Supervisory Notice
On , the Financial Conduct Authority issued a Supervisory Notice to Estate Capital Financial Management Limited
1
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 Estate Capital Financial Management Limited
(“the Firm”) with immediate effect.
1)
The Firm must not, without the prior written consent of the Authority, make
any further unsolicited settlement offers to consumers.
2)
The Firm must withdraw all unsolicited settlement offers that have not been
accepted and within three business days of the date hereof must notify all
consumers who have not accepted unsolicited settlement offers sent to them
that those offers have been withdrawn by sending the form of letter at Annex
B to those consumers, using the usual form of communication with the
consumer and also by post if this is not the usual form.
3)
Where consumers have accepted unsolicited settlement offers, 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):
2
i.
following all requirements in relation to reporting to and notification to the
Authority;
ii.
observing all deadlines;
iii. 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;
iv. following all information gathering requirements;
v.
conducting case reviews using the process set out within the Redress
Scheme;
vi. following all supervision and delegation requirements;
vii. complying with requests for information from the Authority (in the
circumstances specified in the Redress Scheme); and
viii. following all record-keeping requirements.
4)
For any consumers who have accepted unsolicited settlement offers the Firm
must by 28 March 2023 send the form of letter at Annex C instead of the letter
at CONRED 4 Annex 2 R Consumer within scope/confirming inclusion and any
reference within the Scheme to the letter at CONRED 4 Annex 2 R should be
read as a reference to the letter at Annex C.
5)
If in carrying out requirement 3) 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.
6)
If in carrying out requirement 3), 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.
7)
The Firm must not make any communication to a consumer which seeks to
influence, for the benefit of the Firm, the outcome of requirement 3) or a
consumer’s decision to opt out in relation to requirement 4), 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
Scheme, or otherwise.
8)
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
28 February 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), with the exception of Requirements 1 and 2 which
stay in effect until 28 February 2023.
3
2
REASONS FOR ACTION
Summary
2.1
On 1 February 2023, the Firm informed the Authority that it intended to make
settlement offers to 93 customers who would otherwise be subject to the Redress
Scheme. For 77 of those customers, the proposed offer was £300 each based on a
calculation by the Firm that those customers had suffered no loss as a result of
advice to transfer out of the BSPS pension scheme.
2.2
The Authority has concerns that the calculations by the Firm are seriously flawed
because they are significantly misaligned with the Authority’s estimates that
impacted customers would receive an average of £45,000 redress. Customers who
accept these offers may therefore be significantly financially worse off than they
should be.
2.3
Further, the Firm provided evidence to the Authority confirming that its motivation
in making those offers was to limit its liability under the Redress Scheme and limit
its costs in administering the Redress Scheme. The Authority is concerned that this
approach is contrary to Principle 6 of the Authority’s Principles for Businesses,
requiring firms to pay due regard to customers’ interests and to treat them fairly.
2.4
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 desirable
in order to advance one or more of the Authority’s operational objectives, which
includes securing an appropriate degree of protection for consumers.
2.5
The Authority considers that imposition of the Requirements should take immediate
effect because the matters set out in this First Supervisory Notice cast serious
doubts that the Firm is treating customers fairly.
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;
“the Firm” means Estate Capital Financial Associates Limited;
“Handbook” means the Authority’s online handbook of rules and guidance (as in force
from time to time);
“Principle” 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 Swansea with permissions to advise on and
arrange deals in investments and pensions.
4.2
The Firm is in-scope of the Redress Scheme, as it provided defined benefit pension
transfer advice to 111 BSPS members between 26 May 2016 and 29 March 2018.
BSPS
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 and the benefits provided are funded
by the value of contributions made, any charges, and performance of the
investments over time. DC schemes are typically more flexible in how benefits are
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 invested their pension in 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 estimated
that the average amount lost per consumer is about £45,000.
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
5
loss. The rules in the Consumer Redress Scheme Sourcebook (CONRED 4) (British
Steel Redress Scheme) come 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)).
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:
“British Steel pension scheme misleading redress offers”. Within it, the Authority
noted: “we are aware that certain firms are making unsolicited offers to former
BSPS members who have not made complaints”. The statement identified that the
Authority was, at that time, aware of four firms engaged in this conduct. The
statement noted that the FCA 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”.
4.11 The Authority’s expectations for firms were clearly set out in the news story: “we
expect firms to treat customers fairly and to clearly explain the implications of
accepting an offer before the scheme starts”. The potential implications for BSPS
members of accepting an offer were also set out: “accepting an offer now might
mean former members are not included in the scheme and might mean they do not
receive the right amount of redress. If former members do not take any action and
do not reply to the offer from the firm, they will be included in the Redress Scheme
we have established, provided they are eligible. Firms will then be required to use
out calculator when calculating redress if the advice was unsuitable”.
