Supervisory Notice
On , the Financial Conduct Authority issued a Supervisory Notice to David Stock & Co Limited
Registered as a Limited Company in England and Wales No.1920623. Registered Office: 12 Endeavour Square, London E20 1JN
FIRST SUPERVISORY NOTICE
1.1 For the reasons given in this First Supervisory Notice, and pursuant to section 55L(3)(a)
of the Financial Services and Markets Act 2000 (“the Act”), the Financial Conduct Authority
(“the Authority”) has decided to impose the following requirements (“the Requirements”)
on David Stock & Co Limited (“the Firm”) with immediate effect:
1) Where consumers have accepted unsolicited settlement offers prior to the
effective date of the Redress Scheme, the Firm must follow in full all the same
processes set out in the Redress Scheme that they must for consumers who have
not, prior to the effective date of the Redress Scheme, accepted any offer of
redress in connection with BSPS pension transfers, including (but not limited to):
•
following all requirements in relation to reporting to and notification to the
Authority;
•
observing all deadlines;
2
•
sending all letters and conducting all communications required under the Redress
Scheme in circumstances specified therein and following the provisions relating
to communications with consumers and other firms;
•
following all information gathering requirements;
•
conducting case reviews using the process set out within the Redress Scheme;
•
following all supervision and delegation requirements;
•
complying with requests for information from the Authority (in the circumstances
specified in the Redress Scheme); and
•
following all record-keeping requirements.
2) For any consumers who have accepted unsolicited settlement offers the Firm must
by 28 March 2023 send a letter in the form at Annex B instead of the letter at
CONRED 4 Annex 2 R Consumer within scope/confirming inclusion and any
reference within the Redress Scheme to the letter at CONRED 4 Annex 2 R should
be read as a reference to the letter at Annex B.
3) If in carrying out requirement 1) the Firm calculates that the redress payable to a
consumer is higher than the payment that consumer received pursuant to an
unsolicited settlement offer, the Firm must offer the difference to the consumer
using the process set out in CONRED 4.4.5R.
4) If in carrying out requirement 1), the Firm calculates that the redress payable to
a consumer is lower than the payment that consumer received pursuant to an
unsolicited settlement offer, the Firm must not ask the consumer to repay the
difference to the Firm.
5) The Firm must not make any communication to a consumer which seeks to
influence, for the benefit of the Firm, the outcome of requirement 1) or a
consumer’s decision to opt out in relation to requirement 2), either by seeking to
influence the content of information provided by the consumer in response to the
Firm’s requests made when following the processes set out in the Redress
Scheme, or otherwise. For the avoidance of doubt, this also applies such that the
Firm must not allow any other parties to make any communications to consumers
in this way.
6) The Firm must secure all books and records and preserve information and systems
that relate to regulated activities carried on by it, and must retain these in a form
and at a location (to be notified to the Authority in writing by 31 March 2023.
such that they can be provided to the Authority, or to a person named by the
Authority, promptly upon request.
1.2
These Requirements shall take immediate effect and remain in force unless and until
varied or cancelled by the Authority (either on the application of the Firm or of the
Authority’s own volition).
3
2
REASONS FOR ACTION
Summary
2.1
In February 2023, the Firm made unsolicited settlement offers of £50 to 54 out of 112
(48%) of its clients who were BSPS members. As at the date of this application, the
Authority is aware that three (5%) of the BSPS members that the offer was made to have
accepted the Firm’s offer.
2.2
The Authority has concluded, on the basis of the facts and matters described below that,
in respect of the Firm, it is necessary to exercise its power under section 55L(3)(a) of the
Act to impose the Requirements on the Firm because it is failing, or is likely to fail, to
satisfy the Threshold Conditions and it is desirable in order to advance one or more of the
Authority’s operational objectives, which includes securing an appropriate degree of
protection for consumers.
2.3 The Authority has serious concerns relating to the Firm’s conduct in respect of the Redress
Scheme because:
The Firm appears to have provided misleading information to the Authority
indicating that it had not made settlement offers to customers when it had. The
Firm has also failed to fully respond to the Authority’s requests for documents
and information. Supervision is therefore concerned that the Firm may not be
willing or able to provide full and accurate information to the Authority. The
Firm’s failures have impeded Supervision’s ability to adequately assess whether
the Firm has treated customers fairly; and
The Firm represents a serious ongoing risk to consumers because of the evidence
that it may be in breach of Principle 6 of the Authority’s Principles for Businesses,
requiring it to pay due regard to its customers’ interests and to treat them fairly.
Specifically, the offers of £50 are significantly misaligned with estimates used in
sensitivity analysis for our cost benefit analysis that accompanies PS22/14 of
average calculated redress of £45,000 for former BSPS members who received
unsuitable pension transfer advice based on estimated average financial loss of
12% of the average transfer value of £374,00.00. The Authority considers that
this indicates a risk that the approach taken by the Firm in calculating the
settlement offers is flawed and failed to treat customers fairly. Further, the
Authority is unable to assess whether the Firm has communicated the offers to
customers in a way that is clear, fair and not misleading because the Firm has
failed to respond to the Authority’s requests for information and documents
adequately or in some cases at all.
2.4
These Requirements shall take immediate effect and remain in force unless and until
varied or cancelled by the Authority (either on the application of the Firm or of the
Authority’s own volition).
3
DEFINITIONS
3.1
The definitions below are used in this First Supervisory Notice:
“the Act” means the Financial Services and Markets Act 2000;
“the Authority” means the Financial Conduct Authority;
“BSPS” means the British Steel Pension Scheme;
“DB” means Defined Benefit;
“DC” means Defined Contribution”;
“the Firm” means Abbey Lane Financial Associates Limited;
“Handbook” means the Authority’s online handbook of rules and guidance (as in force from
time to time);
“Principles” means the Authority’s Principles for Businesses which are general statements
of the fundamental obligations of firms under the regulatory system;
“the Redress Scheme” means the consumer redress scheme created by CONRED 4 (British
Steel Consumer Redress Scheme);
“Requirements” means the terms imposed on the Firm by this First Supervisory Notice as
outline in section 1 above; and
“Tribunal” means the Upper Tribunal (Tax and Chancery Chamber); and
“Unsolicited settlement offers” means settlement offers to consumers who have not made
a complaint purporting to be in full and final settlement of claims in connection with BSPS
pension transfers.
4
FACTS AND MATTERS
Background
The Firm
4.1
The Firm is an advisory firm based in Newport, Wales with permissions to advise on and
arrange deals in investments, pensions and mortgages.
4.2
The Firm is in-scope of the Redress Scheme, as it provided defined benefit pension
transfer advice to 112 BSPS members between 26 May 2016 and 29 March 2018
BSPS
5
4.3
The BSPS was a defined benefit (“DB”) pension scheme sponsored by Tata Steel. A DB
scheme is a pension arrangement which typically pays safeguarded benefits to its
members in the form of a guaranteed income for life once they retire. The monetary
amount a member will receive depends on the terms of each DB scheme.
4.4
A defined contribution (“DC”) scheme is a pension arrangement by which members invest
a “pot” of money in a selection of assets. The benefits provided depend on performance
of the investments over time. DC schemes are typically more flexible in how benefits may
be drawn, but do not normally provide any safeguarded or guaranteed income.
4.5
A DB transfer is the process by which a member of a DB scheme transfers the capitalised
value of their pension benefits out of a DB scheme and into a DC scheme. The Authority
regulates the provision of DB transfer advice, and rules related to this are found with the
Authority Handbook, predominantly in the Conduct of Business Sourcebook (“COBS”).
