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The Financial Conduct Authority is using emergency powers to stop financial advisers who may have to pay compensation to members of the British Steel Pension Scheme from disposing of assets.
The FCA said it has introduced these emergency rules without consultation because of the risk that some firms will try to move their assets if it consulted first. The temporary measures come into force on Wednesday and run until the end of January next year. They apply to firms that advised five or more BSPS members to transfer out of the pension scheme between 26 May 2016 and 29 March 2018.
"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," said Sheldon Mills, executive director of consumers and competition, adding: "We will act swiftly if the rules aren’t being followed."
FCA expects £71.2m to be paid for redress
Those in-scope for the emergency asset retention rules will now have to report to the FCA whether they can meet the potential cost of the BSPS redress and have to comply with the asset restrictions until they confirm that they have sufficient resources to pay their potential redress bill.
The measures are in reaction to a pensions transfer scandal which saw nearly 8,000 steelworkers transfer out of their final salary scheme, many after having received unsuitable advice to do so.
In December last year and again in March, the FCA had already warned advice firms involved in BSPS defined benefit transfers from disposing of assets. Last month it announced proposals for a redress scheme that could lead to £71.2m of redress to members who were wrongly advised to transfer their pension. A consultation on the redress scheme is open until the end of June. If the BSPS proposed redress scheme is introduced, the FCA said it might later consult on extending the asset retention until firms have paid all the compensation owed.
Some firms are exempt, including those who are dual regulated by the Prudential Regulation Authority, unlimited partnerships, sole traders, firms already subject to similar restrictions or firms that are subject to an insolvency order.
The FCA's chief executive will appear before the Public Accounts Committee, alongside the Financial Ombudsman Service and the Financial Services Compensation Scheme, to answer questions about the FCA’s regulation of financial advice in the BSPS case and its plans for compensating steelworkers.
How likely are steelworkers to receive compensation from advice firms involved in BSPS transfers?
