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“Dear CEO” – The FCA have concerns: do you?

“Dear CEO” – The FCA have concerns: do you?

The FCA have concerns - do you?

DD|hub has just released a new “Dear CEO” question set to help advisers get the information they need to deliver robust, compliant recommendations.

“Dear CEO” letters have become an important tool for the FCA to get the attention of senior management of regulated firms in a particular business sector.

Typically, the FCA will write to the CEO of each regulated firm in a sector to raise matters of concern and draw attention to actions which the FCA expect to see. They wrote to adviser firms in January 2020 identifying four key ways in which consumers of financial advice may be harmed and we wrote about that here. Significantly, they also mentioned inadequate due diligence as a contributory factor in investment and pension scams.

Twenty months on, and advisers will have undertaken a range of actions to mitigate the risks set out in that particular letter, but for firms using discretionary investment managers, there’s more to consider…

In June 2019, the FCA issued a Dear CEO letter to discretionary managers (and others) with a number of questions about how firms protected against market abuse, ensured best execution and other matters. Clearly, every adviser undertaking due diligence on a discretionary manager should also be thinking about those questions and checking that their clients are properly protected (and DD|hub released a “Dear CEO” question set in 2019 to help advisers check this).

But over the last three years, the FCA have issued other Dear CEO letters to platforms and banks listing a range of other concerns (see the table below), many of which are equally relevant for advisers to consider when recommending discretionary services to clients. For example:

  • Technology and operational resilience – this is as equally relevant to a DFM as to a platform: investors need to know that decisions can be made, trades can be carried out, cash moved securely and reconciliations undertaken in a robust, reliable way. This is particularly important against the context of pandemic and of cyber attack, which has caused significant problems at a number of organisations.
  • Conflicts of interest – what conflicts exist which might adversely impact an investor and how are these managed?
  • Governance – although raised specifically in the context of financial crime, the FCA point to the need for effective governance, including an effective “three lines of defence” model, with front-line business people taking responsibility for managing and minimising risk. This applies equally to any business risk, not just financial crime, and to every regulated organisation.

To help advisers get the answers they need to make a sensible assessment of a provider’s capabilities in these areas, we’ve released a new “Dear CEO (FCA letters 2019 – 2021)” question set, with questions designed to get immediate responses on these important topics from the DFMs live on DD|hub. We’ll be adding further questions over the coming weeks to drive down to more detail to help you further.

To choose this question set, simply login, click Create Review from the menu, choose the type of service you want, then select the “Dear CEO (FCA letters 2019 – 2021)” question set.

And if you’ve got any suggestions of other things we should include – please tell us.

Relevant Dear CEO letters 2019-2021

DateSent toIssues raised
13/6/2019Discretionary investment firms (and others)• Fraud, investment scams & market abuse
• Best Execution
• Costs & charges disclosure
• SMCR
• EU Withdrawal
6/2/2020Platforms• Technology and operational resilience
• 3rd party outsourcing
• Conflicts of interest
• Investment Platforms Market Study
• EU withdrawal
21/5/2021Banks (and others) re AML framework failingsFirms falling short of AML requirements, with weaknesses in:
• Governance
• Risk assessment
• Transaction monitoring
• SARs failings
26/7/2021Platforms• Technology and operational resilience – unavailability of services
• SUP 15 notification requirements
• Transfer times
• Brexit
• Diversity & Inclusion
The FCA have concerns about these matters – do you?
Chris Jones

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