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On 28th September, the FCA published its latest portfolio letter - for firms in the platform portfolio.  As usual, the letter provides an update of the FCA's view of the key harms in the sector and a summary of the work it intends to do, but it also includes separate "what we expect of you" sections throughout.

Key Harms 

The FCA's says its key concerns about harm in this portfolio include the following: 

• Fees and charges may not represent fair value and are not properly disclosed.  The FCA will be undertaking proactive work on fair value and transparency of costs and charges, with an "immediate focus" on retained interest on cash balances. 
• Some customers are holding unsuitable high-risk investments due to historic failures to conduct proper due diligence of non-standard assets (NSAs).  Further, FCA is concerned that firms are not properly acknowledging or accurately calculating their liabilities relating to NSAs. This risk is shared with SIPP operators, and so platform providers who are also SIPP operators should also be referring to the FCA's SIPP operator portfolio letter from May 2023.  Boards should seek appropriate assurance on the level of due diligence their firms carried out when onboard NSAs and firms should consider whether they should carry out a remediation programme with consumers who have suffered losses that may have been caused by due diligence failings. If firms have potential liabilities, they should ensure they have been accounted for in their ICARA. The FCA will proactively engage with firms that hold NSAs to evaluate their assessment of their potential liabilities and whether they are taking appropriate steps to address them. The letter states that the FCA will not hesitate to require further capital injection if they consider there is a funding gap to meet those liabilities. 
• Platform firms do not have sufficiently robust systems and controls to protect customers from loss of investment savings or personal data due to fraud (including fraudulent adviser charging) and/or cyber-attacks.  The FCA will be questioning firms on adviser charging systems and controls in 2023/24. 
• The average time it takes customers to transfer their investments and savings between platforms is still too high for some firms.  The FCA will continue to monitor firms on their performance in this regard and will "proactively and assertively" engage with firms where data indicates they could improve.
• System outages or other operational resilience failures (including during significant IT upgrades or re-platforming) mean customers lose access to platform services.  The FCA will be requesting further data from firms on this and may then select firms for further review. 

Emerging Risks of Harm

In terms of emerging risks, the FCA highlights:

• Interest on customers’ cash balances (but see above on costs and charges).
• The growth of online trading applications platforms that overly encourage risky short term trading.

As legal advisers working in this sector, there is perhaps little in the letter which surprises us.  With the Carey and Berkeley Burke cases seemingly behind us, it seems clear that the FCA's focus is firmly on tackling the issues it perceives as most pressing among platform service providers.  Platforms should be considering the portfolio letter closely at a senior level and identifying proactive actions to be taken. If we can assist, please do contact Anna Davis, Matthew Kaltsas-Walker or your usual Burges Salmon contact.

For more news and insight in to financial services regulation, subscribe to our monthly newsletter here.