On 30 September 2021, the FCA published a Dear CEO letter (dated 16 September 2021) which it had sent to firms active in the wealth management and stockbroking sector. The Dear CEO letter follows up on the FCA’s earlier strategy letter published in June 2019 and provides an update on the regulator’s view of the key harms in the sector, its expectations of firms and a summary of the work it intends to do.
In particular, the Dear CEO letter covers:
- Culture in financial services (including diversity and inclusion).
- Fraud, investment scams and market abuse.
- Financial resilience and disorderly firm failure.
- Costs and charges.
In terms of financial resilience the FCA mentions, among other things, that firms must have a good understanding of their regulatory capital and reporting requirements and are referred to ‘Finalised Guidance 20/1: Assessing adequate financial resources’. The FCA also states that should a firm identify emerging liquidity or capital risks in its business, the regulator will expect to be proactively notified at an early stage so that it can work with the firm to minimise consumer harm. The FCA also expects the firm to have a wind down plan that is credible which includes appropriate and timely triggers for implementation, together with a realistic timeframe and cost estimate for achieving the wind down. Firms are also referred to the FCA’s wind-down planning guide for further details. The FCA also warns firms’ chief executives that they and other senior management function holders will be held accountable for their firm’s actions when regulatory expectations are not met. The FCA’s identification process will involve an increased use of data that it will gather directly from firms and a range of other sources available to it. The FCA may engage with a firm to understand the risk of harm from its firm’s business model and any planned changes to it.
