From: RegTech Analyst
The Financial Conduct Authority (FCA) has issued an open letter telling CEOs that the regulator expects them “to prevent harm to your clients” in times of Covid-19.
The open letter was aimed at companies providing a non-discretionary investment service.
“We expect you to act to prevent harm to your clients,” wrote Megan Butler executive director of supervision of the investment, wholesale and specialists division at the FCA.
The letter noted that many clients have rebalanced their portfolios in order to counteract the market uncertainties caused by the coronavirus, meaning more businesses have reported big increases in their clients’ money balances.
However, this could cause some issues that the companies address with their clients.
“Your firm’s relevant senior manager should consider whether the firm needs to hold client money balances which are unlikely to be reinvested, or whether it would be in your clients’ better interests to place these balances directly with their own current or savings account providers,” Butler wrote.
“We consider it good practice in this period for firms to communicate with clients about increased client money balances to ascertain whether these should be returned to them or continue to be held by the firm to facilitate further investment in the short term.
“In line with the above, if it is in clients’ better interests during this period, we expect firms to return client money balances which are unlikely to be reinvested in the short term. The FCA will continue to review client money balances and follow up with firms that report significantly increased balances.”
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