The Financial Services Compensation Scheme has alerted the regulator to 412 phoenixing cases, where advisers who worked at firms that defaulted had joined a claims management company to bring claims against their previous firm.
The FSCS told FTAdviser so far in 2021 it has identified 145 such advisers, in addition to 267 that it had flagged previously to the Financial Conduct Authority.
It said there were further cases it was currently working through.
This comes as earlier this year, the FCA announced proposals to ban CMCs from managing FSCS claims where they have a relevant connection to the claim.
Speaking to FTAdviser, FSCS chief executive Caroline Rainbird said: “We report on a daily basis areas of concern to the FCA and [the regulator] has been able to take an increasing amount of action against individual firms so they can't come into the market or they can't get the authorities that they need to act as their claims management company having failed as a IFA.”
In 2020, the FSCS also identified 150 individuals who worked at defaulted advice firms and re-emerged within active regulated IFAs.
The lifeboat scheme had also shared this data with the FCA.
Rainbird said: “We are a compensation scheme, we can't unilaterally do anything to change things, but what we can do is use our insights and use the data that we have, and to an extent, provide a bit of an independent view on where we're seeing harm being created.
“We have the ability to use the insights that we've got to show where things could be done differently and we're certainly doing that with the FCA.
"We also work across the regulatory families, particularly with the ombudsman service, but also with the Money and Pensions Service and other bodies and government as well to provide our insights.”
She added FSCS was starting to look at other areas of what it calls “regulatory shopping”, where firms are looking at different environments - “maybe slightly less onerous environments than the FCA”, to get authority to effectively act as a claims management company and phoenix up through there.
The FSCS has also highlighted examples of this with the FCA and other parties including HM Treasury.
Rainbird said: “The vast majority of IFAs are decent, honest people who unfortunately have to pay for the consequences of those other IFAs who don't have the same level of behaviour, and have failed and left a trail of people out of pocket.
“It's growing unfortunately, there's still lots happening each and every day but actually the experience we're getting, the insights and working together using each other's data consistently, is giving the evidence and the momentum needed to take action.”
The growing cost of compensation has been causing major problems for advisers for years.