FCA executive director of supervision Megan Butler has warned advisers "we'll be onto you” should they carry out behaviour like phoenixing, lifeboating or setting up claims management companies to handle complaints against them.
Speaking at the Personal Investment Management and Financial Advice's (PIMFA) inaugural Virtual Fest on Thursday (4 June), the Financial Conduct Authority (FCA) executive director gave firms a punchy warning the regulator was keeping a close eye on market behaviour.
She noted ‘phoenixing' - where a firm folds and reincarnates as a different entity to avoid outstanding liabilities - and ‘lifeboating' - where an existing firm is acquired pre-emptively before a firm folds - was "unacceptable".
She also said the FCA had seen examples of advisers leaving advice firms, typically after giving poor pensions advice, only to emerge in claims management companies to take on claims against them.
She said such practices were "totally out of line with the concept of fit and proper" and urged firms to consider the regulatory background of new individuals when hiring.
"As firms, be aware we'll be onto you, and we'll use all regulatory tools available to stamp it out," she continued.
"If you have outstanding liabilities, don't expect to be allowed back into the regulatory arena."
Avoiding large FSCS bills
Elsewhere Butler conceded the Financial Service Compensation Scheme (FSCS) levy was a sticking point among the industry and said the regulator was working on ways to avoid firms receiving "particularly large bills".
She said one way the FCA was trying to mitigate such a circumstance was by gathering data on the financial resilience of the market during the Covid-19 crisis by asking firms about their financial position.
Some 13,000 regulated firms from 15 portfolios, including advisers and wealth managers, will be issued with a ‘financial resilience' survey, which will arrive via email in the coming days. Firms will then have a week to complete it and return it to the regulator.
Butler said the survey would help give the FCA an idea of those firms most vulnerable to failure and get an idea of what impact that could have on the FSCS.
Upcoming regulatory work
Jump in phishing and 'smishing' tactics reported
Administrative fee waived
Sector unlikely to be cause of any impending financial crisis
Reducing amount of financial advice
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