FCA to consult on British Steel redress scheme

The City watchdog 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 companies to review their advice and, if found unsuitable, provide compensation. 

In a Dear CEO letter sent on Wednesday to companies that gave unsuitable advice to BSPS members, the FCA demanded they have adequate assets to pay any compensation due and to not avoid their responsibilities.

If they do not have adequate financial or non-financial resources they must notify the FCA immediately.

Also, companies likely to owe redress should consider their financial position, and if deemed necessary seek help from an insolvency professional. 

The letter stated: “If you have advised on the BSPS during the relevant period, you must not enter a solvent liquidation or apply to dissolve the firm without notifying us in advance. This is irrespective of your assessment of the firm’s redress liabilities.”

Advice companies have been warned to retain assets and not “dispose of, withdraw, transfer, deal with or diminish the value of any of their assets (including their client bank) and any funds that they hold”.

They should also not remove assets from the business in anticipation of regulatory action, the FCA said.

The regulator warned it will take any action it deems necessary if a company attempts to avoid its redress liabilities.

According to the regulator, the BSPS is a “highly exceptional case”, showing unsuitable advice much more often (47 per cent) than in reviews of higher-risk companies in non-BSPS cases (17 per cent).

For a while now, other advisers, solicitors and MPs have been calling on the FCA to introduce a redress scheme.

Board minutes from July showed discussions were held around the available options for securing redress for BSPS members.

But the regulator board decided against it at the time saying it did not have “sufficient information” but that the matter was still under review.

Meanwhile, the National Audit Office is due to carry out an investigation into the FCA’s work on the BSPS, which is scheduled for spring 2022.

Three years ago, BSPS members were asked to decide whether to move their defined benefit pension to a new plan, BSPS2, or stay in the existing fund, which was then moved to the Pension Protection Fund as part of a restructuring of pension liabilities. Transferring out of the scheme was also a possibility for a limited time.

As a result, about 8,000 members transferred out of the old 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 companies — key players in the debacle — stopping their transfer advice service, while others went out of business.

Over recent months, the FCA, along with the Financial Ombudsman Service, the Financial Services Compensation Scheme and MoneyHelper have travelled to Swansea and Scunthorpe to hold one-to-one sessions with steelworkers to discuss their situations and offer help.

The regulator said DB advice company numbers have shrunk to 1,200 from 3,000 in 2018.

This article originally appeared on FTAdviser.com