The Financial Conduct Authority (FCA) is using emergency powers to prevent financial advice firms from disposing of assets to avoid paying compensation to members of the British Steel Pension Scheme (BSPS).
The FCA has adopted these emergency restrictions without consultation because there is a possibility that some firms will take action to get rid of their assets if the regulations are not consulted on first. The measures will take effect on April 27, 2022.
The FCA recently revealed plans for a redress programme for former BSPS members, which the regulator anticipates will result in £71.2 million in compensation for individuals who were incorrectly advised to move their pension.
Firms that advised five or more BSPS members to move out of the pension system between 26 May 2016 and 29 March 2018 are subject to temporary measures.
In-scope enterprises must declare to the FCA whether they can afford the possible cost of BSPS redress. Firms will be required to follow asset restriction guidelines until the FCA confirms that they have sufficient resources to pay any potential redress payment.
Some businesses will be exempt from the rules. If the proposed redress scheme presented by the BSPS is implemented, the FCA may later consult on prolonging asset retention until firms have paid all compensation owing.
FCA executive director of consumers and competition Sheldon Mills says: “Firms who gave poor advice to British steelworkers must ensure that they retain assets and funds to pay redress under our proposed scheme. We are using these emergency powers today to prevent firms from avoiding paying any redress that is due to their customers and to help reduce the potential burden on the Financial Services Compensation Scheme. We will act swiftly if the rules aren’t being followed.”