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COVID-19: FCA Publishes Dear CEO Letter on Increased Client Money Balances

On August 12, the UK’s Financial Conduct Authority (FCA) published a “Dear CEO Letter” (the Letter) for firms providing non-discretionary investment services that are experiencing an increase in levels of client money held in their accounts.

The FCA is aware that clients may have rebalanced their portfolios to mitigate volatility during the COVID-19 pandemic. Consequently, a number of firms that hold client money have reported an increase in client money balances between January to June.

In the Letter, the FCA states that each firm’s relevant senior manager should consider whether the firm needs to hold client money balances that are unlikely to be reinvested, or whether it would be in its clients’ better interests to place those balances directly with each client’s own current or savings account provider.

The FCA considers it good practice during the COVID-19 pandemic for firms to communicate with clients about increased client money balances to ascertain whether these should be returned to them or whether the firm should continue to hold on to them to facilitate further investment in the short term. If it is in a client’s better interests during this period, firms should return client money balances if they are unlikely to be reinvested in the short term.

The Letter is available here.

©2020 Katten Muchin Rosenman LLPNational Law Review, Volume X, Number 227

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About this Author

Carolyn H. Jackson, International Attorney, Katten Muchin law firm
Partner

Carolyn Jackson is a partner in Katten Muchin Rosenman UK LLP and is a Registered Foreign Lawyer. She provides US financial regulatory legal advice to a broad range of market participants, including commercial banks, investment banks, investment managers, broker-dealers, electronic trading platforms, clearinghouses, trade associations and over-the-counter derivatives service providers.

Carolyn guides clients in the structuring and offering of complex securities, commodities and derivatives transactions and in complying with US securities and commodities laws...

+44 0 20 7776 7625
Nathaniel Lalone, Katten Muchin Law Firm, Financial Institutions Attorney
Senior Associate

Nathaniel Lalone, a partner at Katten Muchin Rosenman UK LLP, has a broad range of experience in the regulation of financial products and financial markets, and frequently provides regulatory and compliance advice to trading venues, clearing houses and buy-side firms active in the over-the-counter (OTC) derivatives, futures and securities markets. He is actively involved in advising clients on the implementation of MiFID 2 and MiFIR in the European Union as well as the international reach of US financial services regulation. He also has significant experience with structuring and documentation relating to OTC derivatives and structured products.

Prior to joining Katten, Nathaniel was a member of the US Regulatory and the Derivatives and Structured Finance practices at Allen & Overy LLP.

+44 0 20 7776 7629
Neil Robson, private equity fund managers counselor, Katten Law Firm, London
Partner

Neil Robson, a regulatory and compliance partner with Katten Muchin Rosenman LLP, focuses his practice on counseling hedge and private equity fund managers and other investment advisers on operational, regulatory and compliance issues. He regularly addresses Financial Conduct Authority (FCA) and EU authorization and compliance under both the EU Alternative Investment Fund Managers Directive (AIFM Directive) and MiFID, cross-border issues in the financial services sector, market abuse, anti-money laundering and regulatory capital requirements, formations and buyouts of...

44-0-20-7776-7666