4.12 On 30 January 2023, the Authority sent an email to firms stating that they it had
offered settlements to consumers in advance of the Scheme without a complaint
being made by the consumer, firms should inform their supervisory contact and
submit a notification in a timely manner.
Failings and risks identified
4.13 On 1 February 2023, in response to the email from the Authority the previous day,
the Firm filed a notification stating that it proposed to make offers to a specified 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.
Of the 93 clients in the Firm’s list, 77 were noted as due to receive offers of £300
because the Firm had calculated that they had suffered no loss as a result of the
pension transfer. The Firm stated that the Firm’s calculations “have been generated
by specialist actuarial software. We have taken great care in the calculation of any
offer.”
4.14 In preparation for the Redress Scheme, the Authority carried out an exercise in
which it estimated that the average redress would be payable would be £45,000.
Accepting that the Authority has not conducted actuarial calculations itself, the
significant gap between the Firm’s calculations and the Authority’s estimate raises
serious concerns about the quality of the Firm’s calculations.
4.15 The Firm also provided the Authority with a draft letter to accompany the intended
offers. The draft letter stated that the Firm “faces a significant increase in business
costs and time erosion, if all files need to be reviewed again under the proposed
6
scheme being introduced by the FCA on the 28th February 2023. This is a distraction
to our client and in order to provide clarity, the following steps have been taken.
The issue as to whether the advice was suitable has been parked. The firm has
utilised specialist software […] to calculate whether redress would be due to you
under the new PS22/14 guidance. The redress calculations are set against the
guidance most recently provided under PS22/14.”
4.16 The Authority notes that the draft letter explicitly states that it considers the
Redress Scheme a “distraction” and refers to the costs involved in administering
the Redress Scheme. The Authority is concerned that the Firm is placing its business
needs and convenience ahead of customers’ opportunity to participate in the
Redress Scheme and therefore is failing to have due regard to its customers
interests and to treat them fairly.
4.17
On 7 February 2023, the Authority published a further news story in relation to
offers made to BSPS members ahead of introduction of the Redress Scheme. It
stated that the FCA had now identified 15 firms which had engaged in making the
unsolicited offers. The news story set out the FCA’s expectations that firms would:
•
“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.”
4.18 On 8 February 2023, in response to further enquiries from the Authority, the Firm
stated that its reason for making the settlement offers was because its customers
had expressed a wish not to be involved in the Redress Scheme due to the time it
has taken to establish it. However, the Firm has produced no evidence to support
this view. The Firm also stated that customers had requested that the Firm bring
these matters to a conclusion. However, the Firm has produced no evidence to
support this.
4.19 The Firm also stated that it only intended to make offers where clients have
expressed their wish to settle. However, the Firm has provided no evidence of any
customers proactively expressing such a wish This explanation is also inconsistent
with the draft offer letter.
4.20 The Authority is therefore concerned that the Firm has not taken adequate steps to
ensure that in making these settlement offers it is paying due regard to customers’
interests and treating them fairly.
5
CONCLUSION
5.1
The regulatory provisions relevant to this First Supervisory Notice are set out in
Annex A.
Analysis of failings and risks
Consumer protection operational objective
5.2
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 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 treat them
fairly. Specifically:
7
1)
It is correct to state that the Firm has the legal right to enter into
settlement agreements, however, in doing so the Firm must have due
regard to customers’ interests and treat them fairly;
2)
The settlement offers for most customers of £300, are significantly
misaligned with the average estimated redress of £45,000. Even allowing
for a reasonable variation within settlement figures, it is very unlikely that
there should be such a significant disparity if the calculations had been
carried out appropriately. Rather, this indicates that the approach taken by
the Firm in calculating the settlement offers is flawed and fails to treat
customers fairly;
3)
The Firm has given inconsistent explanations of its reasons for issuing the
settlement offers in the final weeks before the Redress Scheme takes effect
at a value that is significantly lower than expected levels of redress.
5.3 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.
5.4
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
5.5
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.
5.6
The Authority considers that it is necessary for the Requirements to remain in place
indefinitely save for Requirements 1 and 2 which remain in place until 28 February
2023.
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 16 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
Head of Department, Investment Platforms and SIPP Operators
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 Authority’s Principles for Businesses
7.
Principle 6 states “A firm must pay due regard to the interests of its customers and
treat them fairly.”
