Regulation  

FCA refuses to approve ‘phoenixing’ advice firm

FCA refuses to approve ‘phoenixing’ advice firm

The Financial Conduct Authority (FCA) has refused to authorise an adviser who applied to set up a new business, after the firm was suspected of trying to escape £1m in liabilities by ‘phoenixing’.

According to a final notice published on 2 June, the regulator rejected an application made by Independent Family Advisers, after discovering the directors were also running troubled advice firm Strabens Hall.

The FCA notice said Strabens Hall is facing “inevitable insolvency” after eight customers complained to the Financial Ombudsman Service (Fos) about being advised to invest in the unregulated Connaught Income scheme.

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Strabens Hall is expected to face liabilities of more than £1m as a result of the complaints.

The firm’s directors argued that the creation of a new firm would mean it could continue to pursue a legal dispute with its professional indemnity insurer, which has so far cost it £100,000.

Independent Family Advisers wanted permissions to give regulated advice on investments and pensions. The FCA said the application contained “significant deficiencies”, and accused the firm of responding to the regulator’s concerns in a “piecemeal and incremental fashion”.

The proposals made in support of the firm’s application had the hallmarks of what is sometimes described as “phoenixing”, the FCA said.

A warning notice was previously handed down to the directors in October 2014, stating they would not be authorised.

According to the final notice, Strabens Hall failed to recognise “the gravity of the anticipated circumstances of Strabens Hall’s failure and the consequences it could have for consumer creditors”.

The FCA also accused the firm of undermining public confidence in the system for redress provided by Fos, and for those funding the Financial Services Compensation Scheme.

katherine.denham@ft.com