The British Financial Conduct Authority has been shifting its policies towards compliance at fund firms in response to the economic turmoil that the Coronavirus has caused. Its latest pronouncements have been on reports and accounts.

Rule COLL 4.5.1R, backed up by guidance to be found in COLL 4.5.2G, says that in order to provide unitholders with regular and relevant information about the progress of a fund, the fund manager must prepare a long report half-yearly and annually and make it available to those unitholders upon request. COLL 4.5.7R contains the long list of things that have to go into these reports. COLL is the part of the FCA's rulebook that deals with collective investment schemes.

NUCITSRS

Fund managers can work remotely, but the FCA knows that the Government's Coronavirus 'lockdown' is impeding their operations in many ways, hence its decision to let them publish funds’ half-yearly and annual reports and accounts late. It has stated: "Where the authorised fund managers (AFMs) of UK UCITS [Undertakings for Collective Investment in Transferable Securities] schemes and non-UCITS retail schemes (NURS) need extra time to complete their fund’s annual reports, this temporary relief will permit an additional 2 months to publish them. Firms do need to let us know if they do this."

For half-yearly reports, the FCA is permitting fund managers to take one extra month to publish. Again, they must inform it if they do so. The FCA expects them to work closely with their depositaries. It is worried that it might not be able to oversee the fund sector by reading data reports and talking to investment managers.

The FCA promises: "We will not begin enforcement action for breaches of the FCA rules...if AFMs publish annual reports and assessment of value reports within 6 months of their accounting year-end date."

An AFM that wants to use the extra time should tell the fund’s depositary and auditors speedily and email the FCA about it. It should also publish a prominent explanatory statement on its website no later than the original publication date.

Virtual general meetings

Firms have asked the regulators whether they can hold general meetings of fund unitholders in a virtual format and whether a unitholder may be considered to be present at the meeting if they are participating in or have joined a virtual meeting. In the prevailing situation, the FCA says yes to both. It cannot, however, cancel any arrangements promised in fund documents such as prospecti and instruments of incorporation.

VaR

Fund managers are having trouble complying with limits on value at risk (VaR) when running their risk-limit systems. If they are in real trouble with this, they should talk to their supervisory contacts or contact firm.queries@fca.org.uk.

Wetwork

Some firms are making fund-related applications to the FCA and are struggling to obtain physical signatures on their application documents. While the pandemic rages, the FCA is willing to accept electronic signatures on applications to authorise funds or approve changes to funds. Applicants may use such electronic signatures where appropriate and relevant forms should be construed accordingly. At all times, of course, it wants to rest assured that every signatory has seen and agreed with all the information on every form. It is at pains to state that this applies only to information that firms send to its own offices and not to anybody else.

Clients' assets

The viral scourge has disrupted compliance with the client assets (CASS) rules at many firms. Trouble has arisen from cheques being delivered to unmanned offices and remaining unbanked. The FCA wants every firm to consider the harm that it might caused by not cashing this-or-that cheque, especially if the customer cannot receive the product or service intended until the cheque is cashed. It also wants it to communicate with its clients about this.

Physical asset reconciliations

Some firms subject to CASS 6 are having trouble reconciling physical safe custody assets because they cannot access the locations where the assets are held. The FCA wants them to do what they can in these circumstances and to keep it informed.

Delays to improvements

Some firms cannot make planned improvements to improve compliance with the CASS rules. The FCA wants them to tell it about this.

Paper-based and manual processes

An AFM may allow unitholders or potential investors to deal in units in a fund by post or facsimile. If it cannot do so it should consider providing alternative means by which unitholders can deal in units in a way that does not give any unitholder an advantage over any other. If this is impossible, it should look at other options.