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FSA pledges crackdown on phoenix companies

The FSA is to clamp down on phoenix firms amid pressure from IFAs and trade bodies angered by increased Financial Services Compensation Scheme levies.

FSA managing director retail markets Clive Briault unveiled the new hard-hitting policy to stamp out phoenixing to a packed audience of IFAs at Money Marketing Live at Olympia in London last week, attended by over 1,500 IFAs.

Briault set out a tough package of measures that will be used to stop the phoenix practice, including getting signed guarantees from directors to honour liabilities, ringfencing funds to be held by the departing firm to meet any further potential liabilities and refusing authorisation of the new business where directors fail to make “reasonable” arrangements for claims arising out of their previous business.

The FSA says it has thwarted 12 attempts at phoenixing in the last year. It is also investigating one unnamed firm which had ceased trading and had applied to resign because it had considerable exposure to a collapsed fund in which it had been advising clients to invest.

Directors of the controlling firm had been buying small firms and then stripping out the assets and transferring the advisers, leaving a dormant firm with liabilities it could not pay.

FSA spokeswoman Van- essa Wood says that the regulator is working with industry experts on the processes of valuing and liquidating IFAs to inform its work on the phoenixing process and says it will release a case study of “good and bad practice” in June.

But FSCS spokeswoman Suzette Brown says that the scheme has no plans to take a similarly hard line and chase the IFA bosses that dump assets in phoenix companies.

She says: “We will only seek to recover money where there is a reasonable chance of success and it is economic to do so.”

Jamieson Financial Management principal Bruce Jamieson says: ” I am pleased that the FSA has done something about this but this has come too late. It is a disgrace that failed firms have been allowed to pick up the pieces while we pick up the tab.”


Ship to sure

With the FSA regulating lifetime mortgages, brokers might wonder where that leaves Ship, which has acted as a self-regulating body since formation in 1991.

Vertex completes Exchange purchase

Vertex has completed the 95.3m acquisition of Marlborough Stirling, owner of The Exchange.Andy Hunt has been appointed managing director of Marlborough Stirling, replacing the old chief executive Mike OLeary who has left the company. Hunt was previously sales and marketing director of Vertex.Non-executive chairman Geoffrey Harrison-Dees has also left the company along with non-executive directors […]


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