The Financial Conduct Authority (FCA) has sent a ‘Dear CEO’ letter to firms which provided pension transfer advice to British Steel Pension Scheme (BSPS) members, urging them to follow the regulator’s requests.
The letter was sent on 31 March 2022, shortly after the FCA unveiled a consultation into the creation of a BSPS-specific compensation scheme.
In the letter, the regulator set out expectations for firms that provided transfer advice to former BSPS members between 26 May 2016 and 29 March 2018.
They are now required to have and/or maintain “adequate financial resources” to ensure they can meet any liabilities they may incur as a result of their advice.
This may include having adequate professional indemnity (PI) insurance in place, the watchdog explained.
The FCA said that if the advice businesses were involved in the BSPS case they “should consider the effect on your firm’s solvency and, if necessary, seek the advice of an insolvency professional”.
It also prohibited them to enter a solvent liquidation or apply to dissolve the company “without notifying us in advance”.
Obligations
The letter set out a list of “prudential requirements”, including the retention of a firm’s assets in order to meet the costs for carrying out a review and compensating clients for any unsuitable advice given, if the redress scheme goes ahead.
The FCA has now requested firms, with immediate effect, to:
- Not dispose of, withdraw, transfer, deal with or diminish the value of any of their assets;
- Ensure that any payment or disposal of assets is in the ordinary course of business and/or consistent with their usual monthly expenditure, including payments to suppliers, contractors and salaries;
- Consider their solvency status before making any payments; and
- Not enter into arrangements to remove assets from the business “in anticipation of regulatory action or insolvency”.
In addition, the FCA informed businesses they should not apply to cancel their permissions before discussing their plans with the regulator.
They will only be allowed to do so if they can “demonstrate they have assessed any relevant BSPS-related liabilities and that the firm as sufficient financial and non-financial resources to cover them”.
The same requirements apply to directors, partners, controllers, and others associated with the firm, the watchdog said.
The FCA added that “failing to act on the requests in this letter may be a breach of rules or other requirements by your firm, its directors, partners, or others enabling us to take enforcement action”.
