Changes include the FCA accepting digital signatures on loan agreements; more online meetings with clients, which will require verification methods of income, address and affordability of loans and agreements to have inbuilt rigour and to be compliant with current legislation.

Complyport has warned that electronic and digital processes must still fulfil existing legal requirements.   The FCA recently confirmed it would accept electronic signatures for fund-related applications and on all applications from mutual societies.

The FCA has stated that appropriate steps need to be taken onboard to minimise the risks involved with using electronic signatures, especially those which may impact a firm’s responsibility to treat customers fairly with due care.

The FCA said: “Firms should consider the client’s best interests rule and the fair, clear and not misleading rule to ensure that, when a client signs a document electronically, this does not make it more difficult for the client to understand what they are agreeing to.”

Paul Grainger CEO of Complyport Ltd commented:

“The COVID-19 crisis has meant that we have lost the ability to have physical 1-1 meetings to check applications and explain the implications of legal agreements entered into by customers.   However, automotive finance lenders and motor dealership staff dealing with loan finance must still ensure that in the new “norm” of digital meetings and electronic transactions, the finance process is compliant with FCA requirements. Firm’s must fully consider the legal position around the use of electronic signatures and, indeed, around other associated areas such as explicit consent needed in the processing of certain data.”

“So we would expect firms to review their processes and procedures. We expect firms to take a pragmatic approach to adapting process and procedures to facilitate the provision of suitable advice and transactions for their customers, whilst ensuring they remain compliant with FCA requirements..”

Paul Grainger CEO Complyport Ltd further noted:

“Complpyort has warned firms that where firms do move from wet-ink to electronic signatures, they should monitor data including conversion rates, cancellations and complaints.”

The FCA has also provided guidelines in a  3-months payment freeze to customers that are facing financial difficulties in meeting their finance or leasing payments due to coronavirus and suggests firms not to end any agreements or repossess vehicles.

Firms may fairly adjust the terms of a contract affected by coronavirus if needed. Firms should not use temporary depreciation of car prices to recalculate Personal Contract Purchase (PCP) balloon payments at the end of the term. They should offer to the affected customer appropriate solutions in case they wish to keep their vehicle at the end of their PCP agreement but cannot cover the balloon payment due to financial difficulties caused by the coronavirus.

ENDS

For media enquiries:

John Kaponi –  IPM Media Consulting Ltd:

07875 542 969

Notes to Editors:

1. Complyport is a leading compliance and regulatory consultancy providing bespoke, practical solutions for all manner of regulated firms both in the UK and overseas. Our specialist compliance services expertise can either sit alongside your current compliance teams or, for an independent solution, we can bring our team in-house.
2. Established in 2002, Complyport combines former regulators, industry practitioners and legally qualified individuals to offer our clients an unparalleled, professional team.

The post Press Release – Automotive finance firms urged to comply with FCA requirements despite COVID-19 first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .

Handling and prioritising complaints

Firms should not take the current situation as an opportunity to delay unnecessarily or to not deal at all with complaints and they should take all reasonable steps to ensure that complaints can be dealt with by staff members working from home, where this can be done fairly and adequately.

Where firms have a reduced capacity to handle complaints, the FCA expects firms to prioritise:

• Prompt paying of complainants who have accepted redress offers
• the efficient and fair handling of complaints coming from:
  1. consumers who are likely to be vulnerable to harm if the complaint is not resolved
  2. micro-enterprises and small firms who are likely to have serious financial problems
• sending timely holding communications to complainants in 2 above where their complaints cannot be resolved within the required timescales.

Where a firm is not able to deliver these three priorities adequately and effectively through working from home, the FCA advises firms to maintain the physical presence onsite needed to carry out the necessary complaint handling processes. Social distancing onsite, therefore, should apply for as long as the government guidelines insist.

Vulnerable consumers

It is important to note that the coronavirus outbreak is likely to intensify personal circumstances that can cause vulnerability and, indeed, can cause some individuals who might not ordinarily be deemed to be vulnerable to become vulnerable. Such cases include the:

• loss of income from losing employment or being furloughed,
• the impact of isolation on mental and physical health, and people’s ability to work and care for others,
• increasingly demanding working conditions and greater exposure to the virus itself, especially for key workers.

This should not just apply to individuals, as it is possible that small businesses can also face circumstances that can make them vulnerable to harm especially if a firm fails to handle complaints promptly and fairly.

Maintaining the quality of complaint handling

Whilst it may take longer to review complaints when working remotely, the FCA does not expect any reduction in the quality of firms’ complaint handling procedures. Firms should continue to meet the relevant obligations, including investigating complaints competently, diligently and impartially, and paying appropriate compensation or making other necessary remediation.

The current circumstances should not prevent firms from:

• informing consumers about their complaint procedures and those of the Financial Ombudsman Service
• enabling consumers to submit complaints (although firms might need to limit more resource-intensive complaints channels to customers who cannot use other channels)
• acknowledging receipt of complaints, especially where the firms have the technology required to generate automatic responses by email or through online submission of complaints.

