Further to our email Wednesday June 16th 2021 which provided the sector with our heads-up regarding FCA’s approach to Contracts for Difference (“CFD”) Brokers, we confirm that the FCA dispatched a “Dear CEO” letter to all CFD firms yesterday, marking a significant increase in the scrutiny and challenge that firms in this sector will be facing.
Most importantly, through this letter the FCA is placing personal liability on the SMFs and the CEO, in particular to inform the FCA of any breaches and ensure rectification.
As you are well aware, the FCA has taken a keen interest in firms who offer CFD products to retail clients, so much so that the FCA has established its own internal unit just for the supervision of these firms.
The letter details several key areas that the FCA will be looking to target, including operational resilience, consumer duty, financial resilience, CASS, governance, and financial promotions, to name a few. And these are only some of the areas referred to directly – there will be far more that the FCA will want to look at, particularly as CFDs pose significant risk to two of the FCA’s operational objectives: market integrity and consumer protection.
The timeframe is short for ensuring that the matters raised in the letter – both explicitly and implicitly – are addressed at Board level and a remediation or action plan is put into place. As a firm, you only have until the end of January 2023 to ensure that this letter has been discussed and actions agreed – which means you need to have ensured you have conducted a thorough gap analysis of where there may be any shortcomings in your internal procedures and operations – as well as prudential and human resources – and how and by when these will be rectified.
How Can Complyport Help?
Complyport – on the FCA’s Skilled Panel list – has been supporting the UK financial services industry with compliance guidance, advice and best practise for 20 years, with emphasis in exactly the areas highlighted in the FCA letter and beyond.
- Operational resilience & Cybersecurity advice
- CASS advice and protections of client assets
- Prudential support, IFPR, ICARA and financial resilience advice
- Financial Promotions management software solutions
- Comprehensive compliance work-flow management software
- Compliance managed services and resourcing compliance personnel
- Financial Crime and Forensics
- Consumer Duty implementation advice
- Skilled Person Reviews and Regulatory Investigation
Contact our Head of Regulatory Business Solutions, Jan Hagen via jan.hagen@complyport.co.uk to book a free consultation.
If you wish to receive further guidance specific to CFD FX matters in the letter, you may contact our specialised CFD FX team directly at CFDFX@Complyport.co.uk or submit the contact us form to arrange for a call.
