The Financial Conduct Authority has confirmed the 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.
In its final rules published today (January 27), the FCA said following consultation, the temporary asset retention rules will be extended so that they continue to apply until firms have resolved all relevant BSPS cases that are subject to the rules of the redress scheme, and other relevant BSPS cases outside the scheme.
The extended rules will apply from 11:59pm on January 31, 2023 and require certain firms who provided transfer advice to BSPS members during the relevant period to preserve their ability to pay their customers’ relevant claims.
The asset retention rules require in-scope firms to assess whether they are likely to meet their contingent BSPS redress liabilities on an ongoing basis.
In-scope firms are required to complete a prescribed Financial Resilience Assessment (FRA), and firms that have not previously completed an FRA (ie, firms that arranged three or four BSPS transactions) have to report the outcome to the FCA by February 28, 2023.
“Where the FRA suggests that a firm may not have sufficient assets to meet estimated contingent BSPS liabilities, the asset restriction rules will prevent it from undertaking transactions that are not ‘in the ordinary course of business’,” the regulator said.
“Firms subject to the asset restriction rules would be able to continue carrying on their ordinary business but be unable to carry out other transactions that might reduce the assets that they have to meet potential redress liabilities.”
As part of the rules, firms which arranged fewer than three BSPS transfers will be excluded.
The regulator said this is to ensure that its intervention remains proportionate, considering the impact on both firms and the FCA, and is appropriately focused on those firms where there is a greater risk of customer harm - those firms which arranged a higher number of BSPS transfers.
“We also consider that it is appropriate to exclude firms that are natural persons (ie, sole traders) or unlimited partnerships involving one or more natural persons,” it said.
“This is because there is no clear legal division between the personal and business assets of such firms, so we do not consider it appropriate to impose an asset restriction on these types of firm.”
Dear CEO letter
Alongside the final rules, the regulator also sent a Dear CEO letter to pension providers and any other firm that administers or manages the proceeds of BSPS transfers.
This is to ensure these third-party firms are aware of their obligations.
The letter said: “It is to make sure that you are aware of the obligations you have under the scheme, to ensure affected consumers receive fair redress in a timely way,."
The FCA said as part of the redress scheme, the firm may receive requests for information from advice firms.
“Where you do, we expect you to cooperate with these requests and comply with the obligations set out in CONRED 4.3.10R and 4.4.22R,” it said.
“These rules state that firms must take all reasonable steps to locate and provide the information asked for within any reasonable time periods requested.
“In any case, this is no later than four weeks after receiving the request. We expect you to have the necessary resources in place, including the ability to identify requests made under the scheme, before the scheme goes live, to be able to meet these obligations."
The firm that gave the advice may have failed and in these cases, the Financial Services Compensation Scheme (FSCS) will step in to consider claims and calculate whether any redress is due.
The updated rules follow on from a policy statement by the regulator in November and final rules to implement a consumer redress scheme for former members of the BSPS who were given unsuitable advice to transfer their pension.
At the time, it proposed an extension of its asset retention rules for firms who advised BSPS, 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.
The City watchdog said it wants to increase the likelihood that firms hold sufficient resources to enable them to meet the cost of BSPS redress due to their customers.
This will help ensure that the firms that have created BSPS liabilities meet the cost of those liabilities, rather than those liabilities falling to the FSCS and industry levy payers that were not responsible for the harm caused.
“Additionally, where the firm responsible meets the cost of redress itself, the customer who suffered financial loss because of the firm’s conduct will be paid in full and not just up to the current compensation limit of £85,000 for FSCS claims,” it said.
sonia.rach@ft.com
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