deadline
- Firms may only be able to publish RTS 28 reports due by 30 April 2020 on or before 30 June 2020.
ESMA further recommends firms and execution venues record their internal decisions taken with regards to the expected delay in the RTS reports.
ESMA has published its advice to the European Commission on inducements and costs and charges disclosure under the Market in Financial Instruments Directive II (MiFID II). The advice from ESMA encourages the Commission to conduct further analysis on the topic of inducements and proposes some changes to the regime aimed at improving the clients’ understanding of inducements.
Regarding costs and charges disclosure, ESMA has found that the obligation has worked well and has helped investors make informed decisions. It has however advised that some disclosure obligations for eligible counterparties and professional investors are scaled back.
The Financial Action Task Force (FATF) has published a statement regarding measures to combat illicit financing during the current COVID-19 crisis. The organisation notes in its statement that criminals are likely to take advantage of the COVID-19 pandemic and there is likely to be an increase in malicious or fraudulent cybercrimes amongst other various scams targeting innocent victims.
Authorities, financial intelligence units and law enforcement agencies should continue to share information with the private sector to address such money laundering risks.
It advises financial institutions to remain vigilant to emerging money laundering and terrorist financing risks and to ensure this is continually managed effectively and to detect and report any suspicious activity.
To discuss the requirements of money laundering regulations, or to discuss your AML risks at this time, please contact us.