4.6
In March 2016, Tata Steel announced publicly that it was considering options for
restructuring its business and that it would be unable to continue funding the BSPS. In
May 2017, Tata Steel agreed to establish a new DB scheme for its employees to replace
BSPS. This new DB scheme became known as “New BSPS” or “BSPS2”. BSPS members
were given a choice between remaining in the existing scheme, which would move into a
Pension Protection Fund assessment period, with an associated reduction in pension
benefits entitlements, or transferring their accrued rights into the BSPS2 scheme, with
reduced increases in the future. Some BSPS members instead opted for a DB transfer
and transferred the capitalised value of their pension benefits out of the BSPS and into a
DC scheme.
4.7
The Authority’s review of files from firms that advised BSPS members found that in 46%
of cases the recommendation was unsuitable. The Authority has used estimates in the
sensitivity analysis in their cost benefit analysis accompanying PS22/14 that the average
amount lost per consumer who received unsuitable advice is about £45,000, based on
estimated average financial loss being 12% of the average transfer value of £374,00.00.
4.8
On 28 November 2022, the Authority published the final rules for the Redress Scheme
requiring firms to assess any advice they gave to BSPS members to transfer out and to
pay redress if the advice was unsuitable and caused consumer loss. The rules in the
Consumer Redress Scheme Sourcebook (CONRED 4) (British Steel Redress Scheme)
came into effect on 28 February 2023.
4.9
CONRED 4.2.2R will require firms to identify all Redress Scheme cases. A consumer will
not be considered within the Redress Scheme where “a consumer has, prior to the scheme
effective start date [28 February 2023] accepted an offer of redress from the firm or other
person in full and final settlement of all potential claims arising out of” advice which a
firm gave in relation to a BSPS pension transfer during the relevant period (CONRED
4.2.2R(1) and (5)).
Unsolicited settlement offers
6
4.10 On 26 January 2023, the Authority published a news story expressing concern that some
firms were sending unsolicited offers prior to the start of the Redress Scheme. The
statement noted that the Authority believed that “the actions by the firms may be
deliberate attempt to exclude former members from participating in the scheme, binding
them to receiving less money than they might otherwise be entitled”. The Authority’s
expectations for firms were set out: “we expect firms to treat customers fairly and to
clearly explain the implications of accepting an offer before the scheme starts”.
4.11 On 7 February 2023, the Authority published a further news story in relation to offers
made to BSPS members ahead of the Redress Scheme.1 It stated that the Authority had
now identified 15 firms which had engaged in making the unsolicited offers. The Authority
set out its expectations that firms:
•
“Withdraw any existing unsolicited settlement offers pending any consumer
agreement;
•
“Stop making further unsolicited offers to former BSPS members who have not
made complaints;
•
“Treat any pending unsolicited settlement offers as withdrawn.”
4.12 The potential implications for BSPS members of accepting an offer prior to the
commencement of the Redress Scheme is that they may be excluded from the scheme
and may not receive appropriate redress.
Failings and risks identified
4.13 On 20 January 2023, the Authority sent the Firm a section 165 information request
seeking information regarding the Firm’s preparation for the Redress Scheme, including
details of offers of settlements made to BSPS customers who had not complained to the
Firm.
4.14 On 3 February 2023, the Firm responded stating that “The firm is taking steps to complete
the redress calculations of all cases, both those which would fall within the proposed
scheme and those which sit within FOS. Where we have calculated redress, we will make
offers of settlement and remind customers of their duty to mitigate and loss.”
4.15 On 8 February 2023, the Authority emailed the Firm noting that no offers of settlements
had been made and directed them to the Authority’s announcements of 26 January 2023
and 7 February 2023 that outlines the Authority’s expectations that firms would not
provide unsolicited offers to former BSPS members who had not made complaints. The
Firm was asked to provide an undertaking; “to withdraw any existing settlement offers
currently pending any consumer agreement, to cease making any further offers to former
BSPS members who have not made complaints, and to treat any pending settlement
offers as withdrawn.”
4.16 On the same day, the Firm responded to the Authority stating that:
“Our lawyers will be writing to your legal team today raising a number of important
1 FCA news story dated 7 February 2023.
7
queries with you about the S165 requests and your requests for undertakings / VREQs in
relation to the settlements being offered by firms.”
4.17 On 13 February 2023, the Firm sent an email to the Authority attaching a SUP 15
notification, signed by the SMF3 (Executive Director) on 1 February 2023, stating that it
proposed to make offers to an enclosed list of BSPS members and stated that a settlement
would allow the members to replicate the Redress Scheme benefits and would suffer no
prejudice in doing so. The notification stated that the Firm’s calculations “have been
generated by specialist actuarial software which reflects the PS22/13 guidance for
redress.
4.18 On 15 February 2023, the Authority again invited the Firm to a formal undertaking by
inviting the Firm to consider applying for a voluntary requirement and asking the Firm to
respond by the deadline of 17 February 2023, which the Firm declined on 17 February
2023.
4.19 On 23 February 2023, a meeting between the Authority and the Firm took place to discuss
the SUP 15 notification submitted by the Firm in more detail and to obtain further
information on the intention to make unsolicited settlement offers. The Firm told the
Authority:
1) It had not made any unsolicited settlement offers to former BSPS members and
it did not intend on either.
2) The SUP 15 notification was missing information due to an oversight by the
Executive Director and Compliance Consultant.
3) The Executive Director could not recall seeing the SUP 15 notification before
signing it and submitting it to the Authority.
When asked by the Authority for confirmation from the Executive Director of the Firm that
no unsolicited settlement offers to former BSPS members had been made and that the
Firm did not intend on making unsolicited settlement offers, the Executive Director could
not provide this as they wanted to seek advice from their legal representative, pension
transfer specialist and administration manager at the Firm. The Authority asked that the
Firm confirm the position in writing by 12 noon on 24 February 2023.
4.20 On 24 February 2023, the Executive Director of the Firm emailed the Authority to explain
they were unable to provide the confirmation as they had not spoken with the
administration manager or the pension transfer specialist. The Firm asked for an
extension until the end of the day on 27 February 2023.
4.21 On 27 February 2023 at 12:24pm the Administration Manager at the Firm, on behalf of
the Executive Director, emailed the Authority to explain that three unsolicited offers of
£50 had been made to former members of BSPS who were advised to transfer. It was not
clear if these three former members had accepted the offer at this stage. In response,
the Authority issued the Firm a section 165 information request (with a deadline to
respond of 1 March 2023) and an invitation to a Voluntary Requirement, in light of the
offers they have made, to sign and return by 4.45pm on 27 February 2023.
4.22 The Firm’s legal representative, responded to the Authority stating “nothing will happen
of any note in the interim” with reference to the Executive Director of the Firm being away
from the office.
4.23 Between 27 February 2023 to 3 March 2023, the Firm’s legal representative continued to
respond to our emails.
4.24 On 3 March 2023, the Firm’s legal representative emailed the Authority, attaching an
Excel spreadsheet, with some but not all the information requested under s.165 of the
Act. The information showed the Firm had made an unsolicited settlement offer to 44
customers with 3 customers having already accepted the offer and been paid. This
contradicted the Firm’s explanation during the call on 23 February 2023 and via email
from the Administration Manager on 27 February 2023. The Authority responded to
highlight the concerns with the contradicting information received to-date and asked the
Firm to respond with the information that was still outstanding from the Authority’s
information request.
4.25 On 6 March 2023, the Firm and its legal representative emailed the Authority that the
outstanding information was not required as all the remaining customers would now fall
within the Redress Scheme. The Firm and its legal representative also provided an update
on the complaints with the Financial Ombudsman Service (FOS).
4.26 The Firm stated in its email: “I am not sure whether you have fully understood our
intentions, or if I have not made it clear enough, but the 3 clients who have been paid a
gesture of goodwill will be included into the new redress schemes from April 2023”.
