New FCA Safeguarding Regime
Published on: 02/03/2026 00:00
Our Associate Partner Muj Malik has written a whitepaper on the new Safeguarding approach. Here is a summary of how firms should prepare:
- Annual Safeguarding Audits by a qualified auditor and submission of the audit reports to the FCA in prescribed form within set timeframes.
- Increased FCA regulatory scrutiny through monitoring & new monthly reporting requirements
- Significant adverse findings or breaches may trigger supervisory or enforcement action.
To implement the new safeguarding requirements following actions will be required:
1. Governance Framework
- Enhanced governance specific to safeguarding arrangements
- Appointment of key accountable senior manager
2. Segregation Reconciliation
- At least daily reconciliation of all relevant accounts
- Maintenance of records and demonstrate audit trail
3. Resolution Pack
- Pack with specific minimum criteria and thresholds
- To be submitted on 48-hour notice from the FCA for inspection
4. Policies & Procedures
- Update for compliance with new regime & Firm’s business model
- Subject to annual audit review
5. FCA Returns
- Monthly FCA Returns with submission within 15 days
- Notification of breaches and errors in writing to the FCA
6. Unidentified funds
- Record of unallocated & unidentified funds
- Process to monitor ageing, timely action and audit trail
7. Risk Diversification
- Effectively manage or introduce concentration risk
- Evidence the rationale and mitigation where limited diversification
8. 3rd Parties & Bank Letters
- Enhancement to third-party due diligence processes
- Prescriptive requirements for annual bank letters
9. Insurance or Guarantees
- Amendments to policy clauses to ensure compliance
- Operational and cost implications
10. Investments in Liquid Assets
- Ensure asset selection aligns with new safeguarding requirements
- Demonstrate that arrangements effectively protect client funds adhering to liquidity, diversification & credit risk appetite
