Where do liabilities lie and do you spend £15k on Xmas?

Donia O’Loughlin

An IFA forced into administration due to its £1.5m Arch liabilities was the story that garnered the most attention this week.

Willow Financial Management is now in adminstration, but former partners Ian Morris, Peter Holden, Simon Bartlett and Calum Cameron have bought the business, ongoing client remuneration and the company’s physical assets for £40,000, under two new firms My Wealth Management Limited and Dynamic Wealth Limited.

But what about the liabilities? As the firm was a limited company, its financial assets and liabilities are entirely separate from those of its shareholder owners, so the Arch Cru liability may not have passed onto the directors.

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It seems that the liabilities will fall onto the Financial Services Compensation Scheme and we all know what that means; a letter through the post telling advisers to pay up.

It doesn’t seem fair that a firm can go into administration, with the directors starting a new firm, and the liabilities falling onto the industry.

I asked the Financial Conduct Authority where the liabilities would lie, hypothetically, if the directors of a failed company A then set up an entirely new company B?

The FCA told me, hypothetically, that it could not force company B to take a particular course of action but if it was concerned the directors were deliberately shirking their responsibilities it may implement something on them to look after their clients.

If a limited company goes into administration and the directors set up a different firm, I believe the FCA should have the power to force them to take on the liabilities of the failed firm.

FCA: Get your house in order

This week, FTAdviser revealed that the FCA is conducting its third thematic review into Sipps.

The FCA wrote to Sipp operators stating its intention to undertake a thematic review and that it will focus on Sipp operator financial resources, the quality of business Sipp operators allow within their schemes and “operational procedures and controls”.

The Sipp operators that I spoke to said this was an expected move, but it does highlight a few questions.

Considering the FCA’s long-awaited publication of the final rules that will hike capital adequacy thresholds for providers is due before the end of this year, why is this thematic review also focusing on financial resources?

But what is more interesting is that the FCA will be focusing on quality of business. What does that mean? Robert Graves, head of pensions technical services at Rowanmoor, said this “intrigues” him.

Will the FCA be judging how many unregulated investments are in the Sipp compared to regulated?

In the wake of recent fraud scandals, does the FCA plan a move back to a permitted investment list for Sipps as there was prior to A-Day? AJ Bell, among others, have been calling for a return to a list of allowable investments.