4.27 The Authority responded to ask the Firm why it hadn’t applied for a VREQ as a VREQ
would only serve to formalise the actions that the Firm stated it was already taking.
4.28 On 7 March 2023 at 1:09pm, the Firm emailed the Authority stating that in its view the
settled cases are excluded from the Redress Scheme, that the Firm does not believe the
settlements they have entered into have been misleading, and to decline our invitation
to consider applying for a VREQ.
5
CONCLUSION
5.1
The regulatory provisions relevant to this First Supervisory Notice are set out in Annex A.
Analysis of failings and risks
Effective Supervision Threshold Condition
5.2
The Authority considers that the Firm is failing, or is likely to fail, to satisfy the Effective
Supervision Threshold Condition. The Firm has demonstrated an ongoing pattern of poor
engagement with the Authority which has impeded its ability to effectively supervise the
Firm. Specifically:
1)
The Firm appears to have provided misleading information to the
Authority on 23 February 2023 and 27 February 2023 indicating that
it had made settlement offers to only 3 customers when it appears
that the Firm had made offers to 54 customers. The Firm has not
provided an explanation for providing information that the Authority
considers to be misleading; and
2)
The Firm has failed without reasonable excuse to fully respond to the
Authority’s section 165 request letter dated 20 January 2023 and the
email requesting information and documents dated 27 February
2023.
5.3
The Authority is therefore concerned that the Firm may not be willing or able to provide
full and accurate information to the Authority.
5.4
The Firm’s failures have impeded the Authority’s ability to adequately assess whether the
Firm has treated customers fairly. In particular, the Authority has not been able to assess
what information the Firm gave to customers with its settlement offers and therefore
whether those communications were clear, fair and not misleading.
Consumer protection operational objective
5.5
The Authority’s operational objective of consumer protection requires the Authority to
ensure an appropriate degree of protection for consumers (section 1C(1) of the Act). The
Authority considers that the Firm represents a serious ongoing risk to consumers because
of the evidence that it may be in breach of Principle 6 of the Authority’s Principles for
Businesses, requiring it to pay due regard to its customers’ interests and to treat them
fairly. Specifically:
3)
Although it is correct to state that the Firm has the legal right to enter into
settlement agreements with consumers, in doing so in the Authority’s view
the Firm must have due regard to customers’ interests and treat them
fairly.
4)
The unsolicited settlement offers to 54 customers of £50 are significantly
misaligned with estimates used in sensitivity analysis in the cost benefit
analysis accompanying PS22/14 that average calculated redress of
£45,000 for former BSPS members who received unsuitable pension
transfer advice based on estimated average financial loss being 12% of
the average transfer value of £374,00.00. Even allowing for a reasonable
variation within settlement figures, it is unlikely that there should be such
a significant disparity. Further, that the offers were all for the same
amount indicates that the Firm has not considered the likely redress owed
to customers on a case-by-case basis. Rather, this indicates that the
approach taken by the Firm in calculating the settlement offers is likely to
be flawed and therefore fails to treat customers fairly.
5.6
The Authority has concluded, in light of the matters set out above, that it is necessary to
exercise its own-initiative power under section 55L(3)(a) of the Act by imposing the
Requirements in order to protect the interests of consumers.
5.7
The Authority considers that the Requirements are a proportionate and appropriate
means to address the current and immediate risks, and are desirable in order to advance
the Authority’s operational objective of consumer protection.
Timing and duration of the Requirements
5.8
It is necessary to impose the Requirements on an urgent basis to take immediate effect
given the seriousness of the risks and the need to protect consumers.
5.9
The Authority considers that it is necessary for the Requirements to remain in place
indefinitely.
6
PROCEDURAL MATTERS
6.1
The decision which gave rise to the obligation to give this First Supervisory Notice was
made by an Authority staff member under executive procedures according to DEPP 2.5.7G
and DEPP 4.1.7G.
6.2
This First Supervisory Notice is given under section 55Y(4) and in accordance with section
55Y(5) of the Act.
6.3
The following statutory rights are important.
Representations
6.4
The Firm has the right to make written representations to the Authority (whether or not
it refers this matter to the Tribunal). The Firm may also request to make oral
representations but the Authority will only consider this in exceptional circumstances
according to DEPP 2.3.1AG. The deadline for providing written representations and
notifying the Authority that the Firm wishes to make oral representations is 17 March
2023 or such later date as may be permitted by the Authority. Any notification or
representations
should
be
sent
to
the
SPC
Decision
Making
Secretariat
(SPCDecisionMakingSecretariat@fca.org.uk).
The Tribunal
6.5
The Firm has the right to refer the matter to which this First Supervisory Notice relates
to the Tribunal. The Tax and Chancery Chamber is part of the Tribunal which, amongst
other things, hears references arising from decisions of the Authority. Under paragraph
2(2) of Schedule 3 of the Tribunal Procedure (Upper Tribunal) Rules 2008, the Firm has
28 days from the date on which this First Supervisory Notice is given to it to refer the
matter to the Tribunal.
6.6
A reference to the Tribunal can be made by way of a reference notice (Form FTC3) signed
by or on behalf of the Firm and filed with a copy of this First Supervisory Notice. The
Tribunal’s contact details are: The Upper Tribunal, Tax and Chancery Chamber, 5th Floor,
Rolls Building, Fetter Lane, London EC4A 1NL (telephone: 020 7612 9730; email:
uttc@hmcts.gsi.gov.uk).
6.7
Further information on the Tribunal, including guidance and the relevant forms to
complete, can be found on the HM Courts and Tribunal Service website:
http://www.justice.gov.uk/forms/hmcts/tax-and-chancery-upper-tribunal
6.8
The Firm should note that a copy of the reference notice (Form FTC3) must also be sent
to the Authority at the same time as a reference is filed with the Tribunal. A copy of the
reference
notice
should
be
sent
to
the
SPC
Decision
Making
Secretariat
(SPCDecisionMakingSecretariat@fca.org.uk).
Confidentiality and publicity
6.9
The Firm should note that this First Supervisory Notice may contain confidential
information and should not be disclosed to a third party (except for the purpose of
obtaining legal advice on its contents).
6.10 The Firm should note that section 391(5) of the Act requires the Authority, when the First
Supervisory Notice takes effect, to publish such information about the matter to which
the notice relates as it considers appropriate.
Authority contacts
6.11 Any questions regarding this matter generally or the executive procedures decision-
making process should be directed to the SPC Decision Making Secretariat
(SPCDecisionMakingSecretariat@fca.org.uk).
Decision made under Executive Procedures
Nick Hulme
Head of Department, Consumer Investments
Annex A
RELEVANT STATUTORY PROVISIONS
1.
The Authority’s operational objectives established in section 1B of the Act include securing
an appropriate degree of protection for consumers, and protecting and enhancing the
integrity of the UK financial system.
2.
Section 55L of the Act allows the Authority to impose a new requirement on an authorised
person if it appears to the Authority that the authorised person is failing, or likely to fail to
satisfy the Threshold Conditions (section 55L(2)(a)), or it is desirable to exercise the power
in order to advance one or more of the Authority’s operational objectives (section
55L(2)(c)).
3.
Section 55N of the Act allows a requirement to be imposed under section 55L of the Act so
as to require the person concerned to take specified action (section 55N(1)(a)), or to
refrain from taking specified action (section 55N(1)(b)).
4.
Section 55P of the Act allows a requirement to be imposed under section 55L of the Act
prohibiting the disposal of, or other dealing with, any of an authorised person’s assets
(whether in the UK or elsewhere), or restricting such disposals or dealings.
5.
Section 55Y(3) of the Act allows a requirement to take effect immediately (or on a specified
date) if the Authority, having regard to the ground on which it is exercising its own-
initiative power, reasonably considers that it is necessary for the requirement to take effect
immediately (or on that date).
