Adequate Financial Resources – what are they? Who Knows…

All firms should be concerned about FCA’s proposals for Adequate Financial Resources, contained in CP 19/20. This was released in June and a Policy Statement with draft rules is expected in this quarter.

FCA’s proposal is that all firms – irrespective of whether, for example, they do or don’t advise retail clients, hold client money or only carry out corporate finance business – should hold a higher level of financial resources and should plan better and in more detail for wind-down situations. This, FCA contend, would prevent more firms failing and reduce the burden on the Financial Services Compensation Scheme – to which all firms contribute.

The problem is that FCA don’t specify what they think adequate financial resources should be. It’s all up to the firm to look at the risks it faces and provide accordingly.

This will lead to differing levels of compliance and practice amongst similar firms, and all with the end result that financial resources will be higher but in spite of this, firms will still fail and the FSCS will still have to pay out. So the good firms end up paying twice – with higher financial resources and an ongoing FSCS levy.

For more details, see our article in this October’s Compliance Monitor.

SMCR – post implementation review

So now you’ve implemented SMCR. What next?

It will be at least 6 months before FCA ventures out to meet firms to see how their implementation went. And then they’ll want to focus on the Enhanced firms first.

How should Core firms best use this time?
Fulcrum Compliance has developed a post-implementation review programme, benchmarked against FCA requirements, which we will be rolling out to retained clients in the first half of 2020. This looks at all the key aspects of SMCR, including SoRs, training delivered and Compliance Manual policy updates.

If you’d like us to have a look at your own implementation, do get in touch.

Who’s Inside?

Have you looked to see who’s on your insider list recently? You should – you might be surprised.

In Market Watch 60 (released this August) FCA gave some insight into firms’ poor practices in this area. To give you some examples:

  • large numbers of support staff having access to inside information
  • staff having access to inside information when they had no connection to the transaction;
  • staff not on the insider list having access to the information.

FCA reminds firms that “by allowing widespread and unchallenged access to individuals who do not require the inside information to do their job, firms increase the risk of that information being disclosed unlawfully.”

So have a look at your insider list – and remember, it’s a need to know, not a want to know.

So farewell, FCA Contact Centre…

News reaches us that the FCA Contact Centre is no more.
But don’t worry – it’s just been re-named the “Supervision Hub”. FCA believes that this name change better reflects the work that the Contact Centre does as a front-line supervisor. As part of this change, the external website will be updated and the FCA will ensure it’s still clear to consumers who they are and what they do.

So that’s a relief. We’ll all look forward to continued engagement with this key part of the regulatory superstructure.


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