FCA’s Dear CEO letter targets improved prudential processes

February 20, 2018 by Michael Chambers

For the first time in some years, the Financial Conduct Authority (FCA) has written to asset managers’ CEOs on prudential matters.

The letter includes a plea by the FCA for data that it, and the EBA, can rely upon when aggregating firms’ submissions to understand the macro picture. It also highlights that some firms appear not to understand the reporting that is required of them.

More tellingly, the letter requires that CEOs perform a review of the regulatory reporting practices in their firms to ensure they “comply with the relevant reporting provisions” and “produce materially accurate data.”

We expect that the next steps, following the FCA’s sample testing of firms later this year, will include a requirement that all firms – not just those with demonstrably incorrect or incomplete reports – up their prudential game.

In particular, we envisage that firms will be required:

  • to put in place documented policies and procedures around accounting, capital monitoring and forecasting, and regulatory reporting processes that are appropriate and proportionate, robust and designed to produce regular, reliable and timely data; and
  • to monitor the operation of these processes to ensure that they are operating as intended.

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About the Author

Michael is Head of Prudential Practice within ACA’s Financial and Regulatory Reporting team, responsible for regulatory reporting and prudential consulting services, technical interpretation of new and existing rules and prudential training sessions for clients.

Michael works with ACA’s clients including alternative fund managers, corporate finance firms, broker dealers and other investment firms, across a variety of strategies to address their obligations. He represents ACA in its Affiliate Membership with the Investment Association on their Prudential Committee.

Michael holds a BSc (Hons) degree in Accounting and Management Information Systems from the University of Hertfordshire, and is an Associate Chartered Accountant with the ICAEW.