FCA looks to extend asset retention rules for BSPS advice firms

FCA looks to extend asset retention rules for BSPS advice firms

The Financial Conduct Authority has proposed an extension of its asset retention rules for firms who advised British Steel Pension Scheme members, as existing temporary rules are due to end on January 31.

The regulator first announced the use of its emergency powers in April as a way to prevent firms who advised members of the BSPS from disposing of assets to avoid paying compensation.

They were introduced without consultation in a policy statement, with the FCA stating the changes were in light of the risk that some firms could take steps to get rid of their assets if the rules were consulted on first.

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In an update to the BSPS redress scheme today (November 28), the City watchdog said it was looking to extend these asset retention rules.

These will be similar to the current temporary rules, however the FCA has made some changes to reflect the new redress scheme.

The temporary rules contained several exclusions for firms the FCA considered less likely to contribute to the harm it is seeking to avoid, or because the rules were considered inappropriate due to the firm’s legal structure or status.

The FCA said it proposes to apply the same exclusions for the extended rules, but with a change to the threshold for the number of cases the firm advised on. 

The updated exclusions includes firms that provided BSPS transfer advice to fewer than three consumers.

“Such firms are exposed to relatively lower levels of potential liabilities and have been excluded to ensure the intervention remains proportionate,” it said. 

“This is a change from the previous exclusion for firms which provided advice to fewer than five consumers. We propose to reduce the threshold to ensure that more firms which could give rise to redress liabilities and may seek to dispose of assets are subject to the proposed rules. 

“We consider that it is important that firms that arranged a relatively low number of BSPS transfers (ie, three or more) should be subject to the proposed extended asset retention rules because of the potentially high cost of redress that may be due to customers of these firms, which firms will only hold limited resources to meet.”

The FCA said the change also ensures that a larger number of firms can prepare for the consumer redress scheme, now that the final rules for the scheme are confirmed.

Other exclusions include: 

  • PRA-authorised firms.
  • Firms that are natural persons (ie, sole traders) or unlimited partnerships involving one or more natural persons.
  • Firms that are subject to an insolvency order.
  • Firms subject to a Creditors’ Voluntary Liquidation. 
  • Firms subject to comparable asset retention requirements on their permissions through the FCA's direct and individual intervention.
Source: FCA Proposed extended asset retention requirement for firms under the BSPS consumer redress scheme

“We introduced the temporary asset retention rules in April because we were concerned that firms which might be subject to the proposed consumer redress scheme might try to avoid their liabilities to BSPS members by disposing of their assets,” the FCA said.

“We have now made the final rules for the BSPS consumer redress scheme. So we are consulting on extending the temporary asset retention rules. This extension would ensure that the rules continue to apply until firms have resolved all the scheme cases that they are responsible for, plus other relevant cases outside the scheme.”