Firms facing difficulties

As complaint handling may take longer than normal, it is acknowledged that some firms might be unable to meet the timescale requirement set in DISP 1.6. Particularly, the requirement to provide a final response to complainants (generally within 8 weeks of receipt, less for some business types), or to provide a timely explanation why they are unable to provide a final response.

Firms facing difficulties to meet those requirements are encouraged to inform their usual supervisory contact or contact firm.queries@fca.org.uk, conveying the steps they are taking to manage and address the non-compliance.

It is important to note that, whilst the FCA acknowledges that some firms may struggle at this time in meeting their regulatory obligations, these firms are likely to be those that receive large volumes of complaints.  Complyport would expect that, in the majority of cases, firms that only deal with a small number of complaints are unlikely to be materially affected by the Covid-19 disruption and, therefore, should be expected to handle complaints in the normal way.

Claims management companies (CMC) and referrals to the Financial Ombudsman Service (FOS)

Based on the current operational challenges that firms face, the FCA expects CMCs to allow firms a reasonable amount of extra time, beyond 8 weeks, to give a final response before referring complaints to the FOS . unless there is any particular urgency in the individual complaint or the situation of the complainant.

Similarly, the FOS is expected to take current circumstances into consideration and may return a complaint to the CMC and ask the firm to communicate with the CMC directly to discuss and resolve the complaint. Professional cooperation between CMCs and the FOS will also ensure that the latter can focus on resolving complaints referred by vulnerable customers.

Additionally, CMCs are required to take these circumstances into consideration when dealing with their clients.  In particular, CMCs should keep clients updated on their complaints and relevant developments as per CMCOB 6.1.9 and they should consider the client’s specific circumstances when collecting fees.

The FCA is also encouraging CMCs to take account of the current circumstances when submitting Data Subject Access Requests as firms may have difficulties in responding within the defined timeframes. Therefore, CMCs should communicate with firms to understand those problems, consider guidance from the Information Commissioner’s Office (ICO) and, where issues cannot be resolved with firms, speak to the ICO directly before making complaints to it about those firms.

The Financial Ombudsman Service’s general approach

The FCA expects the FOS to take is guidance in the current environment into account when considering a firm’s compliance with the complaint handling rules.

PPI complaints

The considerations outlined by the FCA apply to all complaint including those relating to PPI.  The FCA reminds CMCs of the Dear CEO letter on PPI complaints. The letter still reflects the FCA’s and the Ombudsman Service views.

——————————————-

How we can help: Should you need any guidance or assistance in dealing with issues related to Coronavirus (COVID-19) or matters relating to compliance with FCA or related regulatory matters, please contact:

Jan Hagen – jan.hagen@complyport.co.uk

The post How Financial Services Firms Should Handle Complaints During Covid-19 first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .

Motor Finance

The FCA advises firms to allow a 3-months payment freeze to customers that are facing financial difficulties in meeting their finance or leasing payments due to coronavirus and suggests firms not to end any agreements or repossess vehicles.

Furthermore, the FCA proposes that firms should:

• Fairly adjust the terms of a contract affected by coronavirus if needed. Firms should not use temporary depreciation of car prices to recalculate Personal Contract Purchase (PCP) balloon payments at the end of the term.
• Offer to the affected customer appropriate solutions in case they wish to keep their vehicle at the end of their PCP agreement but cannot cover the balloon payment due to financial difficulties caused by the coronavirus.

High-cost short-term credit (including Payday loans)

The FCA proposes that high-cost short-term credit firms should provide a 1-month interest-free payment freeze to customers that are adversely affected by the coronavirus. This shorter period reflects both the short length of most loans and prevents firms from acquiring additional interest during the freeze period. At the end of the freeze period firms are encouraged to allow customers to pay the deferred payment affordably, either as one single payment or multiple smaller instalments.

High-cost short-term credit firms should also consider whether formal forbearance may be more suitable in the case where a customer has been suffering from financial problems before the coronavirus.

Other credit products (RTO, BNPL, or pawnbroking agreements)

Firms that enter into rent-to-own (“RTO”), buy-now-pay-later (“BNPL”) or pawnbroking agreements should provide a 3-month payment freeze to customers facing payment difficulties due to coronavirus.

The FCA suggests that:

• Pawnbrokers should give a 3-month payment freeze to their customers and, if the redemption period has already ended, they should not issue a sell notice for items that have been pawned. If the pawnbrokers have expressed their intention to sell an item, they should postpone the sale for the period of the payment freeze.
• Firms should extent the promotional period of a BNPL customer for the period of the payment freeze.
• RTO firms should allow a 3-month payment freeze and, in the case where a customer requires the goods during that period, repossession should not be permitted.
• If pawnbrokers or RTO firms are not allowed to redeem, collect, or repossess their goods due to social distancing, they should not pass on to their customers any additional fees incurred as a consequence.

