executive matters (1)

Coronavirus (Covid-19) and the FCA

In the space of just a couple of weeks, the global spread of Coronavirus has forced a seismic shift from what used to pass as ‘normality’. Government, regulators, medical providers, businesses and individual citizens are all now having to adapt as they’ve never done before, very often in timeframes measured in hours rather than days.

As far as the UK’s Financial Services industry is concerned, our regulators are busy monitoring and assessing the evolving situation. They have already issued a plethora of instructions and much needed guidance, all of it aligned with the Government’s strategy to manage and minimise the pandemic’s medical, social and economic fall-out.
With so much information being thrown at us, it’s important to cut through the noise and to distil the key messages emanating from the regulatory bodies and primarily – for the purposes of this article – the FCA.

The FCA has created a section within its website dedicated to providing up to date information for firms and consumers on Coronavirus (Covid-19). It’s well worth taking a look at this if you haven’t done so already.

Key areas covered include:

SM&CR responsibilities in light of Coronavirus – don’t worry, you don’t need to make a single senior manager responsible for coordinating your firm’s response to Coronavirus, but you do need to ensure that responsibility is allocated in a way which best enables your firm to manage the risks it faces. (N.B. In a later edition we’ll be talking more about SM&CR and the ‘to do’ list of outstanding actions)

Key workers in Financial Services – The FCA has issued guidance on this issue to sit alongside the Government’s request for schools to continue providing care for a limited number of children whose parents are critical to the UK’s response to Coronavirus. This includes parents who are needed for the provision of essential financial services.

For the avoidance of doubt, the definition of a key financial worker is a person at a dual-regulated firm, FCA solo-regulated firm, or PSR-regulated firm, or an operator of financial market infrastructure, who fulfils a role which is necessary for the firm to continue to provide essential daily financial services to consumers, or to ensure the continued functioning of markets.
Find out more on the subject of key workers in the Financial Services industry here:
https://www.fca.org.uk/firms/key-workers-financial-services

Impact on consumers – The FCA makes the point that its rules already provide a degree of flexibility to firms in a number of areas and that it expects this to be used to support consumers, taking into account their individual circumstances.

Examples cited are firms enabling customers’ access to cash by waiving fees for ISAs and allowing early termination of term deposits.

However, the bottom line is that the FCA expects all firms to continue treating their customers fairly at all stages in the natural cycle of the product, or service that is being provided and for customer complaints to be handled in accordance with its rules. Where the impact of Coronavirus prevents this, the firm concerned must inform the regulator.

Insurance products – the FCA was quick to announce its expectations of general insurance firms during the pandemic;
https://www.fca.org.uk/firms/insurance-and-coronavirus-our-expectations

The regulator’s website makes specific mention of travel and health insurance with particular attention being drawn to scope of cover and exemptions in relation to the former and clarity of claims moratoria periods for new customers of the latter. A key message is that IDD requirements must continue to be met.

Away from the FCA website, we know from feedback emanating from a recent meeting between the regulator and Trade Associations that claims relating to motor and home insurances should not be rejected where temporary  changes have taken place – such as customers having to work from home – which might otherwise have invalidated their home insurance cover.

If you’re an insurance broker, the FCA sees you as playing a key role in keeping customers informed about the changes that are going on in the market and how these may affect them. You can expect the regulator to stay close to your sector as it’s very keen to provide whatever support it can to you.

Mortgages – the FCA has been encouraged by the positive steps that many lenders have made with a view to protecting their customers by granting flexibility on mortgage payments. The regulator has issued guidance to mortgage lenders and this focuses on two crucial areas; Payment Holidays and Repossessions.  Read the FCA’s guidance here:
https://www.fca.org.uk/firms/mortgages-coronavirus-guidance-firms

Operational resilience – unsurprisingly, the FCA reminds us that it expects all firms to have contingency plans in place (and tested on a regular basis) to enable them to deal with major events.

Along with the PRA, the FCA is reviewing the contingency plans of a wide range of firms, so best be prepared for that call! Areas the FCA will be interested in are, for example, a firm’s assessment and management of operational risk, its ability to continue to operate effectively and the steps being taken to offer critical services and to support customers.

Asset management – The regulators have published a number of statements concerning liquidity in the current climate and these are available from the FCA’s website. The emphasis must continue to be placed on considering the best interests of investors at all times and as a result, the role of authorised fund managers has been given even greater importance. The FCA expects to see good governance and robust decision making.

Similarly, the regulator is keen to engage with any firm that is experiencing difficulties because of the fallout – direct or otherwise – from the pandemic.

And finally …

FCA, PRA and FRC joint statement – published on 26 March, this details a, ‘series of actions to ensure information continues to flow to investors and support the continued functioning of the UK’s capital markets’ which include:

  • The FCA allowing listed companies an extra 2 months to publish their audited annual financial reports.
  • Guidance from the FRC for companies preparing financial statements in the current environment. This is complemented by guidance from the PRA regarding the approach that should be taken by banks, building societies and PRA-designated investment firms in assessing expected loss provisions under IFRS9.
  • Guidance from the FRC for audit firms seeking to overcome the challenge of obtaining audit evidence.

You can read the full text of the statement by following this link:
https://www.fca.org.uk/news/statements/joint-statement-fca-frc-pra

 

 

An update on Apprenticeships with a Message from the Department For Education.

As a RoATP (Registered Apprenticeship Provider) with HM Government, FSTP received a message from Gillian Keegan, Minister for Apprenticeships and Skills on Monday 23rd March.  She said of Apprenticeships;

 

“In this difficult time, I know that providers and employers are doing their best for their workforce. I want to support that by ensuring that wherever possible apprentices can continue and complete their apprenticeship, despite any break they need to take as a result of Covid-19. I, through the ESFA, am committed to working with training providers, end-point assessment organisations and external quality assurance organisations to mitigate the operational and financial impacts of this disruption and maintain the integrity of apprenticeships.  I am hoping that together, with the expertise, support and commitment that you continually demonstrate, we can support apprentices and their employers through these extraordinary and difficult times.”

 

Like other providers we had already moved to support our apprentices online and via video for mentoring and whilst a number of examinations are postponed there is still plenty for learners to do.

What does this mean for employers? – Firstly any of you who are Apprenticeship Levy payers will continue to pay into Levy and if you are not drawing it down to support any learners you will be losing it month on month. We are in difficult times but is this the time to reconsider use of the Levy for your existing staff to supplement L&D budgets, re-train staff into key areas or take on new staff into parts of the business that require additional human resource. Those of you who are not Levy payers can still get access to funding and could even benefit from larger organisations gifting some of their levy payments to you. If you want any guidance or further information on apprenticeship provision email apprenticeships@fstp.co.uk

 

The message from HM Government is a continued commitment to re-skilling and upskilling our workforce. There will be lots to do on the other side of all of this, including contingency planning for further outbreaks of COVID 19 and how that might further change our workforce capability.

 

We appreciate that you are likely to be facing a wide range of potentially complex challenges, many of which are far removed from those you would normally be expected to deal with. We are already helping clients with similar issues and supporting them to ensure that they continue to comply with legal and regulatory requirements.

Julia Kirkland

Senior Partner

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