The Enforcement Guide
8.
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.
9.
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)).
10.
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)).
11.
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)).
12.
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.
13.
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.
14.
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.
15.
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.
16.
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.
17.
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.
18.
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]
Dear [Consumer Name]
RE: British Steel Consumer Redress Scheme
You did not accept our redress offer dated [date]. The FCA has asked us to withdraw this
offer to ensure you are included in the British Steel Pension Scheme redress scheme
starting on 28 February 2023. Please therefore take this letter as confirmation that the
above mentioned redress offer has now lapsed and is withdrawn. This letter is for
information only and no action is required from you at this stage.
We will include you in the redress scheme and carry out the following steps:
1. Review of advice starts
We will write to you between 28 February – 28 March 2023 to say if you are
included in the scheme or not. If we tell you the redress scheme doesn’t apply to
you, we will explain why. If you disagree, we can arrange for the Financial
Ombudsman Service to independently review the advice.
2. Find out if the advice was wrong
When the review is complete, we will write to say if the advice was suitable or not. If
you disagree, we can arrange for the Financial Ombudsman Service to independently
review the advice. This should happen by 28 September 2023.
3. Calculation of what you could be owed
If the advice was wrong, we will calculate what you could be owed. We may ask you
for more information to help with this. We must use a calculator provided by the FCA
for working out what this figure is.
4. Offer of payment is made to you
If we calculate we owe you money, we will write with an offer of payment.
If you have requested a lump sum payment, this should happen by 28 December
2023.
If you have requested a payment into your pension, this should happen by 28
February 2024.
You have 3 months to accept the offer made to you.
5. Get back what you are owed
If you accept the offer, we must pay you within 28 days.
If you're unhappy with the way we have reviewed the advice we gave you, or if we
haven’t done what we should have in time, you can complain to the Financial
Ombudsman Service.
We expect that we will review all files and pay any redress that may be due by
the end of Feb 2024.
During the scheme we will be communicating regularly with the FCA and we are required
to provide them with copies of our file reviews, redress calculations and offers.
We look forward to working with you during this process to draw all of these matters to a
conclusion in an open and transparent manner and if you have any questions please
contact XXXX directly on [insert contact details].
Annex C
FORM OF LETTER TO SEND TO CONSUMERS IN ACCORDANCE WITH
REQUIREMENT 4
[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 Estate Capital Financial Management Limited
(“the Firm”) with immediate effect.
1)
The Firm must not, without the prior written consent of the Authority, make
any further unsolicited settlement offers to consumers.
2)
The Firm must withdraw all unsolicited settlement offers that have not been
accepted and within three business days of the date hereof must notify all
consumers who have not accepted unsolicited settlement offers sent to them
that those offers have been withdrawn by sending the form of letter at Annex
B to those consumers, using the usual form of communication with the
consumer and also by post if this is not the usual form.
3)
Where consumers have accepted unsolicited settlement offers, 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):
2
i.
following all requirements in relation to reporting to and notification to the
Authority;
ii.
observing all deadlines;
iii. 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;
iv. following all information gathering requirements;
v.
conducting case reviews using the process set out within the Redress
Scheme;
vi. following all supervision and delegation requirements;
vii. complying with requests for information from the Authority (in the
circumstances specified in the Redress Scheme); and
viii. following all record-keeping requirements.
4)
For any consumers who have accepted unsolicited settlement offers the Firm
must by 28 March 2023 send the form of letter at Annex C instead of the letter
at CONRED 4 Annex 2 R Consumer within scope/confirming inclusion and any
reference within the Scheme to the letter at CONRED 4 Annex 2 R should be
read as a reference to the letter at Annex C.
5)
If in carrying out requirement 3) 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.
6)
If in carrying out requirement 3), 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.
7)
The Firm must not make any communication to a consumer which seeks to
influence, for the benefit of the Firm, the outcome of requirement 3) or a
consumer’s decision to opt out in relation to requirement 4), 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
Scheme, or otherwise.
8)
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
28 February 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), with the exception of Requirements 1 and 2 which
stay in effect until 28 February 2023.
3
2
REASONS FOR ACTION
Summary
2.1
On 1 February 2023, the Firm informed the Authority that it intended to make
settlement offers to 93 customers who would otherwise be subject to the Redress
Scheme. For 77 of those customers, the proposed offer was £300 each based on a
calculation by the Firm that those customers had suffered no loss as a result of
advice to transfer out of the BSPS pension scheme.