The FCA advises that in most other loan freeze arrangements, firms will be able to charge interest rates during the payment freeze period but, for those customers who require full forbearance, their interest rates should be waived. The  current forbearance arrangements, such as suspending, reducing, waiving or cancelling any further interest or charges, deferring payment of arrears or accepting token payments, will still be applicable for customers with pre-existing financial problems.

The measures proposed by the FCA do not limit firms from providing more favourable terms to their customers if needed.

How we can help: Should you need any guidance or assistance in dealing with issues related to Coronavirus (COVID-19) or matters relating to compliance with FCA or related regulatory matters, please contact:

• Jan Hagen – jan.hagen@complyport.co.uk

The post Coronavirus (COVID-19) Update: The FCA Proposed Supportive Measures For Motor Finance And High-Cost Credit Customers first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .

On behalf of the FCA, Christopher Woolard stated, inter alia: that many people are suffering financial distress as a result of the pandemic and these measures could provide some short-term financial support. These measures are targeted to consumers with credit cards, loans and overdrafts that are negatively affected by the pandemic. Nevertheless, customers who still have the capacity to make payments are advised to continue to do so. Additional supportive measures for other credit markets, e.g. the motor finance sector, will follow.

The measures require firms to:

• offer a temporary payment freeze on loans and credit cards for up to three months, for consumers negatively impacted by Coronavirus
• allow customers who are adversely affected by Coronavirus and who already have an arranged overdraft on their main personal current account, up to £500 charged at zero interest for three months
• make sure that all overdraft customers are no worse off on price when compared to the prices they were charged before the recent overdraft pricing changes came into force
• ensure consumers using any of these temporary payment freeze measures will not have their credit file affected

The time-frame of measures in place

The rule changes will be in force from 9 April 2020 and the total full range of measures will apply by 14 April 2020. The time in-between will allow firms to ensure they have the appropriate level of resources needed to handle their customers’ requests. Some firms, including banking institutions[1] and building societies, will be adopting these changes as of today (9 April 2020).

The FCA suggests that consumers should firstly check the firms’ websites and social media platforms as well as their online services to request assistance prior to contacting the firms by telephone in order to avoid increasing pressure on call centres.

Guidance on the products covered under the confirmed measures

The FCA confirmed that the following products are covered: guarantor loans, logbook loans, home collected credit, a loan issued by Community Development Finance Institution and some loans issued by credit unions, but only where these are regulated. The guidance also applies to firms which have acquired such loans.

How we can help: Should you need any guidance or assistance in dealing with issues related to Coronavirus (COVID-19) or matters relating to compliance with FCA or related regulatory matters, please contact:

• Jan Hagen – jan.hagen@complyport.co.uk

[1] The banks and building societies who are implementing the changes from today are – HSBC, Lloyds, RBS, Barclays, Santander and Nationwide.

The post Coronavirus (COVID-19) Update: FCA Confirms Temporary Measures For Financial Relief For Customers Impacted By The Coronavirus first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .

Extra 2 months for annual reports and a month for half-year reports

Under the temporary relief issued by FCA, Authorised Fund Managers (‘AFMs’) of UK UCITS schemes and non-UCITS retail schemes (‘NURS’) who need extra time in preparing their annual reports, will be given an additional 2 months’ period to publish them.

The temporary relief will also allow one extra month for the publishing of half-year reports. The extra time granted will allow fund managers to act on the best interest of their investors and produce accurate reports.

In both cases, firms need to inform the FCA if they intend to use additional time. In addition to this, and if applicable, firms must also communicate any material concerns under Principle 11. The FCA will maintain supervision of the authorised fund sector through data reports and discussions with investment managers.

Using the additional time

Under UCITS Directive, authorised funds and open-ended funds operating as NURS must publish their audited annual accounts and reports within 4 months of their yearly accounting reference date (COLL 4.5.14R). Additionally, AFMs should include in the fund’s annual report a statement setting out their assessment of value, unless the AFM provides the statement in a different report (COLL 4.5.7R).

Nevertheless, firms that are able to publish their reports and accounts within the set timeframe without compromising either the quality of the reports or the existing health guidelines should publish their reports without making use of the additional time.

Temporary Relief

The FCA will not begin an enforcement action if AFMs publish annual reports and assessment of value reports within 6 months of their year-end accounting date.

Similarly, no enforcement action will be taken if AFMs publish half-year reports within 3 months of the end of their half-yearly accounting period.

This temporary relief is granted under the provisions of the rules in GEN 1.3 (Emergency), which permits appropriate relief to firms that may be unable to comply with a particular rule in the Handbook. GEN 1.3 sets out the various conditions that a temporary relief can be granted.

Actions required by AFMs

AFMs who wish to make use of the additional time should inform the fund’s depositary and auditors and email FCA with the details of the funds that this extension of time will apply and the intended date of publication at ukcis@fca.org.uk

AFMs should, before the original publishing date for either an annual report or half-year report, publish a statement on their websites explaining the rationale behind their decision as well as the intended publication date. AFMs should take all reasonable steps to inform the unitholders about the change in the publication date.

