The UK's Financial Conduct Authority has offered something to the firms that it regulates to help them through the Coronavirus crisis. It has delayed the appearance of new rules, is appearing to invite them to use up their capital buffers now and is allowing them an extra two months to publish their audited annual financial reports.

The FCA has published a number of statements whose connection to the Coronavirus is sometimes tenuous but always noticeable. In a document entitled Statement of Policy: Delaying annual company accounts during the coronavirus crisis, the regulator has decided to permit listed companies which need extra time to complete their audited financial statements to have an additional two months in which publish them. At the moment, the EU's Transparency Directive gives companies four months from their financial year-ends in which to publish audited financial statements. As part of the 'temporary relief' that it wants to afford financial firms the FCA will, among other things, forebear from suspending the listing of companies if they publish financial statements within six months of their year-ends.

On 21 March, the FCA asked financial firms to observe a moratorium of at least two weeks on the publication of their preliminary statements of account or 'prelims.' It has now said that the moratorium (which, though voluntary, has been well observed) can end on 5 April.

The use of capital and liquidity buffers

In one small memo entitled FCA's expectations on financial resilience for FCA solo-regulated firms, the regulator suggests that it might find favour with financial firms that use up their capital buffers to cope with the current crisis. It says: "We want to see firms to continue operating in this challenging period and, where we can, we intend to provide flexibility to regulated firms to ensure this. Capital and liquidity buffers are there to be used in times of stress. Firms who have been set buffers can use them to support the continuation of the firm’s activities."

Compliance Matters asked an FCA spokesman whether this was FCA support for firms that might be struggling with the Coronavirus. He replied: "Well, yeah. I don't think that it's any great secret that firms will suffer significant hardship. We don't have a precise position but if a firm is in trouble, we will consider those as part of the contingency."

The same document mentions that financial firms might benefit from "government schemes [a reference to a recent announcement by the Chancellor, who dedicated £330 billion in loans if needs be] to help firms through this period can be part of a firm’s plans for how they will meet debts as they fall due."

Compliance Matters asked the spokesman why the document was only addressed to firms that were regulated only by the FCA. He replied: "The other firms are the larger ones and they already know. Your Santanders and HSBCs are in regular contact with us. This is addressed to the less well-resourced ones."

The 10% drop letter

The regulator might also be moving towards a suspension of the requirement for every discretionary fund manager to send every HWN client a "10% drop letter" within 24 hours of his portfolio dropping 10% or more in value to apprise him of the fact, although this is speculation. The spokesman was unable to comment on this, although he had received several queries about the same matter.

Keith Richards, the chief executive of the Personal Finance Society, told Compliance Matters: “The FCA’s announcement on ‘providing flexibility’ for solo-regulated firms by allowing them to access cash reserves in a prudent manner, is a welcome one.

“At a time when many will be feeling pressure on their business cash flow, many solo-regulated Personal Finance Society members will be able to strike the right balance between the short, sharp effects they are experiencing and the longer-term financial impacts.

“Accompanying the earlier announcement of deferring annual accounts reporting, we believe the FCA is taking a pragmatic approach to this crisis by easing the administrative burdens placed on advisors.

“Given how swiftly markets and life are changing, it makes sense for listed firms to be excused from putting information out into the market that may be inaccurate or misleading.

“However, we believe that more can be done to unburden firms over the coming months, such as applying a lighter touch on MiFID [the European Union's Markets in Financial Instruments Directive] and Senior Manager & Certification Regimes and pushing back examination deadlines for transfer specialists.

“Following recent discussion, the FCA is considering the suggestion of suspending the 10% reporting requirement under MiFID II rules during this period once it has consulted the European Securities and Markets Authority. If the logic of suspending information for the wholesale market to avoid misleading messages is right, then the same logic applies to suspending information given to retail customers about the value of their portfolio dropping.”

Stuffing envelopes

Simon Ray, the founder of Cyan Wealth Solutions, complained to Compliance Matters about the FCA's inaction so far on the '10% drop letter' issue.

"In essence, what has frustrated me is the lack of guidance from the FCA. The 10% drop letter is a request for DFMs to contact clients in 24 hours to tell them that their portfolio has dropped by 10% - they should be giving us some slack on that. These are volatile times - these drop letters often go out and before they hit the mat, the market has gone back up again. Contacting clients is often difficult to do anyway - as you know, many HNW clients don't have emails that you can get them on. I have firms on my books that draft in everybody from directors down to menial staff to do the job of stuffing envelopes.

"Also, as we approach the first-quarter MiFID II reporting season, someone has to collate and distribute reports. Some firms will churn it through their own printers, but then people have to leave home and go in to work. Who does this? Are they breaching government guidelines by sending people into the office to do a non-essential job? Or others might outsource the job to a printing house. Does that printing house then breach the government's coronavirus rules by keeping the plant operating? Transaction reporting is also a nightmare - it's proving difficult to get everything in the right place."

DB transfers

The FCA is also putting off the publication of its 'final rule' regarding the contingent charging ban on defined-benefit pension transfers till later this year. It was going to publish this in the next few days, but is now reportedly aiming for the second or third quarter of this year.

The response from PIMFA, the UK's main wealth management trade body, has been guarded, with senior policy advisor Simon Harrington stating in a press release: "The FCA’s decision should come as no surprise. There are far more pressing considerations in the market right now – specifically how certain businesses even stay afloat – than the introduction of measures which...will have little to no bearing on the quality of pension transfer advice."

Scams ahoy!

Lastly, the FCA is warning investors (and, by extension, their wealth managers) about potential virus-related frauds. It wants to draw people's attention to the following tactics.

• ‘Good cause’ scams. This happens when the scammers seek investment for good causes such as the production of sanitiser, the manufacture of personal protection equipment or new drugs to treat the Coronavirus. The promise of high returns is the lure.
• Because stockmarkets are plummeting, the fraudsters may advise people to invest in non-standard investments.
• 'Clone firms' are a problem, with some scammers bound to claim to represent firms licensed by the FCA which are, in fact, not. Life insurance firms are especially vulnerable to cloning.
• Fraudsters may contact the investor claiming to be from a Claims Management Company, an insurance company or his credit-card provider. They may offer to help him recuperate losses by submitting a claim for the cost of a holiday or a non-event such as a wedding that had to be cancelled because of the Coronavirus. A request for money or bank details is bound to follow.  
• Lastly, there will be cold calls, emails, texts or WhatsApp messages to HNWs that claim that their banks are in trouble because of the viral crisis. By these means, fraudsters will ask them to transfer money to new banks.