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Law360, London (August 13, 2020, 1:58 PM BST) -- The Financial Conduct Authority has written to investment companies asking them to consider returning customers' money that appears unlikely to be invested in the short term because of volatility in markets during the COVID-19 pandemic.
Some finance firms holding client money have reported a rise in their balances from January to June in the reports they file to the FCA on their financial health. The increase has been linked to the possibility that consumers may have updated their portfolios to lessen the risk of volatility during the crisis.
Megan Butler, the FCA's head of supervision for investment, said in a "Dear CEO" letter on Wednesday that in some cases that rise has been significant.
The regulator considers it good practice during the pandemic for businesses to have conversations with clients about what to do with their money, Butler said. This would help establish whether the money should be returned to clients or remain with the investment company for further investment in the short term.
"If it is in clients' better interests during this period, we expect firms to return client money balances which are unlikely to be reinvested in the short term," Butler said in the letter, which the regulator uses to highlight areas of concern. It was sent to businesses that provide a non-discretionary investment service or those that act on behalf of clients.
The financial watchdog is taking other steps to help consumers and businesses through the pandemic.
It has looked into whether people have been able to able to get hold of cash during the pandemic, and found that most have, although some communities have been excluded. The FCA on Tuesday extended measures to help policyholders struggling to pay their insurance premiums during the COVID-19 chaos.
--Additional reporting by Martin Croucher. Editing by Ed Harris.
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