Regulator Covid-19 Update 6 April

On 6 April, the regulators further update their Covid-19 measures:

  • FCA updated its expectations on solo-regulated firms in respect of the SMCR;
  • FCA published a summary of queries it has received on client assets compliance and its views. It has set up a dedicated email address for queries, but expects firms to have researched the problem and the rules before coming to FCA for help. The main queries have been around:
    • handling of cheques which are delivered to unmanned offices and therefore not banked – FCA says it expects firms to have taken whatever mitigatory steps are possible in the circumstances to avoid breaching the CASS rule that requires cheques representing client money to be banked promptly;
    • likelihood of increased costs of CASS audit reports because of multiple breaches. FCA merely comments that it does not see this would necessarily follow but that firms should be aware of the obligation to notify FCA if they will be reporting late and to notify specific breaches under SUP 15.and other Handbook provisions;
    • physical asset reconciliations where firms cannot access the location where physical assets are held;
    • depositing client money: FCA expects firms to have considered their options before contacting it if they are having difficulty segregating monies appropriately;
    • breach reporting; and
    • CASS firm classification if firms cross thresholds – but FCA says firms should follow the normal January notification requirement;
  • FCA published its expectations regarding funds – noting in particular its agreement to a delay in publication of annual and half-yearly fund reports, its agreement in principle that general meetings can be held in a virtual format and its acceptance of electronic signatures on applications.  It also notes that firms having issues in managing their funds within risk limits generally, and VaR limits specifically should speak to their supervisor – but they should already have in place plans to deal with this type of event and take appropriate remedial action; and
  • the Basel Committee has set out new measures to alleviate the impact of Covid-19. It has provided clarification on its expectations around expected credit loss accounting, and will amend its transitional arrangements for the regulatory capital treatment of ECL accounting.  Additionally, it is postponing implementation of the revised G-SIB framework from 2021 to 2022.

Emma Radmore