"'Voluntary agreement' has implications for FSCS"
Even when the subject matter of my weekly column is quite serious, I generally begin with a somewhat light-hearted anecdote.
Sadly, the matter I want to highlight this week is so serious in its potential implications for the financial services sector that I feel any such comment would be incongruous.
The matter I refer to is the alleged actions of a financial advice firm, which has apparently ignored a ‘voluntary agreement’ made with the FCA to stop all activities relating to pension switching and transfers following a visit from the regulator in July 2015.
In August 2016, the FCA received information from a Sipp provider that the firm was still doing pension transfer-related business – allegedly, 78 transactions have taken place for 72 clients to the tune of more than £2.6m. These allegations have cast a shadow on both the principals of the firm and its apparent lack of principles. Additionally, it highlights the responsibilities of both providers and the regulator in such situations.
The reality is that providers more than anyone, apart from the FCA, have the market intelligence to identify potential problem firms at an early stage, and the only effective way of achieving this is to involve them directly in the funding of the FSCS.
Equally, the FCA needs to be asked what it was doing between July 2015 and August 2016. Why did it not withdraw the relevant permissions immediately? Why was (is) the firm’s website still apparently unchanged in its bid to attract new clients and business?
What steps did the regulator take to alert providers to the so-called ‘voluntary agreement’ regarding the pension transfer business? Critically, having identified a potential problem, what did the FCA do after July 2015 to prevent further consumer detriment?
These important questions need to be urgently and publicly addressed by the regulator. What also needs to be considered are the implications for the FSCS. There must be a real possibility of these 78 cases, along with others, falling on the FSCS and therefore on the shoulders of the honest financial advisers who had no way of being aware of these alleged offences.
These are incredibly important issues with serious implications for the FSCS funding review and the advice sector as a whole, and I urge the FCA and the Treasury to ensure they are properly taken into account.
Ken Davy is chairman of SimplyBiz Group