6.
Section 391 of the Act provides that:
“[…]
(5) When a supervisory notice takes effect, the Authority must publish such
information about the matter to which the notice relates as it considers
appropriate.
(6) But the Authority may not publish information under this section if in its opinion,
publication of the information would, be unfair to the person with respect to whom
the action was taken or proposed to be taken [or] prejudicial to the interests of
consumers or detrimental to the stability of the UK financial system.
(7) Information is to be published under this section in such manner as
the Authority considers appropriate.”
RELEVANT REGULATORY PROVISIONS
The Enforcement Guide
7.
The Authority's approach in relation to its own-initiative powers is set out in Chapter 8 of
the Enforcement Guide (EG), certain provisions of which are summarised below.
8.
EG 8.1.1 reflects the provisions of section 55L of the Act by stating that the Authority may
use its own-initiative power to impose requirements on an authorised person where,
amongst other factors, the person is failing or is likely to fail to satisfy the threshold
conditions for which the Authority is responsible (EG 8.1.1(1)), or it is desirable to exercise
the power in order to advance one or more of its operational objectives (EG 8.1.1(3)).
9.
EG 8.2.1 states that when the Authority considers how it should deal with a concern about a
firm, it will have regard to its statutory objectives and the range of regulatory tools that
are available to it. It will also have regard to the principle that a restriction imposed on a
firm should be proportionate to the objectives the Authority is seeking to achieve (EG
8.2.1(2)).
10.
EG 8.2.3 states that in the course of its supervision and monitoring of a firm or as part of
an enforcement action, the Authority may make it clear that it expects the firm to take
certain steps to meet regulatory requirements. In the vast majority of cases the Authority
will seek to agree with a firm those steps the firm must take to address the Authority’s
concerns. However, where the Authority considers it appropriate to do so, it will exercise
its formal powers under section 55L of the Act to impose a requirement to ensure such
requirements are met. This may include where, amongst other factors, the Authority has
serious concerns about a firm, or about the way its business is being or has been conducted
(EG 8.2.3(1)), or is concerned that the consequences of a firm not taking the desired steps
may be serious (EG 8.2.3(2)).
11.
EG 8.3.1 states that the Authority may impose a requirement so that it takes effect
immediately or on a specified date if it reasonably considers it necessary for the
requirement to take effect immediately (or on the date specified), having regard to the
ground on which it is exercising its own-initiative powers.
12.
EG 8.3.2 states that the Authority will consider exercising its own-initiative power as a
matter of urgency where: 1) the information available to it indicates serious concerns about
the firm or its business that need to be addressed immediately; and 2) circumstances
indicate that it is appropriate to use statutory powers immediately to require and/or prohibit
certain actions by the firm in order to ensure the firm addresses these concerns.
13.
EG 8.3.3 states that it is not possible to provide an exhaustive list of the situations that will
give rise to such serious concerns, but they are likely to include one or more of four listed
characteristics, these include: 1) information indicating significant loss, risk of loss or other
adverse effects for consumers, where action is necessary to protect their interests; 2)
information indicating that a firm’s conduct has put it at risk of being used for the purposes
of financial crime, or of being otherwise involved in crime; 3) evidence that the firm has
submitted to the Authority inaccurate or misleading information so that the Authority
becomes seriously concerned about the firm’s ability to meet its regulatory obligations; 4)
circumstances suggesting a serious problem within a firm or with a firm’s controllers that
calls into question the firm’s ability to continue to meet the threshold conditions.
14.
EG 8.3.4 states that the Authority will consider the full circumstances of each case when it
decides whether an imposition of a requirement is appropriate and sets out a non-
exhaustive list of factors the Authority may consider.
15.
EG 8.3.4(1) includes the extent of any loss, or risk of loss, or other adverse effect on
consumers. The more serious the loss or potential loss or other adverse effect, the more
likely it is that the Authority’s exercise of own-initiative powers will be appropriate, to
protect the consumers' interests.
16.
EG 8.3.4(7) includes the risk that the firm's conduct or business presents to the financial
system and to confidence in the financial system.
17.
EG 8.3.4(9) includes the impact that use of the Authority’s own-initiative powers will have
on the firm's business and on its customers. The Authority will need to be satisfied that
the impact of any use of the own-initiative power is likely to be proportionate to the
concerns being addressed, in the context of the overall aim of achieving its statutory
objectives.
Annex B
FORM OF LETTER TO SEND TO CONSUMERS IN ACCORDANCE WITH REQUIREMENT 2
[To be sent on the Firm’s letterhead]
[Please delete or amend any drafting instructions in italics before sending]
Rydym yn hapus i ddarparu copi o’r llythyr hwn yn y Gymraeg ar gais. Cysylltwch gyda ni ar
cymraeg@fca.org.uk ac fe wnawn anfon copi atoch.
[Firm details]
[Consumer details]
British Steel consumer redress scheme
We will review the advice we gave you to transfer out of the British Steel Pension
Scheme
Dear [Insert name],
[If applicable: You were introduced to our firm by [insert name of introducer firm] for advice
about your British Steel Pension Scheme benefits]
You could be owed money for the advice we gave you to transfer out of the
British Steel Pension Scheme (BSPS). The FCA requires all firms who advised
BSPS members to transfer to be part of a consumer redress scheme.
We will review whether our advice was unsuitable and let you know the
result by [insert day date month year]. You do not have to do anything unless
we need more information from you to complete our review. We will contact
you if this is the case.
If you do not want us to review the advice you were given, please complete
the enclosed form and return it to us by [insert day date month year].
The Financial Conduct Authority (FCA) has gathered evidence that suggests nearly half of the
advice given to people to transfer out of the BSPS was unsuitable. Unsuitable advice is advice
that was not in line with FCA requirements.
You accepted our offer dated [date]. The FCA has asked us to follow the same processes set
out in the British Steel Consumer Redress scheme in full as we must for those who have not
accepted an offer. We will therefore review the advice we gave you to decide if it was
unsuitable.
If we find that we gave you unsuitable advice, we will ask you for some information to help us
check if you are owed money. We will do this by calculating if our advice caused you a financial
loss. If our advice did cause you a loss that is higher than the amount that we have already
paid you, we will be required to offer you an additional payment. The payment will aim to put
you in the position you would have been in if we had given you suitable advice. Whatever the
result of our review, you will not need to pay anything.
You do not need to do anything unless we ask you for information to help us complete our
review. We will contact you if this is the case. We will tell you the result of our review by [insert
day date month year].
You do not need to use a claims management company as it will not affect our review and, if
you do, they will charge you for the service.
If you do not want us to review the advice we gave, please let us know by completing the
enclosed form and returning it to us by [insert day date month year]. If you opt-out, you may
end up with less money during your retirement than you should have had.
You can find out more about the BSPS consumer redress scheme at www.fca.org.uk/bsps. If
you want to contact the FCA, you can:
call its Consumer Helpline on 0800 098 4100; or
email consumer.enquiries@fca.org.uk.
If you would like to contact the FCA using next generation text relay, please call on (18001)
0207 066 1000.
If you have any questions about our review, you can phone or email us [insert contact details].
We are available between [insert contact hours].
Yours sincerely,
Opting out of the review of the advice given to you
[I/We] have enclosed 2 copies of this letter.
If you DO NOT want us to review our advice to transfer out of the BSPS:
1. Tick the box below on 1 copy of this letter; and
2. Send this letter to [me/us] by [date].
CONFIRMATION THAT I DO NOT WANT MY ADVICE REVIEWED
I do not want you to review the advice you gave me to transfer out of the BSPS to see
if I am entitled to a payment.
