Financial Conduct Authority  

FCA blocks adviser phoenixes as crackdown begins

FCA blocks adviser phoenixes as crackdown begins

The Financial Conduct Authority has highlighted early successes from a regulatory crackdown on phoenixing, having prevented a number of advice firms from becoming authorised.

At a recent meeting of the Financial Services Regulatory Partners Phoenixing Group, set up in April 2019 by a number of regulatory bodies to tackle phoenixing, the regulator reported on its use of data analytics and machine learning to identify trends and instances of failed firms re-emerging in a new form.

The FCA said in the past 12 months it had prevented seven suspected phoenix firms or people from becoming authorised. All of these related to financial advice.

It said data from the Financial Ombudsman Service had proved particularly critical to these successes.

The regulator said in a statement on the meeting: "In the last 12 months, the FCA reported that it had prevented phoenixing when two notices were issued warning firms that their applications would be refused because of concerns, leading to the withdrawal of their applications.

"In five other cases, one financial adviser and four financial advice firms withdrew their applications once the FCA discussed phoenixing concerns with them."

It added the Insolvency Service had also reported successful interventions supported by FCA data as well as the FSCS’s insights, which spotlight individuals who have circulated through various firms.

The Financial Services Regulatory Partners Phoenixing Group was launched in April as a working group on preventing phoenixing - the practice of deliberately seeking to avoid liabilities by closing down firms only to re-emerge in a different legal entity.

The group includes the Financial Conduct Authority, the Financial Ombudsman Service, the Financial Service Compensation Scheme, and the Insolvency Service and the Accountant in Bankruptcy.

The regulator said data and machine learning would be a particular focus for the group in the months ahead, alongside a focus on working together to spot the early signs of firms phoenixing.

Sarah Rapson, director of authorisations at the FCA, said: "I am very encouraged by the early successes that collaboration through the working group has already delivered and am confident we can achieve more through data sharing, analytics and, in the future, machine learning."

Debbie Enever, head of external relations at the Financial Ombudsman Service, added: "Phoenixing can create significant issues for consumers and undermines other businesses.

"We’re pleased that our data is helping the FCA prevent it. Action to tackle this issue needs to be coordinated and we are proud to continue to work with partners through this group to ensure consumers are treated fairly."

The working group will next meet formally in May 2020.  

carmen.reichman@ft.com