On 31 March 2020, the FCA published a Dear CEO letter to firms providing services to retail investors about coronavirus.
The Dear CEO letter covers:
- client identify verification needs to continue, but firms have flexibility within FCA rules. During this period, the FCA expects firms to continue to comply with their obligations on client identity verification. The Money Laundering Regulations 2017 (MLRs) and Joint Money Laundering Steering Group guidance already provide for client identify verification to be carried out remotely and give indications of appropriate safeguards and additional checks which firms can use to assist with verification;
- supervisory flexibility over best execution until the end of June. The FCA expects firms to continue to meet their obligations including their obligations on client order handling. The regulator expects firms to take into account current market conditions when determining the relative importance they place on the different execution factors when meeting their obligations, and the venues or brokers they rely upon to achieve best execution. The FCA expects firms to consider their use of different types of orders to execute client order and manage risk during market volatility. However, the FCA has no intention of taking enforcement action where a firm: (i) does not publish RTS 27 reports by 1 April 2020, provided it is published no later than 30 June 2020; and (ii) does not publish RTS 28 and Article 65(6) MiFID II reports, provided they are published by 30 June 2020;
- supervisory flexibility over 10% depreciation notifications until the end of September 2020. Firms providing portfolio management services or holding retail client accounts that include leveraged investments are currently required to inform investors where the value of their portfolio or leveraged position falls by 10% or more compared with its value in their last periodic statement, and for each subsequent 10% fall in value. Firms have raised concerns about the impact on consumers and the operational burden of this in a highly volatile market. The FCA has no intention of taking enforcement action where a firm: (i) has issued at least one notification to a retail clients within a current reporting period, indicating their portfolio has decreased in value by at least 10%; and (ii) subsequently provides general updates through its website, other public channels (such as social media) and/or generic, non-personalised client communications. These communications should update clients on market conditions, explain how clients can check their portfolio value and invite clients to contact the firm if they wish; or (iii) chooses to cease providing 10% depreciation reports for any professional clients. The FCA will adopt this approach for a period of 6 months (to 1 October 2020).