2.2
The Authority has concerns that the calculations by the Firm are seriously flawed
because they are significantly misaligned with the Authority’s estimates that
impacted customers would receive an average of £45,000 redress. Customers who
accept these offers may therefore be significantly financially worse off than they
should be.
2.3
Further, the Firm provided evidence to the Authority confirming that its motivation
in making those offers was to limit its liability under the Redress Scheme and limit
its costs in administering the Redress Scheme. The Authority is concerned that this
approach is contrary to Principle 6 of the Authority’s Principles for Businesses,
requiring firms to pay due regard to customers’ interests and to treat them fairly.
2.4
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 desirable
in order to advance one or more of the Authority’s operational objectives, which
includes securing an appropriate degree of protection for consumers.
2.5
The Authority considers that imposition of the Requirements should take immediate
effect because the matters set out in this First Supervisory Notice cast serious
doubts that the Firm is treating customers fairly.
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;
“the Firm” means Estate Capital Financial Associates Limited;
“Handbook” means the Authority’s online handbook of rules and guidance (as in force
from time to time);
“Principle” 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 Swansea with permissions to advise on and
arrange deals in investments and pensions.
4.2
The Firm is in-scope of the Redress Scheme, as it provided defined benefit pension
transfer advice to 111 BSPS members between 26 May 2016 and 29 March 2018.
BSPS
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 and the benefits provided are funded
by the value of contributions made, any charges, and performance of the
investments over time. DC schemes are typically more flexible in how benefits are
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 invested their pension in 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 estimated
that the average amount lost per consumer is about £45,000.
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
5
loss. The rules in the Consumer Redress Scheme Sourcebook (CONRED 4) (British
Steel Redress Scheme) come 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)).
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:
“British Steel pension scheme misleading redress offers”. Within it, the Authority
noted: “we are aware that certain firms are making unsolicited offers to former
BSPS members who have not made complaints”. The statement identified that the
Authority was, at that time, aware of four firms engaged in this conduct. The
statement noted that the FCA 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”.
4.11 The Authority’s expectations for firms were clearly set out in the news story: “we
expect firms to treat customers fairly and to clearly explain the implications of
accepting an offer before the scheme starts”. The potential implications for BSPS
members of accepting an offer were also set out: “accepting an offer now might
mean former members are not included in the scheme and might mean they do not
receive the right amount of redress. If former members do not take any action and
do not reply to the offer from the firm, they will be included in the Redress Scheme
we have established, provided they are eligible. Firms will then be required to use
out calculator when calculating redress if the advice was unsuitable”.
4.12 On 30 January 2023, the Authority sent an email to firms stating that they it had
offered settlements to consumers in advance of the Scheme without a complaint
being made by the consumer, firms should inform their supervisory contact and
submit a notification in a timely manner.
Failings and risks identified
4.13 On 1 February 2023, in response to the email from the Authority the previous day,
the Firm filed a notification stating that it proposed to make offers to a specified 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.
Of the 93 clients in the Firm’s list, 77 were noted as due to receive offers of £300
because the Firm had calculated that they had suffered no loss as a result of the
pension transfer. The Firm stated that the Firm’s calculations “have been generated
by specialist actuarial software. We have taken great care in the calculation of any
offer.”
4.14 In preparation for the Redress Scheme, the Authority carried out an exercise in
which it estimated that the average redress would be payable would be £45,000.
Accepting that the Authority has not conducted actuarial calculations itself, the
significant gap between the Firm’s calculations and the Authority’s estimate raises
serious concerns about the quality of the Firm’s calculations.
4.15 The Firm also provided the Authority with a draft letter to accompany the intended
offers. The draft letter stated that the Firm “faces a significant increase in business
costs and time erosion, if all files need to be reviewed again under the proposed
6
scheme being introduced by the FCA on the 28th February 2023. This is a distraction
to our client and in order to provide clarity, the following steps have been taken.
The issue as to whether the advice was suitable has been parked. The firm has
utilised specialist software […] to calculate whether redress would be due to you
under the new PS22/14 guidance. The redress calculations are set against the
guidance most recently provided under PS22/14.”
4.16 The Authority notes that the draft letter explicitly states that it considers the
Redress Scheme a “distraction” and refers to the costs involved in administering
the Redress Scheme. The Authority is concerned that the Firm is placing its business
needs and convenience ahead of customers’ opportunity to participate in the
Redress Scheme and therefore is failing to have due regard to its customers
interests and to treat them fairly.
4.17
On 7 February 2023, the Authority published a further news story in relation to
offers made to BSPS members ahead of introduction of the Redress Scheme. It
stated that the FCA had now identified 15 firms which had engaged in making the
unsolicited offers. The news story set out the FCA’s expectations that firms would:
•
“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.”
