A “Dear CEO” letter from the Financial Conduct Authority warns brokers, financial advisors and investment firms about filing inaccurate or incomplete data


The UK’s Financial Conduct Authority (FCA) has warned that “a significant number” of investment firms are filing shoddy information in their regulatory returns.

The “Dear CEO” letter to bosses of IFPRU and BIPRU firms warned against submitting returns “that contain inaccurate and/or incomplete data”.

In response, the FCA wants chief executives to review their firm’s regulatory reporting practices.

“Prudential risk monitoring is a fundamental aspect of a firm’s financial management practices,” said the letter, signed by FCA chief executive Andrew Bailey.

“Poor financial management can be a driver of poor conduct outcomes for consumers. In addition, it can ultimately lead to firm failure, which can cause harm to consumers and/or markets,” read the missive from Bailey.

“The information in returns informs the decisions we make. So, it is vital that data are accurate and complete,” the letter added.

If standards do not improve by the end of the third quarter of this year, the financial watchdog said it would consider the “next steps” it can take.

“Without prejudice to our ongoing supervisory function, we will, as of 1 October 2018, review a sample of firms’ returns,” said the letter.

“If we find that firms continue to submit materially inaccurate, incomplete and/or poor-quality data, we will consider next steps to improve the standards of returns,” Bailey warned.

Michael Chambers, head of prudential at governance, risk and compliance consultancy Cordium, commented: “It is the first time in years, that the FCA has written to asset managers’ CEOs on prudential matters. The regulators have highlighted that some firms do not 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,” said Chambers.

”This suggests 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,” he continued.

“Firms could be required to put in place documented policies and procedures around accounting, capital monitoring and forecasting, and regulatory reporting processes that are appropriate, robust and accurate. Firms will also have to monitor the operation of these processes to make sure that they are operating as intended,” Chambers added.

A link to the “Dear CEO” letter, which includes a list of “common issues” that have irked the regulator, can be found here.