Important reminder on breaches

It should be noted that any firm which decides to make use of the additional time granted by this temporary relief would technically be breaching the rules by failing to publish the reports within the usual 2 or 4 month time-frame.

Regardless of the temporary relief, firms would still need to make a record of the breach on their relevant breach registers.

However, these breaches would not be subject to enforcement action by the FCA in the event that firms take the relevant steps as to notify the FCA, mentioned above.

The time-frame of this policy change

The change in this policy is temporary, taking into consideration the Covid-19 pandemic and its consequences. The FCA will continue to review the policy and will publish further information as to how and when it will cease to apply in a fair, orderly, and transparent way.

How we can help: Should you need any guidance or assistance in dealing with issues related to Coronavirus (COVID-19) or matters relating to compliance with FCA or related regulatory matters, please contact:

• Jan Hagen – jan.hagen@complyport.co.uk

The post Coronavirus (COVID-19) Update: FCA Announces Temporary Relief For The Publishing Of Annual And Half-Year Reports And Accounts first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .

Statements of Responsibilities and ‘significant changes’ to Senior Manager Responsibilities

The FCA recognises that firms may need to make temporary arrangements to cover absences or change Senior Manager responsibilities in direct response to the pandemic. The FCA does not intend to enforce the requirement on firms to submit updated Statements of Responsibilities in certain circumstances. The FCA will not expect firms to notify it of these temporary arrangements under Form D but will expect allocations (however temporary) to be clearly documented by each firm internally.

Temporary arrangements for Senior Management Functions

A Modification by Consent to the 12-week rule to support firms using temporary arrangements during the crisis will be issued. If the arrangements last longer than 12-weeks firms can notify the FCA that they consent to a modification of the 12-week rule. Temporary arrangements can be extended up to 36 weeks. Notification need to be emailed to centralwaiversteam@fca.org.uk or made in writing to Central Waivers Team, Financial Conduct Authority, 12 Endeavour Square, London E20 1JN

Furloughed Staff

The FCA recognises there may be cases where firms decide to furlough Senior Managers if they are unable to fulfil their responsibilities, for example due to illness. Unless a furloughed Senior Manager is permanently leaving their post, the manager will retain their approval during their absence and will not need to be re-approved by the FCA when they return.

Reallocating Prescribed Responsibilities

Firms should reallocate the Prescribed Responsibilities of a furloughed Senior Manager to another Senior Manager.  However, if the firm appoints a temporary replacement under the 12-week rule, the proposed Modification by Consent allows a firm to reallocate the Prescribed Responsibilities to the replacement, even if they are not a Senior Manager and, of course, updated Statements of Responsibility need not be submitted to the FCA (see above). Individuals performing Required Functions – e.g. Compliance Oversight, should only be furloughed as a last resort.

ACTION REQUIRED:

Consider your senior management arrangements and whether any re-allocation of responsibilities is required.

How we can help: Should you need any guidance or assistance in dealing with issues related to Coronavirus (COVID-19) or matters relating to compliance with FCA or related regulatory matters, please contact:

• Jan Hagen – jan.hagen@complyport.co.uk

The post Coronavirus (COVID-19) Update: FCA Statement – SM&CR And COVID-19 – Expectations On FCA Solo-Regulated Firms first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .

The PRA consultation with the seven largest UK banks (HSBC, Nationwide, Santander, Standard Chartered Bank, Barclays, RBS/Nat West and Lloyds) was very short. They were given a very short window in which to agree the PRA proposals and publish their intentions. The PRA action follows similar measures in other European countries.

The PRA justified its action in terms of banks conserving funds so that they are better placed to serve the economy during 2020. The banks will suspend dividends and buybacks on ordinary shares until the end of 2020 and cancel payments of any outstanding 2019 dividends. Banks will also conserve cash by not paying cash bonuses to senior staff. Bank boards were told to make sure they are considering the appropriateness of any accrual, payment and vesting of variable remuneration this year.

The PRA reiterated its confidence that based on the recent stress tests and actions agreed, UK banks will weather the crisis created by the Coronavirus Pandemic.

The PRA has also written to the CEOs of UK insurers. The PRA reminded insurance companies that when their boards are considering any distributions to shareholders or making decisions on variable remuneration, the PRA expects them to pay close attention to the need to protect policyholders, maintain safety and soundness and also ensure that their firm can play its full part in supporting the real economy throughout the disruption arising from the Coronavirus Pandemic.

Complyport expects the PRA (and the FCA) to extend scrutiny of board decisions regarding dividends, share buy-backs and payment of bonuses to smaller banks, insurance companies and financial institutions. The emphasis is expected to be placed on conservation of funds so that firms are better placed to ride out the economic and financial disruption arising from the Coronavirus Pandemic

The post Coronavirus (COVID-19) Bulletin – PRA: No Bank Dividends, Buy-Backs Or Bonuses In 2020 first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .

