Lynn Strongin Dodds
The Financial Conduct Authority (FCA) has agreed to offer supervisory flexibility to traders of their best execution requirements during the current coronavirus crisis.
In a ‘Dear CEO’ letter to firms serving retail investors on its response to the Covid-19 pandemic, interim chief executive Christopher Woolard, said the UK regulator would not take any enforcement action against firms that do not publish the next reports as required on 1 April, as long as they do so no later than June 30.
However, the FCA does expect them to continue to take into account current market conditions when determining the relative importance, they place on the different execution factors when meeting their obligations as well as the venues or brokers they rely upon to achieve best execution. “We would expect firms to consider their use of different types of orders to execute client order and manage risk during market volatility,” according to Woolard.
Under MiFID II, firms are obliged to secure the best price or execution for end investors and to publish quarterly reports to evidence their efforts.
The move follows other FCA actions during the crisis such as the relaxation on recording and reporting of traders’ phone conversations and transactions. Regulation in the UK require phone calls to be recorded for certain activities, while sales and trading staff must be adequately supervised during the coronavirus crisis.
There have been appeals from many parts of the financial service industry for the FCA to do more to help them navigate this unprecedented time. The FCA said in its letter that it had received hundreds of requests for changes to its regulatory approach from trade associations and firms. It said: “We want to continue working with firms and consumer organisations to understand how the impact of the pandemic is affecting markets and the harms that consumers may face. We will keep these measures under review especially as new issues arise.”
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