The Financial Conduct Authority has ordered a Swansea-based IFA, which advised on transfers from the British Steel Pension Scheme (BSPS), to stop disposing of assets without the regulator’s permission.
In an alert published yesterday (February 14), the FCA said it was concerned that AJH Financial Services does not have sufficient financial resources to pay potential BSPS redress claims.
The regulator said the firm has paid out dividends rather than retaining its assets which is against the regulator’s instructions to firms that gave British Steel advice.
The FCA sent a Dear CEO letter last year to firms who gave unsuitable advice to BSPS members and demanded they have adequate assets to pay any compensation due and do not avoid their responsibilities.
If they do not have adequate financial or non-financial resources then firms must notify the FCA immediately.
In yesterday's update, the City watchdog said: “We will act to prevent firms from disposing of assets which may be required to pay redress. We will look to impose requirements where firms have not acted in accordance with the expectations in our Dear CEO letter or have attempted to phoenix or put in place structures to avoid potential redress liabilities.
“We will continue to monitor firms who have advised on BSPS transfers and take action where necessary.”
AJH has the right to refer the FCA’s decision for review by the Upper Tribunal.
Last year, the FCA said it was preparing a redress scheme for members of the BSPS and is expected to consult on this by the end of March 2022 having gathered further evidence and following engagement with stakeholders.
The redress scheme would be limited to BSPS transfer advice given between March 1, 2017 to March 31, 2018, and would ask firms to review their advice, and if found unsuitable, provide compensation.
The BSPS case
During 2017, BSPS members were asked to make decisions about their pensions as part of a restructure of the scheme.
About 8,000 members transferred out of the scheme, with transfers collectively worth about £2.8bn.
But concerns about the suitability of the transfers were soon raised, leading to an intervention from the FCA that resulted in a number of advice firms – key players in the debacle – stopping their transfer advice service, while others went out of business.
The debacle created a mountain of liabilities, and so far, the Financial Services Compensation Scheme has paid out around £36.5m in compensation to BSPS.
The FSCS has received 1,263 BSPS claims in total, of which it has upheld 638.
Last year the lifeboat scheme completed 543 cases, with 490 receiving compensation.
In September, the FCA and FSCS travelled to Swansea to meet steelworkers who could be due compensation but were met with mixed feelings, with some showing no interest while others claimed they were unable to book a place.
The City watchdog also travelled to Swansea in November to meet steelworkers about bringing possible claims against their adviser.
NOTE: We claim no right or title to this article which appears in FT Adviser dot com. Author Sonia Rach.