On 6 February 2020, the FCA published a Dear CEO letter setting out its view of the concerns and expectations relating to platforms. The FCA’s supervision strategy is focused on addressing the following key harms:
- Technology and operational resilience. The FCA expects accountable individuals under the Senior Managers and Certification Regime to be responsible for operational resilience, prioritising plans and investment choices based on their wider potential impact. The FCA expects firms to meet reporting obligations for operational incidents (including cyber-attacks) and to ensure there is clear responsibility for reporting such incidents.
- Third-party outsourcing. The FCA expects platforms to have clear contractual arrangements in place with outsourcers as regards documenting responsibility and actions for incident management, outages and potential wind-down. Firms should undertake reviews of outsourcing arrangements to ensure the service provider is performing the services to a proper standard and any risks are properly managed.
- Conflicts of interest. The FCA expects platforms to identify all potential conflicts of interest and to have processes in place to effectively manage them. Firms operating Best Buy lists must construct them impartially and manage conflicts e.g. preference for funds offering discounts over formal and objective criteria, lack of independence of research teams and associated governance.
- Investment Platforms Market Study (IPMS). The FCA instructs platforms to consider areas where they need to work to implement the findings and recommendations set out in its IPMS final report, which was published in March 2019. In particular, platforms may need to take action on transfers, best execution and information on costs and charges.
- UK’s withdrawal from the EU. Platforms are reminded to consider how the end of the implementation period will affect their business and their customers and what action they may need to take to be ready for 1 January 2021.