The consultation is targeted at banks, building societies, credit card and store card issuers and other providers of consumer credit loans. The proposed measures are intended as an emergency measure.

They will provide urgent but temporary support to users of certain consumer credit products who are facing a financial impact because of the exceptional circumstances arising from Coronavirus.

The FCA is conducting an extremely brief consultation on the proposed measures.

The consultation begins today (2 April 2020) with a deadline of 9am Monday 6 April 2020. If confirmed the measures would start to come into force by 9 April 2020.

It is intended the measures would be in force for up to 3 months.

The proposals focus on ensuring consumers have access to cash or credit at a time when many may be financially stretched but do not have to pay severe charges or interest penalties as a consequence. The proposals are summarised below.

• The FCA expects firms to offer a temporary payment freeze on loans and credit cards where consumers face difficulties with their finances as a result of Coronavirus, for up to three months.
• The FCA expects firms to ensure that for customers who have been hit financially by the coronavirus and already have an arranged overdraft on their main personal current account, up to £500 will be charged at zero interest for up to three months.
• The FCA will require firms to make sure that all overdraft customers are no worse off on price when compared to the prices they were charged before the recent overdraft changes came into force.
• The FCA will require firms to ensure consumers using any of these temporary measures should not have their credit rating affected because of this.

This package is intended to complement measures already announced by the government to support mortgage holders and tenants in the rental sector and the assistance being provided for furloughed employees and the self-employed. The FCA has already issued separate guidance to banks, mortgage lenders and insurers regarding dealing with consumers during the Coronavirus Pandemic.

In setting out its proposals and the extremely short consultation period, the FCA has cited the need to act to protect consumers at a time of national emergency.

Lenders do not have to put these measures in place until they come into force.

It may take a short period of time for lenders to put in place arrangements to provide these measures. Consumers should not contact their lender yet unless their lender is already offering voluntary assistance. The FCA expects to make a further announcement about these measures next week.

These proposals from the FCA would not prevent firms from offering more generous assistance to their customers. Some banks and lenders are already offering more favourable assistance to consumers than that proposed by the FCA.

The post Coronavirus (COVID-19): Update FCA Urgent Consultation: Temporary Financial Relief For Borrowers first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .

• Protection of consumers;
• Protection of industry employees/staff;
• Protection of markets;
• Resilience of firms.

The FCA guidance on responding to the Coronavirus (COVID-19) pandemic is summarised below.

SM&CR responsibilities

The FCA does not require firms to have a single senior manager responsible for their Coronavirus response. Firms should allocate these responsibilities in the way which best enables them to manage the risks they face. There are existing responsibilities specified in the Senior Managers Regime (SMR), for example SMF24 for operational resilience and SMF2 for financial resilience.

The FCA emphasises that firms should pay particular attention to its statement on Key Workers in Financial Services of 20 March 2020 and recommends that the SMF1 (or another most relevant member of the senior management team), should be responsible for the firm’s approach to their key workers.

Regulatory change

The FCA is reviewing its work plans so that it can delay or postpone activity which is not critical to protecting consumers and market integrity in the short-term. This will allow firms to focus on supporting their customers during this difficult period.

The FCA has delayed several regulatory initiatives and also scaled back its programme of routine business interactions, so that it will only contact firms on business-critical requests and responses to the current situation.

It will continue with a small number of regulatory changes which support consumers, particularly the most vulnerable, or where major long-term programmes would be disrupted.

Impact on consumers

The FCA rules already provide flexibility to firms in several areas and the FCA expect this flexibility to be used to support consumers, bearing in mind each consumers’ individual circumstances.

The FCA stated it welcomes firms taking initiatives and going beyond usual business practices to support their customers, especially relating to access to cash. When doing so, firms should notify the FCA so that it can consider the impacts and offer support as appropriate.

The FCA still expects firms to deal with complaints promptly. However, where the pandemic prevents this firms should contact the FCA. The FCA has reminded firms that they should aim to resolve any complaint within 8 weeks (15 days for payments firms). If they cannot, they should write to the customer explaining why they have not met the deadline.

Insurance Products

On 19 March 2020, the FCA published an update on expectations for general insurance firms during the pandemic. This sets out the expectations on insurers, brokers and others involved in the service supply chain.

Travel Insurance

The FCA supports firms making consumers aware of the scope of their cover and what exemptions there may be. Consumers should also be able to find this information on firms’ websites in a clear, concise way and have access to call centres.

Health Insurance

The FCA also expects firms to make clear any time period restrictions when consumers take out a new policy, for example if a policy will not pay out from 12 or 18 months of taking out a new policy.

Mortgages

On 20 March 2020, the FCA published new guidance for mortgage lenders, mortgage administrators, home purchase providers and home purchase administrators. Mortgages represent many consumers’ major financial commitment. FCA is encouraging and facilitating the granting of flexibility on mortgage payments as a way of protecting consumers.

