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Clifford Chance

Clifford Chance

Regulatory Investigations and Financial Crime Insights

FCA publishes guidance to financial services firms on COVID-19

The FCA has set out information for, and the expectations of, firms during the coronavirus pandemic (COVID-19).

On 17 March 2020, the FCA published a new webpage setting out information for firms during the coronavirus pandemic (COVID-19). The FCA is "monitoring the situation closely and stands ready to take any steps necessary to ensure customers are protected and markets continue to function well".

The FCA has established dedicated teams and directed significant resources to focus on its response to the crisis, overseen by its executive committee.

Firms are required to report to the FCA immediately if they believe they will be in difficulty.

What are the FCA's immediate expectations?

Impact on consumers and complaints handling

The FCA expects firms to take reasonable steps to ensure they are prepared to meet the challenges COVID-19 could pose to its customers and staff, particularly through their business continuity plans. Firms should ensure that they provide strong support and service to customers during this time "bearing in mind customers' individual circumstances".

Firms may take initiatives beyond their usual business practices to support their customers, but must notify the FCA promptly so any potential impacts may be assessed and support provided by the regulator where appropriate.

Complaints are to be resolved within the current eight week timeframe (fifteen days for payments firms). However, where the pandemic prevents this, firms should contact the FCA promptly and write to the customer explaining why they have not met the deadline.

Strong operational resilience

All firms should have a tried and tested contingency plan in place to deal with major events. The FCA and the Bank of England are actively reviewing the contingency plans of a wide range of firms, including an assessment of their operational risks. Firms are advised to continually assess their contingency planning and ensure their systems and controls remain fit for purpose. All firms are reminded of, and should give consideration to, the measures set out in FCA CP19/32 "Building operational resilience: impact tolerances for important business services and feedback to DP18/04".

Despite the uncertainty of current circumstances, firms are still expected to "take all reasonable steps to meet the regulatory obligations which are in place to protect their consumers and maintain market integrity". It is imperative that firms establish appropriate systems and controls to ensure they maintain appropriate records where staff work remotely, and to notify the FCA if they cannot.

For further information on the impact of COVID-19 on operational resilience see our recent blog post; COVID-19 five steps to building a financial institution's resilience and related podcast Operational Resilience and the Coronavirus epidemic: Coping with Coronavirus.

Market trading and reporting

The FCA has made it clear it will continue to monitor for market abuse and take action where necessary. As firms move to alternative sites and home working arrangements, "they must consider the broader control environment in these new circumstances".

Firms should continue to record calls, but the FCA accepts that some scenarios may emerge where this is not possible. Firms should notify the FCA accordingly and consider what steps they could take to mitigate outstanding risks including enhanced monitoring or retrospective reviews.

Where a firm has difficulty in submitting regulatory data, the FCA expects it to continue to maintain appropriate records during the period and submit the data as soon as possible thereafter. Firms should not unnecessarily delay these submissions.

In line with a statement by the European Securities and Markets Authority on 20 March 2020, regarding upcoming changes to the tick size regime, the FCA will deprioritise supervision of the new regime at this time, but focus on minimising the potential for operational disruption.

Short-term supervisory focus

The FCA has scaled back its routine business interactions so that it only contacts firms on business-critical requests and responses to the current situation. It will continue with a small number of regulatory changes that support consumers, particularly the most vulnerable, or where major long-term programmes would be disrupted. The FCA is reviewing its current work plans to postpone activity that is not critical to protecting consumers and market integrity. In particular, it is extending the closing date for responses to its open consultation papers and calls for input until 1 October 2020, and rescheduling most other planned work.

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