A HM Treasury minister has said he will urge the Financial Conduct Authority to take action on phoenixing so it does not undermine trust in the financial services sector.
Robert Jenrick, the Exchequer secretary to the Treasury, was speaking after a debate in Parliament this morning (24 April) on the regulation of financial advisers.
The debate had been requested by Thirsk & Malton MP Kevin Hollinrake after two of this constituents lost money after being advised given by an adviser called Scott Robinson, who owned and operated a firm called TBO Investments until 2016.
Mr Hollinrake said despite a complaint to the FCA, a successful claim to the Financial Ombudsman Scheme and it being established that Mr Robinson was providing advice without the required professional indemnity insurance, he remained an approved person on the FCA Register and had closed his previous firm to open a new one, called Mount Sterling Wealth, taking his clients with him.
In response, Mr Jenrick said: "I can't comment on the specifics of the case, although it has been extremely useful to listen to them and learn from them.
"I am very concerned to hear the evidence he has brought before us today and laid out so clearly and painfully.
"Answering more directly the point around phoenixing, we will work with the FCA to ensure appropriate rules are put in place. I intend to ensure action is taken in this area.
"Phoenixing in these circumstances is wrong. It leaves consumers and taxpayers out of pocket and the reputation of the industry tarnished.
"These practices can be deeply corrosive to public trust in the system, which in time is passed on to the whole of our economy.
"I will urge the FCA to step up its efforts, particularly in respect of phoenixing."
Mr Jenrick said he would also "give thought" to the recommendation Mr Hollinrake made that advisers should seek ongoing re-approval after finding out that once approved by the FCA, advisers did not need to demonstrate they met the regulator's requirements on an ongoing basis.
The minister added that "more action may be required" on this area.
Mr Hollinrake, a Conservative MP, raised the issue in Parliament after becoming aware of two constituents who had lost money after being advised by Mr Robinson.
He said the Financial Ombudsman ruled he had provided unsuitable advice and ordered he pay compensation and that an expert witness concluded the investments made on behalf of his constituents were "completely unsuitable" and that Companies Houses issued a compulsory strike-off order to TBO because they had failed to submit accounts since 2012.
TBO Investments was then placed into voluntary liquidation, which prevented one of the clients from taking legal action to recover their losses, and the clients were transferred into another company which still operates.
Mr Hollinrake said he understood that the insolvency practitioner for TBO is taking legal action to return money into the firm on the basis that insolvency rules were breached.
He said: "The regulator continues to designate Mr Scott Robinson as an approved person and authorise his company to provide regulated advice, most incredibly and principally, that to do otherwise may be depriving an individual of their livelihood.
"You may ask, what about the deprivation of my constituents' livelihoods? Of their income, of their investments, of their hard-earned money? Is this not what the FCA should be principally concerned with?"
damian.fantato@ft.com
