FCA to act to prevent CMC phoenixing

New rules being introduced by the FCA will prohibit CMCs from carrying out regulated claims management activity in certain circumstances on claims or potential claims to the FSCS, where the CMCs have relevant connections to the claims.  Effectively, it will stop individuals connected with regulated firms that have been wound up from appearing in connecting with a CMC and seeking to profit from failings of the regulated firm. Further, CMCs will be required to regularly notify the FCA of connections which they have to financial services firms which could be relevant for such purposes.

The new rules will come into force on 7 July 2022 and firms will be required to provide their first notification within 60 days of the rules coming into force or 60 days of them being authorised to carry out regulated claims management activity. Thereafter, notifications must be made within 30 days of firms’ accounting reference date. Firms must report all connections throughout the reporting period, even if individuals have subsequently left the firm.