Dear CEO letter: FCA expectations for wealth management & stockbroking firms [pdf]

Lucy Castledine, the Director for Consumer Investments had written an open letter to all Chief Executive of wealth management and stockbroking firms to urgently address the topic of FCA’s expectations for wealth management and stockbroking firms. The reason behind the letter is that a firm’s Chief Executive is responsible for its compliance with FCA requirements in preventing financial crimes.
Wealth management and stockbroking firms are prone to scams and frauds, resulting in money loss, money laundering and causing significant damage. Additionally, they tend to expose customers to disproportionally high-risk investments. It is therefore especially important that the wealth managers and stockbroking firms understand these risks and advise the clients appropriately.
FCA’s Financial Crimes Expectations
– not engaging or facilitating frauds, scams or money laundering
– understanding financial risks in this sector for particular clientele
– performing compliance in-house and not outsourcing
– robust and effective internal control systems
– competent and experienced SMF 16/17 holders
– disclosing wrongdoings
– implementation of Financial Crime Guide: A firm’s guide to countering financial crime risks (FCG) and Financial Crime Thematic Reviews (FCTR)
Customer Duty Expectations
FCA expects the implementation of Customer Duty to ensure that the clients‘ needs are put in the first place and not otherwise. Especially when it comes to products and services understanding, it is especially important to match the consumer expectations to portfolios; it is prohibited to take advantage of the relationship with the client to offer disproportional investments.
The firm needs to have a clear understanding of its target market’s objectives, allocate relevant products and services, ensure that the customers‘ vulnerability assessment is up to date and correct and justify any irregular investments offered by the firm.
Moreover, the firm needs to review their price and value for services. There have been cases of clients paying for services which have not been executed or the firm charging especially high fees that do not have a rational justification.
Castledine also refers to the Clients Asset Sourcebook for additional rules to be followed.
FCA’s work so far
The FCA has been constantly working on enhancing its methodology to identify problematic firms, improve their services and controls. It continues to work on the received data to make its supervision „targeted, intrusive and assertive“. In case of any doubts or additional information on the points discussed above, it is possible to contact the FCA directly using the contact page or by telephone.