4.18 On 8 February 2023, in response to further enquiries from the Authority, the Firm
stated that its reason for making the settlement offers was because its customers
had expressed a wish not to be involved in the Redress Scheme due to the time it
has taken to establish it. However, the Firm has produced no evidence to support
this view. The Firm also stated that customers had requested that the Firm bring
these matters to a conclusion. However, the Firm has produced no evidence to
support this.
4.19 The Firm also stated that it only intended to make offers where clients have
expressed their wish to settle. However, the Firm has provided no evidence of any
customers proactively expressing such a wish This explanation is also inconsistent
with the draft offer letter.
4.20 The Authority is therefore concerned that the Firm has not taken adequate steps to
ensure that in making these settlement offers it is paying due regard to customers’
interests and treating them fairly.
5
CONCLUSION
5.1
The regulatory provisions relevant to this First Supervisory Notice are set out in
Annex A.
Analysis of failings and risks
Consumer protection operational objective
5.2
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 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 treat them
fairly. Specifically:
7
1)
It is correct to state that the Firm has the legal right to enter into
settlement agreements, however, in doing so the Firm must have due
regard to customers’ interests and treat them fairly;
2)
The settlement offers for most customers of £300, are significantly
misaligned with the average estimated redress of £45,000. Even allowing
for a reasonable variation within settlement figures, it is very unlikely that
there should be such a significant disparity if the calculations had been
carried out appropriately. Rather, this indicates that the approach taken by
the Firm in calculating the settlement offers is flawed and fails to treat
customers fairly;
3)
The Firm has given inconsistent explanations of its reasons for issuing the
settlement offers in the final weeks before the Redress Scheme takes effect
at a value that is significantly lower than expected levels of redress.
5.3 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.
5.4
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
5.5
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.
5.6
The Authority considers that it is necessary for the Requirements to remain in place
indefinitely save for Requirements 1 and 2 which remain in place until 28 February
2023.
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 16 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
Head of Department, Investment Platforms and SIPP Operators
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 Authority’s Principles for Businesses
7.
Principle 6 states “A firm must pay due regard to the interests of its customers and
treat them fairly.”
The Enforcement Guide
8.
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.
9.
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)).
10.
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)).
11.
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)).
12.
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.
13.
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.
14.
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.
15.
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.
16.
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.
17.
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.
18.
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]
Dear [Consumer Name]
RE: British Steel Consumer Redress Scheme
You did not accept our redress offer dated [date]. The FCA has asked us to withdraw this
offer to ensure you are included in the British Steel Pension Scheme redress scheme
starting on 28 February 2023. Please therefore take this letter as confirmation that the
above mentioned redress offer has now lapsed and is withdrawn. This letter is for
information only and no action is required from you at this stage.
We will include you in the redress scheme and carry out the following steps:
1. Review of advice starts
We will write to you between 28 February – 28 March 2023 to say if you are
included in the scheme or not. If we tell you the redress scheme doesn’t apply to
you, we will explain why. If you disagree, we can arrange for the Financial
Ombudsman Service to independently review the advice.
2. Find out if the advice was wrong
When the review is complete, we will write to say if the advice was suitable or not. If
you disagree, we can arrange for the Financial Ombudsman Service to independently
review the advice. This should happen by 28 September 2023.
3. Calculation of what you could be owed
If the advice was wrong, we will calculate what you could be owed. We may ask you
for more information to help with this. We must use a calculator provided by the FCA
for working out what this figure is.
4. Offer of payment is made to you
If we calculate we owe you money, we will write with an offer of payment.
If you have requested a lump sum payment, this should happen by 28 December
2023.
If you have requested a payment into your pension, this should happen by 28
February 2024.
You have 3 months to accept the offer made to you.
5. Get back what you are owed
If you accept the offer, we must pay you within 28 days.
If you're unhappy with the way we have reviewed the advice we gave you, or if we
haven’t done what we should have in time, you can complain to the Financial
Ombudsman Service.
We expect that we will review all files and pay any redress that may be due by
the end of Feb 2024.
During the scheme we will be communicating regularly with the FCA and we are required
to provide them with copies of our file reviews, redress calculations and offers.
We look forward to working with you during this process to draw all of these matters to a
conclusion in an open and transparent manner and if you have any questions please
contact XXXX directly on [insert contact details].
Annex C
FORM OF LETTER TO SEND TO CONSUMERS IN ACCORDANCE WITH
REQUIREMENT 4
[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.