When a firm announces its wind-down decision, this may affect its reputation and/or credit rating. Changes in these factors may cause concerns for creditors, landlords and other suppliers about the firm’s ability to meet any outstanding liabilities and may trigger reactions such as margin calls or demands for full and final payment. It is therefore crucial that the firm communicates with these parties, and ensures there is sufficient liquidity to meet any liabilities when they fall due. This is a prime example of the importance of making a timely decision to wind down.
Status: Please note you should read all Brexit changes to the FCA Handbook and BTS alongside the main FCA transitional directions. Where these directions apply the 'standstill', firms have the choice between complying with the pre-IP completion day rules, or the post-IP completion day rules. To see a full list of Handbook modules affected, please see Annex B to the main FCA transitional directions.
1An effective wind-down plan would include a predetermined communications plan that considers the contents and timing of communications, including website updates (and possibly a hotline), to a wide range of stakeholders, such as relevant regulators (e.g. the listing authority, stock exchange, FCA, overseas regulators etc.), employees, customers, service providers, shareholders, bondholders, relevant industry associations and trade bodies and the media. Some suggested elements the firm may want to consider for the communications plan include:
identifying the stakeholders to be engaged;
determining who should engage those stakeholders;
agreeing the internal process for drafting and approving any communication to the stakeholders;
establishing guidance and procedures for a proactive vs a reactive communication strategy (or combination);
preparing scripts in advance if appropriate, e.g. holding statements, acknowledging that detailed messaging may only be possible reactively; and
recognising the potential need for the governing body to engage with legal advisors and communication experts (e.g. through media training).
Good stakeholder contact during the wind-down period will support the FCA’sconsumer protection and market integrity statutory objectives. Communications should be carefully handled to avoid a lack of reliable information or leaks which could create concerns among consumers and, in more severe cases, an increased risk of detriment and disruption to the wider market.
In line with Principle 11 (PRIN 2.1.1R), firms need to be mindful of their obligation to keep the FCA informed of material developments. This includes issues that might threaten the ongoing viability of the firm and any decision(s) to cease operations. Thereafter, a regular dialogue between the firm and the regulator needs to be maintained.
It is important for the firm to identify one or more individuals who will be responsible for coordinating effective and timely communications during the wind-down period. These individuals are likely to include senior decision-makers as well as those with specialist communications/technology skills, for example those with knowledge of financial disclosure requirements, web publishers etc. This is particularly relevant for a group of companies, or where listed entities are involved. In order for these individuals to effectively deliver communications in a wind-down they will need the appropriate training, tools, systems and resources.
1If the firm is part of a larger group and it decides to have its own individual wind-down plan the plan will almost inevitably be impacted by group activities. In particular, some or all elements of its governance, financing and operations may be dependent on the group. These dependencies have implications on the wind-down plan’s cost, duration and simplicity.
The following are some common questions which a firm could consider in a group scenario.
Does the group/parent need to be consulted before making the wind-down decision?
If there are intra-group transactions, how are they unwound and how do they affect wind-down costs?
A groupfailure event is particularly serious, as it could mean the relevant firm no longer has access to group resources such as a central treasury function, financial resources, IT and administrative functions for its own wind-down operation. It would then need to consider alternative resources in its wind-down planning.
Wind-down will trigger the closure of all regulated business undertaken by the firm, including overseas activities. Closure of overseasbranches or subsidiaries could be complicated due to jurisdictional differences (e.g. regulatory requirements, laws relating to employment and liquidation, etc.) and time differences (e.g. in relation to announcement of wind-down, closing out transactions etc.), which can add to the cost and duration of winding down.