The Financial Conduct Authority is using emergency powers to prevent firms who advised members of the British Steel Pension Scheme (BSPS) from disposing of assets to avoid paying compensation.
The regulator introduced these emergency rules without consultation in a policy statement published today (April 25).
It said the changes were in light of the risk that some firms will take steps to get rid of their assets if the rules were consulted on first, with the measures applying from April 27, 2022.
Sheldon Mills, executive director of consumers and competition at the FCA, said: “Firms who gave poor advice to British steelworkers must ensure that they retain assets and funds to pay redress under our proposed scheme.
“We are using these emergency powers today to prevent firms from avoiding paying any redress that is due to their customers and to help reduce the potential burden on the Financial Services Compensation Scheme.
“We will act swiftly if the rules aren’t being followed.”
The temporary measures announced today apply to firms that advised five or more BSPS members to transfer out of the pension scheme between May 26, 2016 and March 29, 2018.
The requirements mean that in-scope firms have to report to the FCA whether they can meet the potential cost of the BSPS redress.
Firms will have to comply with the asset restriction rules until they confirm to the FCA that they have sufficient resources to pay their potential redress bill.
The City watchdog said if the BSPS proposed redress scheme is introduced, the FCA may later consult on extending the asset retention until firms have paid all the compensation owed.
Source: FCA policy statement -Temporary asset retention requirement for certain firms subject to the proposed British Steel Pension Scheme consumer redress scheme
This comes as last week the FCA said it stopped David Stock & Co Limited discarding its assets without the regulator’s permission.
The FCA said DS&C was not able to demonstrate that it had adequate resources, which is a minimum requirement for firms regulated by the FCA.
In addition, the regulator said that imposing the requirement is in the interests of its "statutory objective to protect consumers".
Last month the FCA launched a consultation on a redress scheme for former members of the BSPS.
The regulator set out plans to deliver £71.2mn in compensation to former members of the BSPS who received unsuitable advice to transfer out of their pension.
This is to ensure that firms can meet the costs of carrying out a review and compensating customers for any unsuitable advice they may have given if the scheme is implemented.
Last week, the FCA also relaunched its pension transfer ‘advice checker’ tool, designed so consumers can see whether they received unsuitable advice.
sonia.rach@ft.com
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