This note sets out some thoughts
and information on the current crisis.
Information from the FCA
The FCA has set up dedicated
webpages for firms (link: https://www.fca.org.uk/firms/information-firms-coronavirus-covid-19-response)
and for consumers (link: https://www.fca.org.uk/consumers/coronavirus-covid-19).
The key messages for firms are:
• Strong support for businesses
and individuals is expected of firms by the regulator pursuant to the ‘treat
customers fairly’ duty.
• The regulator is slowing or
curtailing regulatory change, including consultations and face-to-face
interactions with firms.
• Firms must consider their operational
resilience and their Principle 11 obligations.
The Principle 11 notification
duties, particularly in relation to the financial resilience of firms, are
emphasised by the FCA on the webpage above.
It is easy in a crisis to lose sight of the fact that the regulators must
be kept informed of developments, and if they are the last to hear of a
significant development, disciplinary action is likely to follow.
Key practical problems for firms
include implementing the advice on social distancing whilst complying with
their regulatory obligations. Most firms
have required staff to work from home where possible, but many in finance
cannot. A number of large firms are now
operating from their back-up off-site locations on the outskirts of
London. (Few in finance believed they
would ever have to go to their off-site office pursuant to their firm’s
Business Continuity Plan. The now
lengthy commutes for many traders and salespersons are of course the least of
our problems.)
Regulatory duties
It is important for senior
managers and certified persons to bear in mind, during these challenging times,
that the relevant regulatory duties generally bite on the concept of “reasonable
steps”. For example, the FCA states
on the firm’s webpage on the coronavirus: “Firms should take all reasonable
steps to meet the regulatory obligations which are in place to protect their
consumers and maintain market integrity”.
That mirrors firm’s obligations in PRIN (the Principles for Business)
and in the individual Conduct Rules.
Thus, the FCA states as regards
the control environment at firms during the transition to home-working and
off-site offices: (1) “Firms should continue to record calls, but we accept
that some scenarios may emerge where this is not possible”; and (2) “Firms
may experience difficulties in submitting their regulatory data, in which case
we expect them to maintain appropriate records during this period and submit
the data as soon as possible”. Thus,
the FCA only expects firms to take steps that are reasonable in the
circumstances, extreme as they are.
However, the FCA states: “We
expect all firms to have contingency plans to deal with major events and that
the plans have been tested”. Those
plans may become a matter for regulatory action in due course, particularly
where the lack of those plans causes problems for consumers or market
participants. However, the question for
senior managers now is what steps they can reasonably take to mitigate any such
disruption, to maintain market integrity and to prevent business failure.
