It concerns three advice firms – Financial Page, Henderson Carter Associates Limited, and Bank House Investment Management Limited – each of which have had various permission restrictions imposed on them by the FCA regarding pension business.
Last week, I decided to check in on Bank House’s status. The results showed me just what a nightmare the regulatory maze is to navigate, even for seasoned watchers of the advice space.
It left me wondering just what hope consumers could possibly have of understanding who they should and shouldn’t be dealing with.
To be clear, I am not accusing anyone of any wrongdoing here. All documentation and practices appear to be perfectly correct and in line with the rules. My point is more that the way multiple information sources and agencies present information about suspended, defaulted or insolvent firms is just a bit of a mess.
Scores on the doors
The first stop on my tour was to Bank House’s FCA register entry.
The grey box under the firm’s name does note that “this firm has requirements or restrictions placed on the financial services activities that it can operate”, and that “requirements or restrictions can include suspensions”.
However, a consumer would have to scroll through the six following sections, to the section marked “permission”, then open up a supplementary five tabs, to get the full details of what these are – i.e. that in this case, Bank House has been told not to conduct any pension transfers into non-standard Sipp investments, and cease all regulated activities entirely.
The bigger issue, however, is that register entry still lists Bank House’s status as “authorised” right at the top. That in itself might be enough to convince an inexpert consumer to deal with a firm that they perhaps shouldn’t.
But hang on, if Bank House can’t conduct any regulated activity, why is it still authorised by the regulator?
An FCA spokeswoman confirms that the FCA does not automatically remove authorisation after an order to cease all regulated business.
I’ve found an analogy that seems to sum the situation up perfectly (thanks to my learned colleague Michael Klimes for this one): having FCA authorisation without being allowed to conduct any regulated business is like having a driving licence but not being allowed to drive a car.
This probably makes sense, since the FCA could just as easily turn around next week and tell the firm that it has now fixed the issues that needed fixing, so it can start trading again. The person might still be allowed to drive a motorbike. But, again, this is a pretty confusing state of affairs for the man on the street.
(As a side note, I just checked the entry for Active Wealth, the advice firm asked to appear before MPs to justify its transfer activity around the British Steel Pension Scheme. It is also still listed as authorised).
While the FCA’s permission restrictions apply to regulated business, the regulator confirmed to me that, theoretically, there would be nothing to stop Bank House making money through business that doesn’t require regulatory approval.
Now, in this case, as Bank House director Robert Ward tells Money Marketing, the firm has not decided to do this, and does not intend to change that any time soon.
Ward says: “Any order to cease regulated activities is exactly that. It means that the firm cannot do anything that is regulated. It does not mean that a firm is insolvent or required to liquidate. I can confirm however that Bank House Investment management is not trading.
“It does not mean that the firm is no longer regulated. The firm could, should the regulator agree have the order to cease regulated activities removed. I confirm that no such application has been made or at this point is expected to be made.”
Bank House’s website is now a dead link, so for all intents and purposes there is little chance of new customers coming forward to do new business with it.
But if it’s not trading, how is the firm still listed as “active” on its Companies House listing?
To complicate matters further, if you search the Financial Services Compensation Scheme’s list of “failed firms”, you find Bank House was declared in default on 27 April 2017.
So, we now have three or four separate sources of information telling us apparently contradictory things. The firm is both not allowed to do any regulated business, but is authorised. It is in default, but it is not in administration. It is active, but it is not trading.
Let me stress again none of these books are cooked, it’s simply a product of the different ways of presenting data across the registers.
For example, for the FSCS to declare in default, the lifeboat fund only has to be satisfied that at least one compensation claim would pass its “civil liabilities test” – i.e. that it would win in court – and that the firm in question would be unable to pay its debts. This is not the same as entering into formal liquidation or administration under companies’ law.
Bank House’s Ward explains the scenario: “The FSCS declaration is one made by the FSCS itself where it cannot see that a firm can satisfy any claims made against it. Clearly if a firm has ceased to trade it will no longer have the ability to discharge such claims should they be made. [But] the firm is a legal entity in its own right and will only be placed into liquidation if in the opinion of the directors or its insolvency advisors it is correct to do so.”
Joining the dots
So where does this leave us, and the poor consumer? This is particularly acute for those who may have a grievance with the firm. Looking back at the FCA register, it notes that “the FSCS may be able to compensate customers if this firm fails”. But it also notes “the Financial Ombudsman Service may be able to consider a dispute with this firm”.
Which is it? If you search the FOS records, you can see three decisions in relation to Bank House – all three of which were upheld in favour of the consumer – so the claimant might want to start there.
But these all date back to 2016. If you wanted to complain now, because the firm has been declared unable to pay claims against it, you would have to take your case to the FSCS instead of the FOS, which can only deal with solvent firms.
If you’re confused at this stage, so was I. It is worth noting that all of these processes have very legitimate reasons behind them. But there are a whole host of layers of confusion to wade through.
The FCA should start looking at ways it’s register can highlight, and highlight more prominently, clearer messaging about exactly what is going on at firms listed on it. The other parts of the company reporting and claims chain also need to work together closer to make sure we at least get some semblance of a full picture.
Justin Cash is editor of Money Marketing. Follow him on Twitter @Justin_Cash_1