But he cautions: “This could give HMRC a significant advantage over other unpaid creditors, contrary to the intent behind the abolition of the crown preference under the Enterprise Act 2002, and have unintended consequences for ‘good’ phoenixes.”
Robin Ellison, partner at city law firm Pinsent Masons, says: “Phoenixing is a pain, but controls by the FCA are not that hard to achieve, given that individuals have to show they are fit and proper.”
Yet he agrees it is not so much the fact a company has gone bust, but how it has gone bust. So how easy is it to determine who is fit and proper, and who isn’t?
That again comes back to how to sift the ‘good’ phoenixers from the ‘bad’ – before consumer detriment is caused in the first place – without eroding free market principles.
As a result, the latest steps are not enough for some in the industry. They note that bad phoenixers not only leave a trail of devastation for customers, but also for other advisers who have to foot the bill in terms of the FSCS levy and potentially higher professional indemnity insurance premiums.
Keith Richards, chief executive of the Personal Finance Society, says: “The FCA has arguably been asleep at the wheel regarding phoenixing. It has perhaps been complacent in the knowledge the sector will bear the cost of consumer protection regardless of the impact on firms and ultimately the wider advised consumer population, which absolutely needs to be addressed.”
As a result, some industry practitioners have called for outright bans on directors caught phoenixing to avoid liabilities or circumvent legislation.
“The severe cases should get banned as approved persons and so find phoenixing more difficult,” says Olly Laughton-Scott, partner at Imas Corporate Finance. “That said, only 283 people have been banned of more than 440,000 people who have been approved.”
It is clear many rogue companies still operate under the radar. The FCA has made some strides to bring these charlatans out into the open, through its Scam Smart campaign and its new-look search function on the FCA register of advisers, but this comes with its own complications.
By including rogues and scammers in the ‘find an adviser’ search facility on the FCA register, advisers and commentators have warned this could lead to further confusion by mixing the good with the bad, rather than achieve the intended transparency.
The regulator is also sometimes too slow to act, Mr Ellison says. “What is unacceptable is the slowness of the FCA in responding to clear and obvious frauds, as in pensions liberation exercises. It tries to clear up after the event, but it is too late by then.”