The City watchdog is expected to consult on this by the end of March 2022 having gathered further evidence and following engagement with stakeholders.
The redress scheme would be limited to BSPS transfer advice given between March 1, 2017 to March 31, 2018, and would ask firms to review their advice, and if found unsuitable, provide compensation.
In a Dear CEO letter sent to firms who gave unsuitable advice to BSPS members today (December 23) the FCA demanded they have adequate assets to pay any compensation due and do not avoid their responsibilities.
If they do not have adequate financial or non-financial resources they must notify the FCA immediately.
Also, firms likely to owe redress should consider their financial position and if deemed necessary seek help from an insolvency professional.
The letter states: “If you have advised on the British Steel Pension Scheme during the relevant period you must not enter a solvent liquidation or apply to dissolve the firm without notifying us in advance. This is irrespective of your assessment of the firm’s redress liabilities.”
Advice firms have been warned to retain assets and not “dispose of, withdraw, transfer, deal with or diminish the value of any of their assets (including their client bank) and any funds that they hold”.
They should also not remove assets from the business in anticipation of regulatory action, the FCA said.
It stated: “This includes the sale, transfer or removal of all or any part of the business, as well as providing, or selling, client information to claims management companies.
"We will take such action as we deem necessary where a firm attempts to avoid redress liabilities, including where a firm takes steps to enter a solvent liquidation or dissolution.”
The letter warns firms to not cancel their authorisation without first talking to the FCA. They should not even apply unless they can show they have addressed any BSPS liabilities first.
The regulator has also addressed any phoenixing concerns, saying the same applied to directors, partners, controllers or others associated with firms who gave BSPS advice and are now looking to become authorised via “a different legal entity”.
The FCA said this included acquiring control of an existing firm, an appointed representative, a new authorisation or adding permissions.
The regulator warned it will take any action it deems necessary if a firm attempts to avoid its redress liabilities.
Firms should continue to carry out any past business reviews and ongoing enforcement investigations or supervisory work connected to the British Steel Pension Scheme, the FCA stated.
According to the regulator BSPS is a “highly exceptional case” showing unsuitable advice much more often (47 per cent) than in reviews of higher-risk firms in non-BSPS cases (17 per cent).
For a while now, other advisers, solicitors and MPs have been calling on the FCA to introduce a redress scheme.
Board minutes from in July showed discussions were held around the available options for securing redress for BSPS members.
But the FCA board decided against it at the time saying it didn't have "sufficient information" but the matter was still under review.
Meanwhile the National Audit Office is due to carry out an investigation into the FCA’s work on BSPS, which is scheduled for Spring 2022.
The BSPS case
Three years ago British Steel Pension Scheme members were asked to decide whether to move their DB pension to a new plan, BSPS2, or stay in the existing fund, which was then moved to the PPF as part of a restructuring of pension liabilities, or to transfer out altogether.
As a result about 8,000 members transferred out of the old scheme, with transfers collectively worth about £2.8bn.
But concerns about the suitability of the transfers were soon raised, leading to an intervention from the FCA that resulted in a number of advice firms – key players in the debacle – stopping their transfer advice service, while others went out of business.
Over recent months, the FCA, along with the Financial Ombudsman Service, the Financial Services Compensation Scheme, and MoneyHelper, have travelled to Swansea and Scunthorpe to hold one to one sessions with steelworkers to discuss their situations and offer help.
The regulator said DB advice firm numbers have shrunk from 3,000 in 2018 to 1,200 now.
amy.austin@ft.com
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