Source · Select Committees · Public Accounts Committee
Recommendation 13
13
Alongside the unsuitable advice provided by firms, there have been other issues of non-compliance within...
Conclusion
Alongside the unsuitable advice provided by firms, there have been other issues of non-compliance within the BSPS case, including unregulated introducers and phoenixing. The FCA has identified that in 30% of BSPS cases members were introduced to their adviser by third parties, and whilst some introducers are authorised and regulated by the FCA, it identified that in eight cases introducers were unregulated.42 The FCA’s regulatory remit prevents it from taking enforcement action against unregulated third parties, and instead the FCA issued an alert reminding firms of their obligations.43 Similarly, the FCA has identified instances of phoenixing, in which rogue advice firms voluntarily leave the market only to reappear under different names. In response, the FCA updated its guidance to raise firms’ awareness of the issue and is yet to take enforcement action.44 The FCA’s work to put things right
Government Response
Not Addressed
HM Government
Not Addressed
The government disagrees with the Committee’s recommendation. 3.10 It does, however, recognise the importance of the recommendation and welcomes the Committee’s view on the need for effective mechanisms to consider and, where appropriate, address concerns about activity that is not within the FCA's regulatory perimeter. The government has concluded that, on balance, the key mechanisms that currently exist are appropriate to address the types of concern highlighted by the Committee. These mechanisms are described below. 3.11 The FCA’s remit, also known as the regulatory perimeter, is the boundary between what the FCA does and does not regulate. Where the Treasury considers that an activity should be regulated, it will typically engage with the FCA to bring those activities within the perimeter. The costs and benefits of bringing activities into the regulatory perimeter can be finely balanced, which is why the government is committed to regulating only where there is a clear case for doing so. 3.12 To support consumers’ understanding of the perimeter and explain the work being undertaken to address perimeter issues, the FCA has published an Annual Perimeter Report since 2019. Where there are concerns about activities which are relevant to, but not within the FCA’s remit, there are existing arrangements for engagement between the Treasury and the FCA on these issues, including an Annual Perimeter Meeting between the FCA CEO and the relevant Treasury minister. 3.13 Firms that are authorised to conduct regulated activities may also conduct unregulated activities. Whilst being an introducer does not require FCA-authorisation, many introducers in the case of BSPS were authorised and regulated by the FCA to conduct other regulated activities. Regulated introducers tend to be financial advisers and other regulated firms that do not have the necessary FCA permission to give DB transfer advice. These firms need to “refer” their clients to a firm with the appropriate DB transfer permissions should their clients want advice on their DB scheme. Unregulated introducers are firms that are not authorised by the FCA. 3.14 Where authorised firms are performing unregulated activities alongside their regulated activities, the FCA already has the ability to take action in relation to those unregulated activities. This is because certain FCA rules, including its Principles for Businesses, apply to an authorised firm’s business as a whole, not just its regulated activities. In relation to the concerns raised by the Committee, this means the FCA is already able to take action against regulated introducers, even though being an introducer is not a regulated activity. 3.15 The FCA has recently taken steps to enhance its approach to unregulated activities performed by authorised firms. Further details are available in its response to Dame Elizabeth Gloster’s Report of the Independent Investigation into the FCA's Regulation of London Capital & Finance plc.