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Coronavirus (COVID-19): UK FCA Issues Second Statement on Response to Pandemic

March 18, 2020

The UK Financial Conduct Authority (FCA) issued a further statement on 17 March elaborating usefully on its initial statement of 4 March (see our prior blog). Strikingly, it has abandoned the rather terse tone of the initial statement in favour of a more reassuring and understanding one, recognising the pressures exerted by the pandemic on regulated firms and consumers. Here are the key points.

General

The FCA

  • stands ready to take any steps necessary to ensure customers are protected and markets continue to function well;
  • has significant resources focused on their response, both for the firms they regulate (firms) and their staff and the situation is being overseen by its executive committee;
  • welcomes firms reviewing their current arrangements to address the evolving situation while managing the risks to their employees, customers, and the impact on the market;
  • is in regular contact with firms to assess their current position, and expects firms to be taking reasonable steps to ensure they are prepared to meet the challenges the pandemic could pose to customers and staff, particularly through their business continuity plans;
  • expects firms to provide strong support and service to customers during this period. They should be clear and transparent and provide support as consumers and small businesses face challenges at this time; and
  • expects firms to manage their financial resilience and actively manage their liquidity. Firms should report to FCA immediately if they believe they will be in difficulty.

Regulatory Change

The FCA is reviewing its work plans so that it can delay or postpone activity which is not critical to protecting consumers and market integrity in the short-term, allowing firms to focus on supporting their customers. For example, it is extending the closing date for responses to its five open consultation papers until 1 October 2020, has decided to delay 11 publications originally due before the end of June and has scaled back its programme of routine business interactions.

Market Trading and Reporting

The FCA reminds firms moving to alternative sites and working from home arrangements that they must consider the broader control environment in those new circumstances.

While the FCA repeats that firms should continue to record calls, in a marked change in tone from the 4 March statement, it now helpfully accepts that some scenarios may emerge where this is not possible. Firms should make the FCA aware if they are unable to meet these requirements.

Firms experiencing difficulties in submitting their regulatory data should maintain appropriate records and submit the data as soon as possible.

Firms should continue to take all steps to prevent market abuse risks. For its part, the FCA will continue to monitor for market abuse and, if necessary, take action.

Operational Resilience

The FCA expects all firms to have contingency plans to deal with major events and that the plans have been tested, and is actively reviewing the contingency plans of a wide range of firms. While the FCA reminds firms that they should take all reasonable steps to meet the regulatory obligations which are in place to protect their consumers and maintain market integrity, it does offer the reassurance that it will continue proactively discussing with firms and trade associations the issues they are facing.

Impact on Consumers

The FCA reminds firms that its rules already provide flexibility to firms in a number of areas; it expects them to use this flexibility to support consumers, bearing in mind customers’ individual circumstances; and welcomes firms taking initiatives going beyond usual business practices to support their customers. That said, the FCA still expects firms to deal with complaints promptly. However, where the pandemic prevents this firms should contact them.

Mortgages, Unsecured Debt Products, Access to Cash, and Insurance

The FCA notes it has been encouraged by the actions of some lenders in granting flexibility on mortgage payments as a way of protecting consumers.

In the current climate, the FCA wants firms to show greater flexibility to customers in persistent credit card debt.

The FCA notes that it is working with the Bank of England and the Payment Services Regulator to understand problems consumers may have accessing cash. UK firms have already taken steps to help ensure consumers have access to cash, and the FCA is confident electronic payment providers have capacity to cope with the potential changes in transaction numbers. Significantly, the FCA points to the need to learn the lessons from other countries' experience.

The FCA supports firms making consumers aware of the scope of their travel insurance cover and what exemptions there may be, and expects firms to make clear any time restrictions when consumers take out a new health insurance policy.

Finally, the FCA also issued the same day Issue 27 of its Primary Market Bulletin, which focuses on commentary for listed issuers and market participants in light of the pandemic. We shall release a further alert soon.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact the author, William Yonge.