The Financial Conduct Authority has warned investment platforms over their operational resilience as it prepares to intensify supervision of the firms.
In a Dear CEO letter published yesterday (July 26), the FCA said several firms had experienced IT outages and severe operational issues due to a surge in trading activity on November 9, 2020.
The regulator warned firms must have contingency plans in place to deal with operational disruptions and ensure the plans have been tested.
It will soon be asking for specific data about service disruptions on an ongoing basis, which will better enable it to identify outliers and take appropriate action, it said.
The FCA said: “These were clear examples of severe but plausible operational disruptions causing harm to consumers and negatively affecting market confidence.
“We expect firms to invest in their systems to ensure that they keep pace with the growth of their business and remain fit for purpose.
"IT upgrades and migrations should undergo thorough analysis and testing to reduce incidents and outages that cause harm to customers.”
This comes on the back of a Dear CEO letter in February 2020 in which the City watchdog set out its concerns, expectations and strategy for supervising platforms.
A key area outlined last year was insufficient investment, processes and resources for technology and operations which the regulator stated could lead to business continuity issues with services to customers and advisers being unavailable, intermittent or restricted.
The FCA said all the areas of harm in the letter last year were still relevant and it will continue to review progress in mitigating them.
Other areas outlined in the letter today included SUP 15 notification requirements, transfer times, Brexit and the diversity and inclusion discussion paper.
The FCA said it expects firms to notify the regulator of any matter which could have a significant adverse impact on the firm’s reputation, or which could affect the firm's ability to continue to provide adequate services to its customers.
This includes material service degradation incidents such as operational disruptions.
It said: “To date, we do not believe all material incidents at platforms that meet the SUP 15 requirements, are being reported to us. We expect this to change.”
The City watchdog also urged firms to take diversity and inclusion seriously and encouraged them to contribute to its discussion paper on the matter.
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