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FCA Dear CEO Letter – compliance with regulatory reporting obligations

FCA Dear CEO letter – compliance with regulatory reporting obligations

Background

  • On 10 August 2020, the FCA published a letter to the senior partners and directors of audit firms.
  • The FCA noted that audit firms providing assurance to FCA-regulated firms continue to play a crucial role at this time due to the impact of coronavirus.
  • The information that audit firms give to the FCA through both public and private assurance reports and disclosures remains vitally important for the FCA.
  • While FCA supervisors regularly engage with auditors, the FCA reminds auditors that this duty to inform becomes binding as soon as uncertainties arise.
  • The duty covers areas such as when an entity is likely to be unable to continue as a going concern. For the avoidance of doubt, the FCA expects auditors to raise such issues with the FCA proactively and without delay.
  • The FCA has also produced guidance to regulated firms to provide clarity for possible areas of concern; on 11 June 2020, the FCA published FG 20/1: “Assessing adequate financial resources”.

Impacts

Those disclosures take on extra importance currently to help the FCA to prevent harms occurring. In the past, however, this information has not always been communicated to the FCA in a timely manner.

The FCA reminds all firms that it expects the audit profession to be particularly aware of their reporting obligations during the current coronavirus crisis period.

The FCA refers for example to reporting duties in relation to significant matters arising under SUP3 of the FCA Handbook, sections 342(5) and 343(5) of Financial Services and Markets Act 2000 and UK auditing standards.

The auditor of a financial institution or a company with transferable securities admitted to trading on a regulated market that is subject to statutory regulation has a ‘duty to report’ certain information to the regulator, relevant to the regulator’s functions, which comes to the auditor’s attention during their work.

The FCA guidance framework document FG 20/1 provides more clarity to firms on:

  • the role of adequate financial resources in minimising harm;
  • the practices firms can adopt when assessing adequate financial resources; and
  • how the FCA assesses the adequacy of a firm’s financial resources

Timeline with relevant dates to be logged on regulatory calendar

  • No specific dates were included in this FCA letter.

Next steps

All regulated firms and audit firms are urged to note these important regulatory obligations and to contact the FCA if there are any further questions.

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