Financial Conduct Authority  

Warning FCA will not be lenient on conduct amid Covid crisis

Warning FCA will not be lenient on conduct amid Covid crisis

The Financial Conduct Authority will not be lenient on firms which neglect their standards of conduct amid the Covid-19 crisis, a regulatory consultant has warned.

The watchdog has already re-shuffled and delayed its regulatory calendar in light of the ever-spreading economic and social fallout, with a number of industry figures calling for “regulatory forbearance in these extraordinary times”. 

This week it emerged it was delaying its decision on new rules for defined benefit transfer advice.

But one area in which regulatory expert Ben Blackett-Ord, chief executive at consultancy Bovill, said the FCA was unlikely to show any leniency to firms, was standards of conduct. 

Mr Blackett-Ord said: "In these tricky times, in terms of things like conduct, there is no room for firms to verge away from the high standards the regulator expects.

"I think the regulator would be right to say this is not the time and place for leniency because now is the time to maintain the highest possible ethical standards and examples. 

"Now is the time to work even harder to look after your clients and staff."

The recent roll-out of the Senior Managers and Certification Regime to the advice sector last year introduced another level of individual accountability within firms, including a new standard for personal conduct. 

Mr Blackett-Ord warned the FCA was also likely to be as "concerned as ever" about firms potentially going bust and ensuring client assets are protected, but he said there would be areas in which a "degree of forbearance" was appropriate. 

He added: "To my mind the FCA has always been a pragmatic regulator. In relation to operational requirements - things like getting returns in on time - I would be surprised if the FCA didn’t take a more pragmatic approach.

"Clearly it understands everybody is working under a BCP regime at the moment and meeting some of those operational challenges is going to be tough and I have no doubt we will see the FCA being a bit more lenient in some areas.

"As long as firms can demonstrate they are doing their best - in relation to the operational aspects - I think the regulator is likely to be happy with that, as long as we are not seeing standards falling."

The Bovill boss pointed to the regulator's recently published guidance, in which it set its expectations for mortgages and small business loans during these turbulent times, as supporting a certain element of flexibility in its supervision of the market. 

Last week the FCA warned against repossessions in the current market climate and asked lenders to offer struggling customers a three-month mortgage payment holiday in light of the spreading coronavirus pandemic and the associated economic fallout. 

Mr Blackett-Ord said: "The guidance gives a hint of that kind of pragmatic approach in terms of requiring lenders to judge firms on the basis of past performance, and not on the basis of what they are suffering at the moment.”