In light of continued spread of the COVID-19, the Financial Conduct Authority (“FCA”) published a statement on 4 March 2020 that its rules still apply despite any disruption caused by the virus – as many in the industry would expect. A link to the statement can be found here.
The FCA’s position is that firms should already have contingency plans in place to deal with major events. As regulator, it will be actively reviewing firms’ contingency plans, including assessments of operational risks and client services, ensuring they continue to operate on a day-to-day basis effectively.
Dual regulated firms should note that the Prudential Regulation Authority will also be reviewing the contingency plans of banks, insurers and financial market infrastructure.
Firms should continue to take all reasonable steps to meet their regulatory obligations. For example, the regulator expects firms to implement normal internal processes and give staff access to the compliance support they need. If firms can meet these standards, the regulator does not object that these functions happen from backup sites or with staff working from home.
If the spread of the virus causes a material proportion of a firm’s workforce to be off sick, some regulated firms might want or expect a degree of flexibility when it comes to regulatory compliance. The public position of the PRA and FCA will almost certainly be that there is no room for such flexibility, and a firm’s business continuity plan should allow it to continue to operate, even in extreme circumstances, otherwise customer interests, market integrity and financial stability could all be at risk.
What the regulators will not (and probably cannot) say is whether, if the rules are breached, they would be willing to take a COVID-19 pandemic into account, as a mitigating circumstance, when they are deciding whether to take action against a firm; and, if so, what kind or action to take, or how far to go. In any event, this is only likely to be possible for smaller firms and those who can show that, despite any technical breaches that might have occurred, consumer interests were not harmed in any way, and market integrity and financial stability were never at risk.
The FCA have said they will continue to work with firms to resolve any particular issues they may have and will keep its guidance under review in conjunction with the Bank of England and HM Treasury.
If you are unsure whether your contingency plans are adequate (either from a COVID-19 perspective, or more generally) you should seek advice. Fox Williams can advise on the steps and processes you need to take to ensure that your firm meets its regulatory requirements. For further information, please contact firstname.lastname@example.org or email@example.com.
Articles and commentary by our legal experts on the impact of COVID-19 are all available here.