1In WDPG 3.6 (Impact assessment: who will be affected by the wind-down?) we explain how important it is for firms to assess the impact of a wind-down on customers, markets and other parties. In this section, we highlight the importance of anticipating the reactions of those parties.

Employees may want to leave as soon as possible to secure new roles. Firms may therefore need to consider how to ensure they can retain the key employees needed to carry out a wind-down.

If a firm is winding-down, especially under challenging market conditions, there is a risk that counterparties or other clients may simply default. This may have consequences on anticipated revenues and costs, and the duration and/or impact of the wind-down.

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.

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:

1. (1)

   identifying the stakeholders to be engaged;

2. (2)

   determining who should engage those stakeholders;

3. (3)

   agreeing the internal process for drafting and approving any communication to the stakeholders;

4. (4)

   establishing guidance and procedures for a proactive vs a reactive communication strategy (or combination);

5. (5)

   preparing scripts in advance if appropriate, e.g. holding statements, acknowledging that detailed messaging may only be possible reactively; and

6. (6)

   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.

1Any firm holding client monies or custody assets must ensure that it complies with all applicable CASSrules.

In particular, all firms that fall under the requirements of CASS 10.1.1R must maintain a CASS resolution pack.

The purpose of the CASS resolution pack is to ensure that a firm maintains and is able to retrieve information that would, in the event of its insolvency, help an insolvency practitioner achieve a timely return of client money and safe custody assets held by the firm to its clients.

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.

A firm preparing a wind-down plan at group level might be facing two possible wind-down scenario options:

1. (1)

   the firm winds down its regulated business on its own in an event independent of its group; or

2. (2)

   the firm winds down its regulated business as part of a larger groupfailure/wind-down event.

The following are some common questions which a firm could consider in a group scenario.

1. (1)

   Does the group/parent need to be consulted before making the wind-down decision?

2. (2)

   If the group has entities that are listed, are there any actions to be taken in line with applicable disclosure regimes and listing rules?

3. (3)

   If there are intra-group transactions, how are they unwound and how do they affect wind-down costs?

4. (4)

   What support will the firm receive from the group during its wind-down?

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.

1Continuing requirements during wind-down: The wind-down plan does not create an exception for complying with threshold conditions or our rules during the wind-down period.

During wind-down firms will need to continue to comply with the Principles, reporting requirements, financial resource requirements and any other relevant requirements.