Please be aware that if you decide you DO NOT want us to review your advice, you could
lose out on a payment and may end up with less money during your retirement
than you should have had.
FIRST SUPERVISORY NOTICE
1.1 For the reasons given in this First Supervisory Notice, and pursuant to section 55L(3)(a)
of the Financial Services and Markets Act 2000 (“the Act”), the Financial Conduct Authority
(“the Authority”) has decided to impose the following requirements (“the Requirements”)
on David Stock & Co Limited (“the Firm”) with immediate effect:
1) Where consumers have accepted unsolicited settlement offers prior to the
effective date of the Redress Scheme, the Firm must follow in full all the same
processes set out in the Redress Scheme that they must for consumers who have
not, prior to the effective date of the Redress Scheme, accepted any offer of
redress in connection with BSPS pension transfers, including (but not limited to):
•
following all requirements in relation to reporting to and notification to the
Authority;
•
observing all deadlines;
2
•
sending all letters and conducting all communications required under the Redress
Scheme in circumstances specified therein and following the provisions relating
to communications with consumers and other firms;
•
following all information gathering requirements;
•
conducting case reviews using the process set out within the Redress Scheme;
•
following all supervision and delegation requirements;
•
complying with requests for information from the Authority (in the circumstances
specified in the Redress Scheme); and
•
following all record-keeping requirements.
2) For any consumers who have accepted unsolicited settlement offers the Firm must
by 28 March 2023 send a letter in the form at Annex B instead of the letter at
CONRED 4 Annex 2 R Consumer within scope/confirming inclusion and any
reference within the Redress Scheme to the letter at CONRED 4 Annex 2 R should
be read as a reference to the letter at Annex B.
3) If in carrying out requirement 1) the Firm calculates that the redress payable to a
consumer is higher than the payment that consumer received pursuant to an
unsolicited settlement offer, the Firm must offer the difference to the consumer
using the process set out in CONRED 4.4.5R.
4) If in carrying out requirement 1), the Firm calculates that the redress payable to
a consumer is lower than the payment that consumer received pursuant to an
unsolicited settlement offer, the Firm must not ask the consumer to repay the
difference to the Firm.
5) The Firm must not make any communication to a consumer which seeks to
influence, for the benefit of the Firm, the outcome of requirement 1) or a
consumer’s decision to opt out in relation to requirement 2), either by seeking to
influence the content of information provided by the consumer in response to the
Firm’s requests made when following the processes set out in the Redress
Scheme, or otherwise. For the avoidance of doubt, this also applies such that the
Firm must not allow any other parties to make any communications to consumers
in this way.
6) The Firm must secure all books and records and preserve information and systems
that relate to regulated activities carried on by it, and must retain these in a form
and at a location (to be notified to the Authority in writing by 31 March 2023.
such that they can be provided to the Authority, or to a person named by the
Authority, promptly upon request.
1.2
These Requirements shall take immediate effect and remain in force unless and until
varied or cancelled by the Authority (either on the application of the Firm or of the
Authority’s own volition).
3
2
REASONS FOR ACTION
Summary
2.1
In February 2023, the Firm made unsolicited settlement offers of £50 to 54 out of 112
(48%) of its clients who were BSPS members. As at the date of this application, the
Authority is aware that three (5%) of the BSPS members that the offer was made to have
accepted the Firm’s offer.
2.2
The Authority has concluded, on the basis of the facts and matters described below that,
in respect of the Firm, it is necessary to exercise its power under section 55L(3)(a) of the
Act to impose the Requirements on the Firm because it is failing, or is likely to fail, to
satisfy the Threshold Conditions and it is desirable in order to advance one or more of the
Authority’s operational objectives, which includes securing an appropriate degree of
protection for consumers.
2.3 The Authority has serious concerns relating to the Firm’s conduct in respect of the Redress
Scheme because:
The Firm appears to have provided misleading information to the Authority
indicating that it had not made settlement offers to customers when it had. The
Firm has also failed to fully respond to the Authority’s requests for documents
and information. Supervision is therefore concerned that the Firm may not be
willing or able to provide full and accurate information to the Authority. The
Firm’s failures have impeded Supervision’s ability to adequately assess whether
the Firm has treated customers fairly; and
The Firm represents a serious ongoing risk to consumers because of the evidence
that it may be in breach of Principle 6 of the Authority’s Principles for Businesses,
requiring it to pay due regard to its customers’ interests and to treat them fairly.
Specifically, the offers of £50 are significantly misaligned with estimates used in
sensitivity analysis for our cost benefit analysis that accompanies PS22/14 of
average calculated redress of £45,000 for former BSPS members who received
unsuitable pension transfer advice based on estimated average financial loss of
12% of the average transfer value of £374,00.00. The Authority considers that
this indicates a risk that the approach taken by the Firm in calculating the
settlement offers is flawed and failed to treat customers fairly. Further, the
Authority is unable to assess whether the Firm has communicated the offers to
customers in a way that is clear, fair and not misleading because the Firm has
failed to respond to the Authority’s requests for information and documents
adequately or in some cases at all.
2.4
These Requirements shall take immediate effect and remain in force unless and until
varied or cancelled by the Authority (either on the application of the Firm or of the
Authority’s own volition).
3
DEFINITIONS
3.1
The definitions below are used in this First Supervisory Notice:
“the Act” means the Financial Services and Markets Act 2000;
“the Authority” means the Financial Conduct Authority;
“BSPS” means the British Steel Pension Scheme;
“DB” means Defined Benefit;
“DC” means Defined Contribution”;
“the Firm” means Abbey Lane Financial Associates Limited;
“Handbook” means the Authority’s online handbook of rules and guidance (as in force from
time to time);
“Principles” means the Authority’s Principles for Businesses which are general statements
of the fundamental obligations of firms under the regulatory system;
“the Redress Scheme” means the consumer redress scheme created by CONRED 4 (British
Steel Consumer Redress Scheme);
“Requirements” means the terms imposed on the Firm by this First Supervisory Notice as
outline in section 1 above; and
“Tribunal” means the Upper Tribunal (Tax and Chancery Chamber); and
“Unsolicited settlement offers” means settlement offers to consumers who have not made
a complaint purporting to be in full and final settlement of claims in connection with BSPS
pension transfers.
4
FACTS AND MATTERS
Background
The Firm
4.1
The Firm is an advisory firm based in Newport, Wales with permissions to advise on and
arrange deals in investments, pensions and mortgages.
4.2
The Firm is in-scope of the Redress Scheme, as it provided defined benefit pension
transfer advice to 112 BSPS members between 26 May 2016 and 29 March 2018
BSPS
5
4.3
The BSPS was a defined benefit (“DB”) pension scheme sponsored by Tata Steel. A DB
scheme is a pension arrangement which typically pays safeguarded benefits to its
members in the form of a guaranteed income for life once they retire. The monetary
amount a member will receive depends on the terms of each DB scheme.
4.4
A defined contribution (“DC”) scheme is a pension arrangement by which members invest
a “pot” of money in a selection of assets. The benefits provided depend on performance
of the investments over time. DC schemes are typically more flexible in how benefits may
be drawn, but do not normally provide any safeguarded or guaranteed income.
4.5
A DB transfer is the process by which a member of a DB scheme transfers the capitalised
value of their pension benefits out of a DB scheme and into a DC scheme. The Authority
regulates the provision of DB transfer advice, and rules related to this are found with the
Authority Handbook, predominantly in the Conduct of Business Sourcebook (“COBS”).
