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Industry update

Registered Persons and financial stability

Many businesses will be facing increased financial pressure as a result of the COVID-19 pandemic. Registered Persons must be aware of the financial pressures affecting their business and increased financial monitoring should become an integral part of their governance procedures.

We expect all Registered Persons to be able to demonstrate that due consideration is given to the financial position of the business and its client entities so that, in the event of financial difficulties, the Registered Person engages at the earliest opportunity with their Supervisor.

Our expectations:

  • Regular full board meetings are held considering the Registered Person’s financial position. These are accurately documented in full detail
  • Asset values in the prevailing market conditions are regularly considered. This applies to the assets of a Registered Person in addition to any assets held in client companies or trusts
  • The strength and documentation of any financial guarantees that support the business are regularly checked and minuted
  • Directors and Trustees review whether they are sufficiently skilled to opine on financial risks and solvency and, if not, consider seeking appropriate independent advice. Alternatively, the board should include a member who is adequately experienced to contribute on these matters
  • Robust procedures for the management of client assets, for reconciling movements in client assets, and for guarding against involvement in financial crime are maintained.

We would like to stress the importance of an open and honest dialogue between a Registered Person and their Supervisor. We expect to be informed in advance of any of the following actions being taken by a Registered Person:

  • Breach of the Registered Person’s ANLA requirements
  • Appointment of legal advisers to advise on a restructure of the Registered Person
  • Documented concerns in relation to the solvency of the Registered Person or a client entity.                          

Failure on the part of a Registered Person to comply with the Code of Practice in relation to governance obligations could render the Registered Person and/or a Principal Person liable to sanction by the JFSC and/or liability for wrongful or fraudulent trading.