The Financial Conduct Authority has urged firms which have begun holding increased client money balances during the Coronavirus pandemic to consider returning the money to clients.
In a Dear CEO letter sent to firms that offer a non-discretionary investment service, the FCA showed concern about consumers holding large sums of cash in their platform account and whether they understand the associated risks.
In the letter the FCA said it expects firms to act where needed in order to prevent harm to clients.
Megan Butler, executive director of supervision for the investment wholesale and specialists division at the regulator, said in the letter: “We are aware that clients may have rebalanced their portfolios to mitigate volatility during the coronavirus pandemic. As a result, a number of firms who hold client money have reported an increase in client money balances – in some cases significantly so – in their reporting from January to June 2020.
“Your firm’s relevant senior manager should consider whether the firm needs to hold client money balances which are unlikely to be reinvested, or whether it would be in your clients’ better interests to place these balances directly with their own current or savings account providers. We consider it good practice in this period for firms to communicate with clients about increased client money balances to ascertain whether these should be returned to them or continue to be held by the firm to facilitate further investment in the short term.
“In line with the above, if it is in clients’ better interests during this period, we expect firms to return client money balances which are unlikely to be reinvested in the short term. The FCA will continue to review client money balances and follow up with firms that report significantly increased balances.”
Leave a Reply