4.6
In March 2016, Tata Steel announced publicly that it was considering options for
restructuring its business and that it would be unable to continue funding the BSPS. In
May 2017, Tata Steel agreed to establish a new DB scheme for its employees to replace
BSPS. This new DB scheme became known as “New BSPS” or “BSPS2”. BSPS members
were given a choice between remaining in the existing scheme, which would move into a
Pension Protection Fund assessment period, with an associated reduction in pension
benefits entitlements, or transferring their accrued rights into the BSPS2 scheme, with
reduced increases in the future. Some BSPS members instead opted for a DB transfer
and transferred the capitalised value of their pension benefits out of the BSPS and into a
DC scheme.
4.7
The Authority’s review of files from firms that advised BSPS members found that in 46%
of cases the recommendation was unsuitable. The Authority has used estimates in the
sensitivity analysis in their cost benefit analysis accompanying PS22/14 that the average
amount lost per consumer who received unsuitable advice is about £45,000, based on
estimated average financial loss being 12% of the average transfer value of £374,00.00.
4.8
On 28 November 2022, the Authority published the final rules for the Redress Scheme
requiring firms to assess any advice they gave to BSPS members to transfer out and to
pay redress if the advice was unsuitable and caused consumer loss. The rules in the
Consumer Redress Scheme Sourcebook (CONRED 4) (British Steel Redress Scheme)
came into effect on 28 February 2023.
4.9
CONRED 4.2.2R will require firms to identify all Redress Scheme cases. A consumer will
not be considered within the Redress Scheme where “a consumer has, prior to the scheme
effective start date [28 February 2023] accepted an offer of redress from the firm or other
person in full and final settlement of all potential claims arising out of” advice which a
firm gave in relation to a BSPS pension transfer during the relevant period (CONRED
4.2.2R(1) and (5)).
Unsolicited settlement offers
6
4.10 On 26 January 2023, the Authority published a news story expressing concern that some
firms were sending unsolicited offers prior to the start of the Redress Scheme. The
statement noted that the Authority believed that “the actions by the firms may be
deliberate attempt to exclude former members from participating in the scheme, binding
them to receiving less money than they might otherwise be entitled”. The Authority’s
expectations for firms were set out: “we expect firms to treat customers fairly and to
clearly explain the implications of accepting an offer before the scheme starts”.
4.11 On 7 February 2023, the Authority published a further news story in relation to offers
made to BSPS members ahead of the Redress Scheme.1 It stated that the Authority had
now identified 15 firms which had engaged in making the unsolicited offers. The Authority
set out its expectations that firms:
•
“Withdraw any existing unsolicited settlement offers pending any consumer
agreement;
•
“Stop making further unsolicited offers to former BSPS members who have not
made complaints;
•
“Treat any pending unsolicited settlement offers as withdrawn.”
4.12 The potential implications for BSPS members of accepting an offer prior to the
commencement of the Redress Scheme is that they may be excluded from the scheme
and may not receive appropriate redress.
Failings and risks identified
4.13 On 20 January 2023, the Authority sent the Firm a section 165 information request
seeking information regarding the Firm’s preparation for the Redress Scheme, including
details of offers of settlements made to BSPS customers who had not complained to the
Firm.
4.14 On 3 February 2023, the Firm responded stating that “The firm is taking steps to complete
the redress calculations of all cases, both those which would fall within the proposed
scheme and those which sit within FOS. Where we have calculated redress, we will make
offers of settlement and remind customers of their duty to mitigate and loss.”
4.15 On 8 February 2023, the Authority emailed the Firm noting that no offers of settlements
had been made and directed them to the Authority’s announcements of 26 January 2023
and 7 February 2023 that outlines the Authority’s expectations that firms would not
provide unsolicited offers to former BSPS members who had not made complaints. The
Firm was asked to provide an undertaking; “to withdraw any existing settlement offers
currently pending any consumer agreement, to cease making any further offers to former
BSPS members who have not made complaints, and to treat any pending settlement
offers as withdrawn.”
4.16 On the same day, the Firm responded to the Authority stating that:
“Our lawyers will be writing to your legal team today raising a number of important
1 FCA news story dated 7 February 2023.
7
queries with you about the S165 requests and your requests for undertakings / VREQs in
relation to the settlements being offered by firms.”
4.17 On 13 February 2023, the Firm sent an email to the Authority attaching a SUP 15
notification, signed by the SMF3 (Executive Director) on 1 February 2023, stating that it
proposed to make offers to an enclosed list of BSPS members and stated that a settlement
would allow the members to replicate the Redress Scheme benefits and would suffer no
prejudice in doing so. The notification stated that the Firm’s calculations “have been
generated by specialist actuarial software which reflects the PS22/13 guidance for
redress.
4.18 On 15 February 2023, the Authority again invited the Firm to a formal undertaking by
inviting the Firm to consider applying for a voluntary requirement and asking the Firm to
respond by the deadline of 17 February 2023, which the Firm declined on 17 February
2023.
4.19 On 23 February 2023, a meeting between the Authority and the Firm took place to discuss
the SUP 15 notification submitted by the Firm in more detail and to obtain further
information on the intention to make unsolicited settlement offers. The Firm told the
Authority:
1) It had not made any unsolicited settlement offers to former BSPS members and
it did not intend on either.
2) The SUP 15 notification was missing information due to an oversight by the
Executive Director and Compliance Consultant.
3) The Executive Director could not recall seeing the SUP 15 notification before
signing it and submitting it to the Authority.
When asked by the Authority for confirmation from the Executive Director of the Firm that
no unsolicited settlement offers to former BSPS members had been made and that the
Firm did not intend on making unsolicited settlement offers, the Executive Director could
not provide this as they wanted to seek advice from their legal representative, pension
transfer specialist and administration manager at the Firm. The Authority asked that the
Firm confirm the position in writing by 12 noon on 24 February 2023.
4.20 On 24 February 2023, the Executive Director of the Firm emailed the Authority to explain
they were unable to provide the confirmation as they had not spoken with the
administration manager or the pension transfer specialist. The Firm asked for an
extension until the end of the day on 27 February 2023.
4.21 On 27 February 2023 at 12:24pm the Administration Manager at the Firm, on behalf of
the Executive Director, emailed the Authority to explain that three unsolicited offers of
£50 had been made to former members of BSPS who were advised to transfer. It was not
clear if these three former members had accepted the offer at this stage. In response,
the Authority issued the Firm a section 165 information request (with a deadline to
respond of 1 March 2023) and an invitation to a Voluntary Requirement, in light of the
offers they have made, to sign and return by 4.45pm on 27 February 2023.
4.22 The Firm’s legal representative, responded to the Authority stating “nothing will happen
of any note in the interim” with reference to the Executive Director of the Firm being away
from the office.
4.23 Between 27 February 2023 to 3 March 2023, the Firm’s legal representative continued to
respond to our emails.
4.24 On 3 March 2023, the Firm’s legal representative emailed the Authority, attaching an
Excel spreadsheet, with some but not all the information requested under s.165 of the
Act. The information showed the Firm had made an unsolicited settlement offer to 44
customers with 3 customers having already accepted the offer and been paid. This
contradicted the Firm’s explanation during the call on 23 February 2023 and via email
from the Administration Manager on 27 February 2023. The Authority responded to
highlight the concerns with the contradicting information received to-date and asked the
Firm to respond with the information that was still outstanding from the Authority’s
information request.
4.25 On 6 March 2023, the Firm and its legal representative emailed the Authority that the
outstanding information was not required as all the remaining customers would now fall
within the Redress Scheme. The Firm and its legal representative also provided an update
on the complaints with the Financial Ombudsman Service (FOS).
4.26 The Firm stated in its email: “I am not sure whether you have fully understood our
intentions, or if I have not made it clear enough, but the 3 clients who have been paid a
gesture of goodwill will be included into the new redress schemes from April 2023”.
4.27 The Authority responded to ask the Firm why it hadn’t applied for a VREQ as a VREQ
would only serve to formalise the actions that the Firm stated it was already taking.
