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FCA addresses concerns on treatment of customer cash balances


The FCA has sent a Dear CEO letter to 42 investment platforms and SIPP operators outlining its concerns over how firms deal with interest earned on customers’ cash balances. Cash balances include client money balances for which firms have given clients written notice to retain interest under CASS 7.11.32R, as well as balances held on deposit via mandates or contractual arrangements.

Firms are now expected to have fully implemented the Consumer Duty. This would include acting in good faith, ensuring price and value in the products and services offered, and ensuring an adequate level of understanding and support. The FCA found a high degree of variance in the quality of disclosures made to consumers on the retention of interest, with information hard to find and understand. Retaining interest that exceeds operating costs or charging fees as well as retaining interest on cash balances held, would not provide fair value, and could be seen as causing foreseeable harm to customers.

Investment platforms and SIPP operators are expected to review their approaches, confirm they have done so to the FCA, and provide the following information:

  • Confirmation that the firm has ceased, or will cease, double dipping (charging fees for holding cash while retaining interest earned on customers’ cash)
  • Confirmation of any changes the firm has made or intends to make to the rate of retention of interest on customer cash balances
  • Confirmation that the firm has revisited its Fair Value Assessments (as set out in PRIN 2A.4) and is ready to provide this assessment to the FCA on request
  • Evidence of any new improvements to disclosures, including websites and customer literature, regarding the retention of cash interest on customers’ cash balances
  • A copy of the section of the firm’s terms and conditions outlining the treatment of interest on customer cash balances and the basis on which this is calculated.

Firms had until 31 January 2024 to provide the confirmations and information requested, and until 29 February to make the corresponding changes.