How should regulated firms respond to coronavirus?
Regulated firms, like all other businesses, are having to adjust to meet the challenges presented by the pandemic. The FCA has published a statement for… Read more
Regulated firms, like all other businesses, are having to adjust to meet the challenges presented by the pandemic. The FCA has published a statement for firms facing these challenges. In this article, we consider some of the issues raised by the FCA and what firms can do to respond to such issues.
How does the FCA expect firms to respond to coronavirus?
The FCA has stated that it expects firms to take, “reasonable steps to ensure they are prepared to meet the challenges coronavirus could pose to customers and staff, particularly through their business continuity plans.”
The FCA has also said that it expects firms to provide, “strong support and service to customers during this period.” The message is that customers are likely to be vulnerable to financial stresses and financial services firms may need to be more accommodating than normal to their clients.
At the same, the FCA expects firms to keep their own house in order by managing their financial resilience and actively managing their liquidity.The FCA advises firms report to it immediately if they believe they will be in difficulty.
What about planned regulatory changes?
Essentially the FCA is planning to delay or postpone certain activities that are not critical to protecting consumers and market integrity in the short-term. Some consumer-focused initiatives will continue.
The FCA has said that one of the immediate actions it is taking is to extend the closing date for responses to open consultations and Calls for Input until 1 October 2020 and rescheduling most other planned work.
This means that regulated firms will be expected to apply their focus to supporting their customers during weeks and months ahead rather than dealing with new regulatory requirements.
Will firms still be expected to have meetings with the FCA?
The FCA has scaled back its programme of routine business interactions, especially through meetings so that it will only contact firms on business-critical requests and responses to the current situation.
What should firms do to support consumers?
The FCA has said that it welcomes firms taking initiatives going beyond usual business practices to support their customers.
It says that a number of firms have taken steps to enable customers’ access to cash, such as waiving fees for ISAs and allowing them to end their term deposits early.
However, if firms choose to take such measures, they will need to consider whether to notify the FCA under Principle 11, SUP 15 or otherwise.
How should firms deal with complaints?
Many firms will be struggling with issues around staff resourcing in call centres and other areas of the business, including complaints handling. Thankfully, the FCA seems to be allowing firms some leeway in terms of the timing for resolving complaints.
The FCA has said that it still expects firms to deal with complaints promptly. However, it has also said that, where the pandemic prevents this, firms should contact it.
The FCA reminds firms that they should aim to resolve any complaint within 8 weeks (15 days for payment services firms), but if they cannot, they should write to the customer explaining why they have not met the deadline.
What specific things should firms consider in respect of insurance products?
It is natural at this time that consumers will want to know if their insurance policies cover, for example, risks related to travel and health.
In relation to travel insurance, the FCA reminds firms of the need to make consumers aware of the scope of their cover and what exclusions there may be.
The FCA also expects firms to make this information on available on their websites in a clear, concise way and give consumers access to call centres.
In relation to health insurance, the FCA has said it expects firms to make clear any time period restrictions when consumers take out a new policy, for example, where a policy will not pay out from 12 or 18 months of taking out a new policy.
What has the FCA said about firms’ contingency plans?
The FCA and PRA have been consulting on operational resilience prior to the pandemic.
The FCA has said that it expects all firms to have contingency plans to deal with major events and that the plans have been tested.
The FCA has also said that it is actively reviewing the contingency plans of a wide range of firms alongside the Bank of England.
It has given an example of a firm that has to close a call centre, requiring staff to work from other locations (including at home). In such a case, the FCA states that the firm should establish appropriate systems and controls to ensure it maintains appropriate records.This may present particular technological challenges, for example, in relation to call recording (the FCA states that its rules are not specific in respect of call recording in such situations).
Are there specific issues for firms trading in financial markets?
The FCA has said that where firms are moving to alternative sites and working from home arrangements, they must consider the broader control environment.
In these circumstances, the FCA states that firms should continue to record calls, but it accepts that this may not be possible in certain scenarios. The FCA expects firms to make it aware if they cannot meet such requirements.
The FCA has also said that it expects firms to consider what steps they could take to mitigate outstanding risks if they are unable to comply with their obligations to record voice communications, which could include enhanced monitoring or retrospective review once the situation has been resolved.
Where firms experience difficulties in submitting their regulatory data, the FCA expects them to maintain appropriate records during this period and submit the data as soon as possible without delaying submissions unnecessarily. Where firms have concerns about regulatory data submissions, the FCA encourages them to contact it as soon as possible.
The FCA also expects firms to continue to take all steps to prevent market abuse risks, which could include enhanced monitoring or retrospective reviews. The reference to enhanced monitoring might suggest that the FCA believes that there could be a heightened risk of market abuse in the current situation.
The FCA’s statement on coronavirus can be found here.
For advice on how to deal with any regulatory issues resulting from the pandemic, please contact our Financial Regulation team.
Find all our Covid-19 related advice here.
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