The Financial Services Compensation Scheme (FSCS) will improve its information sharing mechanisms with regulators in a bid to make phoenixing more difficult for advisers and company directors.
Mark Neale, FSCS chief executive, told FTAdviser that it would be brave to pledge to end phoenixing, since "there may be circumstances in which the directors of companies that failed are still fit and proper people to run another company".
But he added: "We can be much more systematic and quicker in sharing intelligence of that kind with the regulators, so that the risks of phoenixing are much reduced."
Part of the FSCS's strategy for the 2020s, published this week, will consist of developing FSCS’s own capacity to collect, collate and pass on actionable intelligence as a result of compensation and recoveries work.
The scheme will alert the regulators to directors and advisers responsible for mis-selling and, in particular, help the regulators to prevent these individuals re-inventing themselves elsewhere in the regulated financial services market or the regulated claims management market.
Mr Neale said that the FSCS already works with regulators on this matter, but wants to improve the intelligence sharing, "putting it all together swifter and in a more structured basis".
Phoenixing - the process by which an old firm is declared insolvent or closed down by the owner, only for him to set up another business in a new name - is not illegal in the UK.
However, where the Financial Conduct Authority (FCA) has taken a dim view of advisers phoenixing where the owners shut down their old firm, thinking they can escape from their debts or from bad advice they know is on their books, and then transferring their client book into a new firm and carrying on as before in a new name.
In May this year, the FCA and the Insolvency Service agreed to a deal intended to cut down on the number of phoenix companies operating in the UK.
The move is intended to prevent bad advisory practices and unethical individuals setting up again and causing client detriment.
The watchdog also revealed in September that it is using technology to help combat phoenixing.
Alistair Cunningham, chartered financial planner at Wingate Financial Planning, said the FSCS’s sharing of data with the regulators "will probably have a limited impact on bad advice as it happens, or shortly after, due to the length of time claims take to come through.
"However it could stop phoenixing if the regulator join the dots and stop authorisations for serial, or prolific offenders," he concluded.
maria.espadinha@ft.com