Unsecured Debt Products

The FCA has stated its rules give firms the flexibility to act in the best interests of the customer. The FCA welcomes the steps firms have taken to offer support to customers and to encourage them to contact their bank or lender if they are experiencing financial difficulties.

The FCA wants firms to show greater flexibility to customers in persistent credit card debt. The FCA has indicated that the normal procedure for dealing with low repayments of persistent debt should be relaxed and consumers should be given until 1 October 2020 to respond to firm’s communications regarding resolution. This means that firms would not be obliged by to suspend the cards of non-responders before then.

Access to Cash

The FCA is working with the Bank of England and the Payment Systems Regulator to understand problems consumers may have accessing cash, and ensure the UK learns the lessons from other countries’ experience of Coronavirus.

UK banks have taken steps to help ensure consumers have access to cash, including the raising of cash machine withdrawal limits and the raising of the limit for contactless card payments.

Firms should continue to help vulnerable consumers access their banking services – online or over the phone. Firms should also remind consumers to be aware of fraud and protect their personal data.

Operational Resilience

The FCA stated it expects all firms to have contingency plans to deal with major events and that the plans have been tested. The Bank of England, Prudential Regulatory Authority and the FCA are actively reviewing the contingency plans of a wide range of firms. This will focus on assessment of operational risks, the ability of firms to continue to operate effectively and the steps firms are taking to ensure continuation of service to customers.

The FCA expects all firms to have read, taken account of and acted upon the issues raised in its Consultation Paper on Operational Resilience (CP19-32) issued in December 2019. The Consultation Paper can be downloaded from the following link – https://www.fca.org.uk/publication/consultation/cp19-32.pdf.

Market Trading and Reporting

The FCA has indicated that firms must consider the broader control environment as they relocate people and functions to new locations/sites or work from home.

Where normally required to do so, firms should continue to record calls, where possible. They should make the FCA aware if they are unable to meet these requirements. Firms are required to consider what steps they could take to mitigate such outstanding risks if they are unable to comply with their obligations to record voice communications.

Firms may experience difficulties in submitting their regulatory data, in which case the FCA expect them to maintain appropriate records during this period and submit the data as soon as possible.

Firms should continue to take all steps to prevent market abuse risks. This could include enhanced monitoring, or retrospective reviews.

The FCA is supportive of the recent ESMA statement regarding upcoming changes to the tick size regime for certain firms, required by the EU Investment Firms Regulation. The FCA will not prioritise supervision of the new requirements at this time. It expects firms to focus on minimising the potential for operational disruption.

Guidance issued by the FCA can be accessed or downloaded from the following link: https://www.fca.org.uk/coronavirus

List of Guidance issued by the FCA related to Coronavirus (COVID-19)

•  FCA information for firms on coronavirus (Covid-19) response, 29 March 2020
• Work-related travel – responsibilities of Senior Managers, 29 March 2020
• Statement of Policy: Delaying annual company accounts during the coronavirus crisis, 26 March 2020
• Joint statement by the FCA, FRC and PRA, 26 March 2020
• FCA’s expectations on financial resilience for FCA solo-regulated firms, 26 March 2020
• Banks and building societies – branch access for essential services, 25 March 2020
• Impact of the coronavirus on firms’ LIBOR transition plans, 25 March 2020
• Bank branch opening, 24 March 2020
• UK markets, 23 March 2020
• Announcement of preliminary accounts: technical Q&A for firms, 22 March 2020
• Key workers in financial services, 20 March 2020

Delayed Consultation Papers, Calls for Input and Planned Publications

The FCA has decided to extend the closure dates for the following published consultation papers and calls for input until 1 October 2020.

The FCA has decided to delay the following publications due before end June. The FCA will provide updates at an appropriate point.

The Coronavirus (COVID-19) Pandemic: A Summary of Recent Regulatory Developments in the EU’s Investment Services Sector and Capital Markets

Ever since the escalation of the COVID-19 outbreak in Europe, the status quo in the EU’s investment services sector and capital markets has dramatically changed. New developments emerge on an almost daily basis, while the industry is experiencing a major turmoil. Below we summarise the most important EU regulatory developments that have occurred in response to this pandemic in March.

Net short position ban and lowering of notification threshold for net short positions

Extreme adverse circumstances that constitute a serious threat to market confidence and financial stability have prompted a number of national competent authorities in the EU to ban net short positions for any shares or debt instruments listed on Trading Venues for which they are the designated regulator. Such bans were issued by the competent authorities of Austria, Belgium, France, Greece, Italy and Spain.

The net short position prohibits both short selling and any transaction that creates or relates to a financial instrument, and the effect or one of the effects of that transaction is to confer a financial advantage on the natural or legal person in the event of a decrease in the price or value of another financial instrument (meaning, among others, options, CFDs, spread bets). The ban applies irrespective of whether the transactions occur on Exchange or OTC. The only entities exempted from the net short position ban are authorised primary dealers and market makers who have applied for the exemption afforded under Article 17 of the Short Selling Regulation.

