Advisers have questioned why the regulator is only now using emergency powers to stop firms who advised members of the British Steel Pension Scheme from disposing of assets to avoid paying compensation.
In a policy statement today (April 25), the Financial Conduct Authority said it was introducing emergency rules without consultation in light of the risk that some firms will take steps to get rid of their assets if the rules were consulted on first.
But while advisers have welcomed this move from the FCA, many raised questions about why the regulator was only just introducing them now and how successful these rules would be.
Felix Milton, chartered financial planner at Philip J Milton & Company, said: “My initial comments when I saw the story were ‘Finally!’ though I am a little confused as to why the FCA didn’t use these powers earlier when it was clear bad firms were disappearing, taking the assets with them.
“Unfortunately, whilst this move is welcomed, I do not expect the largest culprits will be impacted by this move. I would still like to see the FCA go after the personal assets of those who misadvised the British Steel Scheme members.”
Likewise, Tom Kean, director at Thameside Financial Planning, said on the face of it, it sounds like a reasonable thing to do to help mitigate “the ever-increasing burden of demoralising regulatory fees".
“I wish we were not in this position in the first place,” he added. “Had the FCA been awake when they needed to have been, and there were plenty of folk warning about this impending scandal, we’d not be talking about any of this in the first place.”
The temporary measures announced today apply to firms that advised five or more BSPS members to transfer out of the pension scheme between May 26, 2016 and March 29, 2018.
The requirements mean that in-scope firms have to report to the FCA whether they can meet the potential cost of the BSPS redress.
Firms will have to comply with the asset restriction rules until they confirm to the FCA that they have sufficient resources to pay their potential redress bill.
Justin King, chartered financial planner at MFP Wealth Management, said the introduction of the emergency rules was a “sensible precaution” but questioned why there is a limit of five or more transfers.
“Surely the important attribute would be the amount of resources a firm holds,” he said.
Other advisers raised concerns about what the regulator's timeframe and what it means when it said it will “act swiftly”.
An FCA spokesperson said: “Our rules already require firms to hold the resources they need to meet their liabilities. In our Dear CEO letters of December 22, 2021 and March 31, 2022 we reinforced our expectations that firms should retain assets to meet BSPS liabilities.
"These emergency rules will help us deal with firms that are failing to meet our expectations more swiftly and efficiently. This will result in more capital being available to meet redress liabilities.”
Welcome move
Elsewhere, Amyr Rocha Lima, chartered financial planner, said this was a “good move” by the FCA.
He said: “This should help make sure the firms responsible for redress liabilities meet the cost of those liabilities, rather than the costs falling to other FSCS levy payers - and ultimately being passed on to consumers.”
Last month the FCA launched a consultation on a redress scheme for former members of the BSPS.
The regulator set out plans to deliver £71.2mn in compensation to members who received unsuitable advice to transfer out of their pension.
This is to ensure firms can meet the costs of carrying out a review and compensate members for any unsuitable advice.
Tim Fassam, director of government relations and policy at Pimfa, welcomed today's move by the FCA.
“We have very real concerns that firms with significant exposure to British Steel will seek to lifeboat or phoenix, as a result of their potential liabilities and, as we set out in our paper outlining steps towards FSCS reform, it is right that the FCA is seeking to close down this loophole before they dump their liabilities on the rest of the industry.”
However, he added: “While it is right that the FCA has announced these measures, this does crystallise a broader concern that we have around the BSPS redress scheme – namely that the FCA’s assumptions both in terms of total redress owed and the likely liability for the FSCS are wildly optimistic. We continue to engage on this issue on behalf of our member firms.”
Last week the FCA stopped David Stock & Co Limited discarding its assets without permission.
The FCA said DS&C was not able to demonstrate that it had adequate resources, which is a minimum requirement for firms regulated by the FCA.
Around the same time, the FCA also relaunched its pension transfer ‘advice checker’ tool, designed so consumers can see whether they received unsuitable advice.
sonia.rach@ft.com
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