Vida FatemiFCA has written a letter to firms that it identifies as providing a platform service, setting out the key harms in the sector, expectations of these firms and a summary of the work FCA intends to do. This follows the strategy letter of February 2020 and the strategy update letter of July 2021.
At a high level, Platform firms are expected to help consumers invest with confidence, understand the risks they are taking, and the regulatory protections provided. FCA expects firms to consider how the economic environment, including interest rates, could impact the outcomes consumers get from their services, good governance and for firms to have implemented and embedded the Consumer Duty.
Some of the key harms highlighted by FCA include:
- Fees and charges not representing fair value;
- Platform firms not having sufficiently robust systems and controls to protect customers from loss of investment savings or personal data due to fraud and/or cyber attacks;
- Ensuring the average transfer times for customers to transfer their investments and savings between platforms are shorter for all customers;
- Firms not properly acknowledging or accurately calculating their liabilities relating to non-standard assets (NSAs) which could lead to delays in customers redress payments and increase the potential for firm failure; and
- Customers losing access to platform services due to system outages or other operational resilience failures.
As a way of mitigating these harms, FCA sets out their expectations of firms, which includes:
- Firms should ensure their fair value frameworks and assessments are thorough and effective, and that firms have made the changes needed to governance and controls to incorporate the requirements of the Consumer Duty;
- Firms should have accurate records on NSAs taken on, assess the level of due diligence carried out when the NSAs were taken on and whether this causes consumer harm, whether there should be a remediation process and ensure that they have adequate financial resources to cover potential liabilities;
- Firm resources (including people, processes, technology, systems and controls) should be commensurate to the scale and nature of business operations at all times and firms must have contingency plans to deal with operational disruptions;
- Firms should have robust processes to review fraud controls on an ongoing basis and FCA will take action against firms who cannot evidence they have done so and consumers have suffered a loss;
- Firms should engage with and continue to support the principles and actions endorsed by the STAR initiative in relation to poor transfer times.
Over the next year, FCA will target firms where there are indicators and/or evidence of failings relating to the expectations set out in this letter and can expect to be asked to demonstrate how they have incorporated this letter into their work plans.