4.28 On 7 March 2023 at 1:09pm, the Firm emailed the Authority stating that in its view the
settled cases are excluded from the Redress Scheme, that the Firm does not believe the
settlements they have entered into have been misleading, and to decline our invitation
to consider applying for a VREQ.
5
CONCLUSION
5.1
The regulatory provisions relevant to this First Supervisory Notice are set out in Annex A.
Analysis of failings and risks
Effective Supervision Threshold Condition
5.2
The Authority considers that the Firm is failing, or is likely to fail, to satisfy the Effective
Supervision Threshold Condition. The Firm has demonstrated an ongoing pattern of poor
engagement with the Authority which has impeded its ability to effectively supervise the
Firm. Specifically:
1)
The Firm appears to have provided misleading information to the
Authority on 23 February 2023 and 27 February 2023 indicating that
it had made settlement offers to only 3 customers when it appears
that the Firm had made offers to 54 customers. The Firm has not
provided an explanation for providing information that the Authority
considers to be misleading; and
2)
The Firm has failed without reasonable excuse to fully respond to the
Authority’s section 165 request letter dated 20 January 2023 and the
email requesting information and documents dated 27 February
2023.
5.3
The Authority is therefore concerned that the Firm may not be willing or able to provide
full and accurate information to the Authority.
5.4
The Firm’s failures have impeded the Authority’s ability to adequately assess whether the
Firm has treated customers fairly. In particular, the Authority has not been able to assess
what information the Firm gave to customers with its settlement offers and therefore
whether those communications were clear, fair and not misleading.
Consumer protection operational objective
5.5
The Authority’s operational objective of consumer protection requires the Authority to
ensure an appropriate degree of protection for consumers (section 1C(1) of the Act). The
Authority considers that the Firm represents a serious ongoing risk to consumers because
of the evidence that it may be in breach of Principle 6 of the Authority’s Principles for
Businesses, requiring it to pay due regard to its customers’ interests and to treat them
fairly. Specifically:
3)
Although it is correct to state that the Firm has the legal right to enter into
settlement agreements with consumers, in doing so in the Authority’s view
the Firm must have due regard to customers’ interests and treat them
fairly.
4)
The unsolicited settlement offers to 54 customers of £50 are significantly
misaligned with estimates used in sensitivity analysis in the cost benefit
analysis accompanying PS22/14 that average calculated redress of
£45,000 for former BSPS members who received unsuitable pension
transfer advice based on estimated average financial loss being 12% of
the average transfer value of £374,00.00. Even allowing for a reasonable
variation within settlement figures, it is unlikely that there should be such
a significant disparity. Further, that the offers were all for the same
amount indicates that the Firm has not considered the likely redress owed
to customers on a case-by-case basis. Rather, this indicates that the
approach taken by the Firm in calculating the settlement offers is likely to
be flawed and therefore fails to treat customers fairly.
5.6
The Authority has concluded, in light of the matters set out above, that it is necessary to
exercise its own-initiative power under section 55L(3)(a) of the Act by imposing the
Requirements in order to protect the interests of consumers.
5.7
The Authority considers that the Requirements are a proportionate and appropriate
means to address the current and immediate risks, and are desirable in order to advance
the Authority’s operational objective of consumer protection.
Timing and duration of the Requirements
5.8
It is necessary to impose the Requirements on an urgent basis to take immediate effect
given the seriousness of the risks and the need to protect consumers.
5.9
The Authority considers that it is necessary for the Requirements to remain in place
indefinitely.
6
PROCEDURAL MATTERS
6.1
The decision which gave rise to the obligation to give this First Supervisory Notice was
made by an Authority staff member under executive procedures according to DEPP 2.5.7G
and DEPP 4.1.7G.
6.2
This First Supervisory Notice is given under section 55Y(4) and in accordance with section
55Y(5) of the Act.
6.3
The following statutory rights are important.
Representations
6.4
The Firm has the right to make written representations to the Authority (whether or not
it refers this matter to the Tribunal). The Firm may also request to make oral
representations but the Authority will only consider this in exceptional circumstances
according to DEPP 2.3.1AG. The deadline for providing written representations and
notifying the Authority that the Firm wishes to make oral representations is 17 March
2023 or such later date as may be permitted by the Authority. Any notification or
representations
should
be
sent
to
the
SPC
Decision
Making
Secretariat
(SPCDecisionMakingSecretariat@fca.org.uk).
The Tribunal
6.5
The Firm has the right to refer the matter to which this First Supervisory Notice relates
to the Tribunal. The Tax and Chancery Chamber is part of the Tribunal which, amongst
other things, hears references arising from decisions of the Authority. Under paragraph
2(2) of Schedule 3 of the Tribunal Procedure (Upper Tribunal) Rules 2008, the Firm has
28 days from the date on which this First Supervisory Notice is given to it to refer the
matter to the Tribunal.
6.6
A reference to the Tribunal can be made by way of a reference notice (Form FTC3) signed
by or on behalf of the Firm and filed with a copy of this First Supervisory Notice. The
Tribunal’s contact details are: The Upper Tribunal, Tax and Chancery Chamber, 5th Floor,
Rolls Building, Fetter Lane, London EC4A 1NL (telephone: 020 7612 9730; email:
uttc@hmcts.gsi.gov.uk).
6.7
Further information on the Tribunal, including guidance and the relevant forms to
complete, can be found on the HM Courts and Tribunal Service website:
http://www.justice.gov.uk/forms/hmcts/tax-and-chancery-upper-tribunal
6.8
The Firm should note that a copy of the reference notice (Form FTC3) must also be sent
to the Authority at the same time as a reference is filed with the Tribunal. A copy of the
reference
notice
should
be
sent
to
the
SPC
Decision
Making
Secretariat
(SPCDecisionMakingSecretariat@fca.org.uk).
Confidentiality and publicity
6.9
The Firm should note that this First Supervisory Notice may contain confidential
information and should not be disclosed to a third party (except for the purpose of
obtaining legal advice on its contents).
6.10 The Firm should note that section 391(5) of the Act requires the Authority, when the First
Supervisory Notice takes effect, to publish such information about the matter to which
the notice relates as it considers appropriate.
Authority contacts
6.11 Any questions regarding this matter generally or the executive procedures decision-
making process should be directed to the SPC Decision Making Secretariat
(SPCDecisionMakingSecretariat@fca.org.uk).
Decision made under Executive Procedures
Nick Hulme
Head of Department, Consumer Investments
Annex A
RELEVANT STATUTORY PROVISIONS
1.
The Authority’s operational objectives established in section 1B of the Act include securing
an appropriate degree of protection for consumers, and protecting and enhancing the
integrity of the UK financial system.
2.
Section 55L of the Act allows the Authority to impose a new requirement on an authorised
person if it appears to the Authority that the authorised person is failing, or likely to fail to
satisfy the Threshold Conditions (section 55L(2)(a)), or it is desirable to exercise the power
in order to advance one or more of the Authority’s operational objectives (section
55L(2)(c)).
3.
Section 55N of the Act allows a requirement to be imposed under section 55L of the Act so
as to require the person concerned to take specified action (section 55N(1)(a)), or to
refrain from taking specified action (section 55N(1)(b)).
4.
Section 55P of the Act allows a requirement to be imposed under section 55L of the Act
prohibiting the disposal of, or other dealing with, any of an authorised person’s assets
(whether in the UK or elsewhere), or restricting such disposals or dealings.
5.
Section 55Y(3) of the Act allows a requirement to take effect immediately (or on a specified
date) if the Authority, having regard to the ground on which it is exercising its own-
initiative power, reasonably considers that it is necessary for the requirement to take effect
immediately (or on that date).
6.
