FCA has published its proposals for a compensation scheme to compensate former members of the British Steel Pension Scheme who received unsuitable advice to transfer out. FCA says that almost half the advice it reviewed relating to BSPS was unsuitable. If the scheme goes ahead, FCA will make rules setting out how advisers must determine whether they gave unsuitable advice and pay compensation. The consultation sets out how FCA proposes that firms review their advice and how customers should be compensated if they have received unsuitable advice. It also sets out proposals for safeguards and independent checks of reviews. The scheme will cover all advice received between 26 May 2016 and 29 March 2018 unless the consumer has already received redress, referred a complaint to FOS or had their advice considered under a skilled persons review. FCA’s plan is that where firms review advice and consider it suitable, they should facilitate referrals of these cases to FOS, and it FOS upholds a complaint that results, the matter will return to the adviser for calculating redress. Firms will have strict reporting deadlines also, so FCA can monitor progress.
FCA has also written to the CEOs of all firms who gave relevant advice, telling them it expects them to ensure with immediate effect that they have adequate financial resources and to notify FCA immediately if they have not. It tells firms to consider the impact of potential redress liabilities and consult with insolvency practitioners if appropriate, as well as considering their wider duties under Companies Act and Insolvency Act obligations. It asks firms to keep it updated of any relevant discussions. Additionally, it says firms that advised on BSPS transfers during the relevant period may not enter a solvent liquidation or apply to dissolve the firm without first speaking to FCA.
FCA also expects firms to retain assets for a potential redress exercise and sets out how it expects them to do so – and in particular how they must not dispose of or diminish the value of any assets except in the ordinary course of business. Additionally, firms must not apply to cancel their authorisation and no relevant individuals should apply for authorisation through a new entity. Moreover, any firm seeking to make an application for an individual with a link to relevant advice should conduct robust due diligence before doing so. Finally, FCA reminds firms that they must deal with complaints fairly, and that it will take action against any firm that appears to be seeking to deter FOS complaints.
FCA is seeking feedback on its consultation by 30 June, except on one of its questions on calculating redress, on which it asks for responses by 12 May.