There are two jobs I really wouldn’t want at the moment. The first is Brexit secretary. The second is head of the FCA’s authorisations team.
That team is a vital line of defence against financial crime. Part of its job is to stop suspect firms and individuals from getting regulatory permissions in the first place, without being either too lax or unfairly harsh.
Earlier this month, the FCA announced it was teaming up with the Financial Services Compensation Scheme, the Financial Ombudsman Service, the Insolvency Service and Scotland’s Accountant in Bankruptcy to tackle the scourge of phoenixing – where firms deliberately wind down and get reauthorised in a different guise to avoid past liabilities.
The taskforce certainly has its work cut out. The issue remains that, no matter how good the data-sharing, there are a whole host of questions around the problem of phoenixing that don’t have clear-cut answers.
When it comes to rejecting the application of a firm or individual that has failed previously to set up again, these grey areas include, but are not limited to, the following:
Should you reauthorise a firm that had just one rogue adviser? How do you prove this?
Should you reauthorise, but only for other business areas than the one that caused the issue?
What if it was just the product that failed, despite the adviser’s thorough due diligence? What if there are still ongoing FOS claims?
What if the firm signs an attestation to pick up past liabilities as a condition of authorisation?
Legally, can the FCA enforce different capital adequacy standards for suspect firms to let them in? Can the firm be trusted to abide by any temporary variation of permissions that the FCA might use as a stopgap solution?
What happens on mergers, where firms might pick up client banks, but not liabilities from a failed business?
How can you possibly monitor the situation when rogues use different Companies House details, myriad subsidiaries and cleverly crafted FCA Register records?
Honestly, that barely scratches the surface of the list we sketched out for our cover story this week.
More to the point, aficionados of regulation will tell you that some of the rogues are pretty good at being rogues; the price of their legal teams and compliance consultants tends to be inversely proportionate to how willing they are to take regulatory risks.
I’m not saying the new phoenixing taskforce isn’t a step in the right direction. Just don’t expect any silver bullets any time soon.
Speaking of setting up under a new guise, Money Marketing has undergone its own transition. We are now safely ensconced in our shiny new Croydon offices, ahead of the planned demolition of our former Wells Street base later this year. Sandwich shop recommendations on a postcard, please.
Justin Cash is editor of Money Marketing. Follow him on Twitter @Justin_Cash_1