Financial Conduct Authority  

Regulator prevents 12 advice firms from phoenixing in 2020

Regulator prevents 12 advice firms from phoenixing in 2020

The City watchdog thwarted a dozen advisers attempting to phoenix in the first 10 months of 2020.

Data published by the Financial Conduct Authority today (January 18) showed that 12 financial advice firms were prevented from gaining authorisation where phoenixing was suspected from January to October last year.

The regulator said: “In all those cases, the firm withdrew their application when we raised our concerns with them rather than be taken through the refusal process. 

“In two other cases where we suspected phoenixing, conditions were placed on the approval of the firms to ensure that the new firm could not be used to facilitate the avoidance of liabilities.”

The FCA said it also paid close attention to the candidates put forward by advice firms for approval as holders of senior management functions, seeking to identify those who had given unsuitable advice themselves or allowed others to provide poor advice on their watch.

In the wider market, the regulator stopped 343 applications — around one in 10 — where the potential for consumer harm was identified and a further 131 firms had their authorisation revoked.

The FCA said: “We seek to prevent harm by ensuring that all regulated firms and individuals meet our minimum standards.”

Scams and high-risk investment

The regulator also opened more than 1,500 supervisory cases involving scams and higher risk investments over the 10 months, with new cases remaining high throughout the year. 

During the same period, around 1,000 of such cases were closed or passed to other agencies.

It said: “If the firms and/or individuals reported to us fall within our remit then we investigate and act on as many as we can. 

“In total, our work on scams has resulted in approximately £14.32m being awarded under restitution orders, over £6.9m worth of funds being frozen and over £5.9m being secured for investors for redistribution.”

The FCA said it had also received more than 24,000 reports about potential unauthorised business over the 10 months — a sharp increase from the 20,300 reports seen in 2019.

Tackling scams was also prevalent in the regulated space, and the FCA currently has 30 live investigations or proceedings relating to regulated firms where consumers have invested in potential scams or higher risk investments.

The regulator finalised enforcement action against one firm and five individuals in 2020, including a fine against advice firm LJ Financial Planning and the banning of ‘playboy’ adviser Neil Bartlett.

The FCA said: “We know we cannot stop every scam from happening, but we want to do everything we can to shrink the audience that scammers can target and help support the government’s priority to make the UK a more unattractive place to commit financial crime.”

Its ScamSmart website has received more than 1m visitors since its launch in 2014, and in 2020, nearly 110,000 people visited the site with a number of consumers indicating they had avoided a scam thanks to the site.