Section 391 of the Act provides that:
“[…]
(5) When a supervisory notice takes effect, the Authority must publish such
information about the matter to which the notice relates as it considers
appropriate.
(6) But the Authority may not publish information under this section if in its opinion,
publication of the information would, be unfair to the person with respect to whom
the action was taken or proposed to be taken [or] prejudicial to the interests of
consumers or detrimental to the stability of the UK financial system.
(7) Information is to be published under this section in such manner as
the Authority considers appropriate.”
RELEVANT REGULATORY PROVISIONS
The Enforcement Guide
7.
The Authority's approach in relation to its own-initiative powers is set out in Chapter 8 of
the Enforcement Guide (EG), certain provisions of which are summarised below.
8.
EG 8.1.1 reflects the provisions of section 55L of the Act by stating that the Authority may
use its own-initiative power to impose requirements on an authorised person where,
amongst other factors, the person is failing or is likely to fail to satisfy the threshold
conditions for which the Authority is responsible (EG 8.1.1(1)), or it is desirable to exercise
the power in order to advance one or more of its operational objectives (EG 8.1.1(3)).
9.
EG 8.2.1 states that when the Authority considers how it should deal with a concern about a
firm, it will have regard to its statutory objectives and the range of regulatory tools that
are available to it. It will also have regard to the principle that a restriction imposed on a
firm should be proportionate to the objectives the Authority is seeking to achieve (EG
8.2.1(2)).
10.
EG 8.2.3 states that in the course of its supervision and monitoring of a firm or as part of
an enforcement action, the Authority may make it clear that it expects the firm to take
certain steps to meet regulatory requirements. In the vast majority of cases the Authority
will seek to agree with a firm those steps the firm must take to address the Authority’s
concerns. However, where the Authority considers it appropriate to do so, it will exercise
its formal powers under section 55L of the Act to impose a requirement to ensure such
requirements are met. This may include where, amongst other factors, the Authority has
serious concerns about a firm, or about the way its business is being or has been conducted
(EG 8.2.3(1)), or is concerned that the consequences of a firm not taking the desired steps
may be serious (EG 8.2.3(2)).
11.
EG 8.3.1 states that the Authority may impose a requirement so that it takes effect
immediately or on a specified date if it reasonably considers it necessary for the
requirement to take effect immediately (or on the date specified), having regard to the
ground on which it is exercising its own-initiative powers.
12.
EG 8.3.2 states that the Authority will consider exercising its own-initiative power as a
matter of urgency where: 1) the information available to it indicates serious concerns about
the firm or its business that need to be addressed immediately; and 2) circumstances
indicate that it is appropriate to use statutory powers immediately to require and/or prohibit
certain actions by the firm in order to ensure the firm addresses these concerns.
13.
EG 8.3.3 states that it is not possible to provide an exhaustive list of the situations that will
give rise to such serious concerns, but they are likely to include one or more of four listed
characteristics, these include: 1) information indicating significant loss, risk of loss or other
adverse effects for consumers, where action is necessary to protect their interests; 2)
information indicating that a firm’s conduct has put it at risk of being used for the purposes
of financial crime, or of being otherwise involved in crime; 3) evidence that the firm has
submitted to the Authority inaccurate or misleading information so that the Authority
becomes seriously concerned about the firm’s ability to meet its regulatory obligations; 4)
circumstances suggesting a serious problem within a firm or with a firm’s controllers that
calls into question the firm’s ability to continue to meet the threshold conditions.
14.
EG 8.3.4 states that the Authority will consider the full circumstances of each case when it
decides whether an imposition of a requirement is appropriate and sets out a non-
exhaustive list of factors the Authority may consider.
15.
EG 8.3.4(1) includes the extent of any loss, or risk of loss, or other adverse effect on
consumers. The more serious the loss or potential loss or other adverse effect, the more
likely it is that the Authority’s exercise of own-initiative powers will be appropriate, to
protect the consumers' interests.
16.
EG 8.3.4(7) includes the risk that the firm's conduct or business presents to the financial
system and to confidence in the financial system.
17.
EG 8.3.4(9) includes the impact that use of the Authority’s own-initiative powers will have
on the firm's business and on its customers. The Authority will need to be satisfied that
the impact of any use of the own-initiative power is likely to be proportionate to the
concerns being addressed, in the context of the overall aim of achieving its statutory
objectives.
Annex B
FORM OF LETTER TO SEND TO CONSUMERS IN ACCORDANCE WITH REQUIREMENT 2
[To be sent on the Firm’s letterhead]
[Please delete or amend any drafting instructions in italics before sending]
Rydym yn hapus i ddarparu copi o’r llythyr hwn yn y Gymraeg ar gais. Cysylltwch gyda ni ar
cymraeg@fca.org.uk ac fe wnawn anfon copi atoch.
[Firm details]
[Consumer details]
British Steel consumer redress scheme
We will review the advice we gave you to transfer out of the British Steel Pension
Scheme
Dear [Insert name],
[If applicable: You were introduced to our firm by [insert name of introducer firm] for advice
about your British Steel Pension Scheme benefits]
You could be owed money for the advice we gave you to transfer out of the
British Steel Pension Scheme (BSPS). The FCA requires all firms who advised
BSPS members to transfer to be part of a consumer redress scheme.
We will review whether our advice was unsuitable and let you know the
result by [insert day date month year]. You do not have to do anything unless
we need more information from you to complete our review. We will contact
you if this is the case.
If you do not want us to review the advice you were given, please complete
the enclosed form and return it to us by [insert day date month year].
The Financial Conduct Authority (FCA) has gathered evidence that suggests nearly half of the
advice given to people to transfer out of the BSPS was unsuitable. Unsuitable advice is advice
that was not in line with FCA requirements.
You accepted our offer dated [date]. The FCA has asked us to follow the same processes set
out in the British Steel Consumer Redress scheme in full as we must for those who have not
accepted an offer. We will therefore review the advice we gave you to decide if it was
unsuitable.
If we find that we gave you unsuitable advice, we will ask you for some information to help us
check if you are owed money. We will do this by calculating if our advice caused you a financial
loss. If our advice did cause you a loss that is higher than the amount that we have already
paid you, we will be required to offer you an additional payment. The payment will aim to put
you in the position you would have been in if we had given you suitable advice. Whatever the
result of our review, you will not need to pay anything.
You do not need to do anything unless we ask you for information to help us complete our
review. We will contact you if this is the case. We will tell you the result of our review by [insert
day date month year].
You do not need to use a claims management company as it will not affect our review and, if
you do, they will charge you for the service.
If you do not want us to review the advice we gave, please let us know by completing the
enclosed form and returning it to us by [insert day date month year]. If you opt-out, you may
end up with less money during your retirement than you should have had.
You can find out more about the BSPS consumer redress scheme at www.fca.org.uk/bsps. If
you want to contact the FCA, you can:
call its Consumer Helpline on 0800 098 4100; or
email consumer.enquiries@fca.org.uk.
If you would like to contact the FCA using next generation text relay, please call on (18001)
0207 066 1000.
If you have any questions about our review, you can phone or email us [insert contact details].
We are available between [insert contact hours].
Yours sincerely,
Opting out of the review of the advice given to you
[I/We] have enclosed 2 copies of this letter.
If you DO NOT want us to review our advice to transfer out of the BSPS:
1. Tick the box below on 1 copy of this letter; and
2. Send this letter to [me/us] by [date].
CONFIRMATION THAT I DO NOT WANT MY ADVICE REVIEWED
I do not want you to review the advice you gave me to transfer out of the BSPS to see
if I am entitled to a payment.
Please be aware that if you decide you DO NOT want us to review your advice, you could
lose out on a payment and may end up with less money during your retirement
than you should have had.