ESMA has also issued a decision temporarily requiring the holders of net short positions in shares traded on an EU regulated market to notify their relevant competent authorities if the net short position reaches or exceeds 0.1% of the issued share capital after the entry into force of said decision. ESMA considers that lowering the reporting threshold is a precautionary action, taken so that the relevant authorities can carefully monitor market developments following the coronavirus fallout.

Extension of the SFTR reporting start date

In an effort to mitigate COVID-19’s impact, ESMA issued a public statement clarifying that it expects competent authorities not to prioritise their supervisory actions towards entities subject to Securities Finance Transactions (SFT) reporting obligations from 13 April 2020 to 13 July 2020. Moreover, ESMA has clarified in an updated public statement that SFTs concluded between 13 April 2020 and 13 July 2020 and SFTs subject to backloading under SFTR are also not to be prioritised as part of the competent authorities’ supervisory actions.

Lax on requirements for recording of telephone conversations

ESMA issued a public statement clarifying that, considering the exceptional circumstances created by the COVID-19 outbreak, some scenarios may emerge where the recording of relevant conversations required by MiFID II may not be practicable. If firms, under these exceptional scenarios, are unable to record voice communications, ESMA expects them to consider the alternative steps they could take to mitigate the risks related to the lack of recordings.

Firms are expected to deploy all possible efforts to ensure that the above measures remain temporary and that the recording of telephone conversations is restored as soon as possible.

Measures specific to issuers and market transparency

Guidance regarding the accounting implications of the COVID-19 outbreak on the calculation of expected credit losses in accordance with IFRS 9

ESMA issued a public statement to promote the consistent application of IFRS in the EU and avoid divergence in practice on the application of IFRS 9 given the COVID-19 outbreak. The statement addresses the accounting implications of the measures taken or proposed by the national governments and EU bodies (for example, the moratoria on the repayment of loans) to address the adverse systemic economic impact of COVID-19.

In its statement, ESMA provides guidance to issuers and auditors, specifically regarding the calculation of expected credit losses and related disclosure requirements.

The EBA has also issued a related statement on the prudential framework and accounting implications of COVID-19. The two statements are consistent as with regards to financial reporting.

Extension to financial reporting deadlines and the importance of transparency

In light of the difficulties encountered by issuers in preparing financial reports and the challenges faced by auditors in carrying out timely audits of accounts due to the COVID-19 pandemic, ESMA issued a public statement recommending that national competent authorities apply forbearance powers towards issuers who need to delay the publication of financial reports beyond the statutory deadline. At the same time, the statement underlines that issuers should keep their investors informed of the expected publication delay and that the requirements under the Market Abuse Regulation still apply.

ESMA also highlighted that financial reporting is an important anchor for the economic decisions of users of financial information, as well as for exercising their rights to vote or otherwise influence management actions. The preparation of periodic information must continue to be carried out in accordance with the applicable financial reporting framework to ensure investor protection and to preserve the integrity and proper functioning of the EU’s financial markets.

EU-wide stress test postponed to 2021 to allow banks to prioritise operational continuity

The EBA announced that it has decided to postpone the EU-wide stress test to 2021 as a way of alleviating the immediate operational burden for banks during this challenging juncture. The final timeline for the EU-wide stress test will be communicated by the EBA in due course.

Urge to ensure business continuity

In another recent public statement, ESMA urged financial market participants to apply their contingency plans, including the deployment of business continuity measures, to ensure operational continuity in line with the regulatory obligations.

Similarly, several national competent authorities urged their regulated entities to do the same, alongside reviewing their business continuity and disaster recovery systems and making the necessary amendments based on each entity’s size, complexity and nature of business.

Extension to various ESMA consultation papers

ESMA has announced that it has decided to extend by four weeks the response date for all ongoing consultations with a closing date on or after 16 March.

Other initiatives by national regulators

The COVID-19 outbreak significantly impacted the activities of all market stakeholders, pushing them to reprioritise their efforts to address the crisis. To mitigate the impact of COVID-19, several national regulators have extended, where possible, several local reporting deadlines and other obligations. In an effort to limit the spread of the virus, some national regulators have announced working from home plans as well as suspended relevant activities such as examinations and training courses.

Furthermore, regulators are alarmed over COVID-19’s effect on the industry and are constantly gathering data across the market to understand and assess the extent of its impact with the aim of taking appropriate actions where necessary.

Extension to best execution reports

In another recent public statement, ESMA acknowledges the difficulties encountered by execution venues  and firms in preparing the general best execution reports required under RTS 27 and 28  of MiFID II. In this respect, ESMA recommends that national competent authorities take into account these circumstances by considering the possibility that:

• 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 (i.e. 30 June 2020); and
• firms may only be able to publish the RTS 28 reports due by 30 April 2020 on or before 30 June 2020.

Furthermore, ESMA encourages national competent authorities not to prioritise supervisory action against execution venues and firms in respect of the deadlines of the general best execution reports for the periods referred to above.

