The U.K. Financial Conduct Authority published a
Dear CEO letter setting out its strategy for providers and distributors of contract for differences over the next two years. The FCA's planned work relates to:
- Consumer Duty — the FCA will continue to test the embedding of the Consumer Duty and plans to conduct a multi-firm review focusing on the Consumer Duty's 'price and value' outcome;
- market abuse — the FCA aims to improve the identification of market abuse in the portfolio, focusing on transaction reporting and continuing its firm-specific targeted reviews of surveillance arrangements;
- reducing harm for firm failure — the FCA will continue to assess firms' implementation of the Investment Firms Prudential Regime, using regulatory returns and targeted data requests to identify outliers. The FCA will also oversee the progress of smaller firms on their MIFIDPRU capital glide paths and take action where firms have inadequate plans to increase capital in line with minimum glide path expectations;
- 'halo' firms — the FCA will continue to invite firms conducting no material activity to cancel their permissions. The FCA we will scrutinize loss-making, largely inactive firms that meet minimum prudential requirements via 'last minute' injections of funds from controllers and consider whether this amounts to renting an FCA 'halo'; and
- the FCA will continue to ensure that fast-growing firms hold adequate capital and liquidity. The FCA will also monitor whether such firms' wider systems and controls are commensurate with growth or anticipated growth. By January 31, 2025, CEOs are expected to have discussed this letter with their senior management and agreed next steps.
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