Against the background of a FCA dear CEO letter instructing platforms to immediately cease the practice of charging interest on client cash holdings where a platform fee is also charged on that cash, a more recent good and poor consumer duty practice update published last month highlighted a number of firms were having their fair value assessments reviewed.

With the likely outcome being a regulatory direction, setting out what firms will need to do for their own internal governance and how they need to communicate it, we look at how AI can form part of the solution.

Ensuring fair value assessments for client cash held on platforms is paramount. As platforms grow increasingly complex, traditional oversight methods struggle to keep pace. This is where Artificial Intelligence (AI) can assist the being a solution to the problem statement.

Here's how AI can provide accelerated results

Enhanced Policy and Rule Compliance:

• Automated rule enforcement: AI can automate the process of checking platform activities against a predefined set of rules and regulations related to fair value assessments, ensuring consistent adherence and reducing human error.
• Policy gap identification: Through machine learning, AI can analyse historical data and identify potential gaps or weaknesses in existing policies, allowing for continuous improvement and adaptation to emerging risks.
• Provide and roll out policy and compliance access to all employee: Using AI assistance and Agents, provide the firms employee access to ask and analyse the policies of compliance directly. Providing AI enable direct access, enhancing education, insights, analytics ad transparency.

Real-time Monitoring and Anomaly Detection:

• Constant vigilance: AI can continuously monitor vast datasets of platform transactions, cash flows, and market data to identify potential discrepancies or anomalies indicative of unfair value assessments.
• Early warning system: By setting predefined thresholds and risk indicators, AI can trigger alerts for suspicious activities, enabling rapid intervention and mitigation of potential harm to clients.

Increased Transparency and Auditability:

• Transparent decision-making: AI algorithms can provide clear audit trails, documenting every step of the fair value assessment process, enhancing transparency and accountability.
• Reduced bias and subjectivity: By removing human bias from the equation, AI can promote objective and consistent application of fair value assessment methodologies, fostering trust and confidence among clients.

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