Extension to systematic internalisers new tick-size regime

The application date of the new tick-size regime for systematic internalisers under the Markets in Financial Instruments Regulation (MiFIR) and the Investment Firms Regulation (IFR) was set at 26 March 2020. In response to developments related to the COVID-19 pandemic, ESMA issued a public statement clarifying that it expects competent authorities not to prioritise their supervisory actions in relation to the new tick-size regime until 26 June 2020, and to generally apply their risk-based supervisory powers in their day-to-day enforcement of applicable legislation in this area in a proportionate manner.

How can Complyport assist you?

Our team of experts can offer you the following services:

• Assistance and management of FCA authorisations,
• Ongoing compliance advice and support,

• Advice on how recent regulatory changes affect your business,
• Updating your business continuity and disaster recovery plans,
• Bespoke compliance health-check reviews,
• Updating of your compliance monitoring programme,
• Advice on ICAAP and financial reporting, and
• Risk management advisory and support.

Why Complyport? 

Complyport is a regulatory compliance consulting firm supporting the UK financial services industry for around 20 years. They specialise in providing Governance, Risk and Compliance services to firms in the financial services industry in the UK and overseas. Complyport advises and assists firms to become authorised and to comply with the rules and requirements of regulators on an ongoing basis. They have successfully assisted over 300 firms to become authorised with the FCA and have been providing regulatory support to over 500 regulated firms on an ongoing basis at a Group level. With presence in the UK, EU and Hong Kong, Complyport can assist firms across multiple jurisdictions.

Complyport’s multidisciplinary consultants possess deep expertise in their field, having acted in FCA skilled person reviews, as expert witnesses in legal cases and as expert investigators for firms or their legal advisers. The team assists firms on issues relating to corporate governance, risk management, business controls, compliance and business improvement. They conduct audits and reviews of a firm’s products, processes, policies and procedures to identify scope for business, to determine the impact of regulatory developments and to verify compliance with local regulations. Complyport offers full support with financial reporting, capital adequacy assessments and compliance training as well as a suite of online RegTech applications to enable a firm to demonstrate continued compliance with the regulatory obligations.

For more information on our services, please visit our website at 185.183.35.69/~complyport or contact our team at +44 20 7399 4980  or via email at info@complyport.co.uk.

The post The Coronavirus (COVID-19) Pandemic: A Summary of FCA Guidance & Regulatory Developments in the EU’s Investment Services and Capital Markets Sectors first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .

Whilst the FCA has indicated it wishes to see firms to continue to operate and that it intends to apply flexibility, the statement lacks clarity on exactly what it means by flexibility and how such flexibility will be applied.

The FCA has indicated that Government aid to firms can be part of a firm’s plans for survival. The three main measures for most financial services firms that are likely to provide financial support are VAT deferral, the 80% of pay for Furloughed Workers scheme and the Coronavirus Business Interruption Loan Scheme. However, under current rules, whilst loans and deferred payments will assist with cash flow, any bank loan or Coronavirus Business Interruption Loans Scheme loan, unless arranged as a subordinated loan, will normally be treated as a liability for capital adequacy purposes. FCA has not issued any guidance or clarification regarding whether it will provide any suspension of rules or other easement in relation to this issue.

The FCA has stated that if a firm is concerned it will be unable to meet its capital requirements or its debts as they fall due, the firm should contact its FCA Supervisor with its plan for the immediate period ahead. The FCA also states that if a firm needs to exit the market, it should have a plan as to how this can be achieved in an orderly way, taking steps to reduce the harm to consumers and the markets.

The FCA has further indicated that firms that have been set capital buffers can continue to use them to support continuation of that firm’s activities. Firms that are regulated for prudential purposes by the Prudential Regulation Authority (PRA), should be aware of the PRA’s guidance and requirements too. They must discuss any concerns with the PRA and keep the FCA advised of the same.

The full text of the FCA announcement can be viewed and/or downloaded from the following link:

https://www.fca.org.uk/news/statements/fca-expectations-financial-resilience-fca-solo-regulated-firms

ACTION REQUIRED

1. Firms should closely monitor cash flow and capital and should model for how long they can trade whilst remaining solvent and compliant.
2. Firms must develop a contingency plan to reduce cost and/or seek external financial assistance where required.
3. Firms should review their ICAAP and liquidity assessment (or similar capital adequacy and cash flow if not required to produce an ICAAP) in the light of current trading conditions and current risks.
4. Firms should consider how, if needed,  they can exit the market in an orderly way whilst reducing harm to consumers and the markets.

How we can help:
Should you need any guidance or assistance in dealing with issues related to Coronavirus (COVID-19) or matters relating to compliance with FCA or related regulatory matters, please contact

• Jan Hagen – jan.hagen@complyport.co.uk

The post Coronavirus (COVID-19) Update: FCA Capital Adequacy Guidance For Solo Regulated Firms first appeared on Complyport - Your Trusted Partner in Governance, Risk, Compliance & Technology .