FCA Crackdown on firms who seek to limit their liabilities
New Guidance Published by the FCA
The FCA has noted an increase in firms developing proposals, such as Scheme of Arrangements, to deal with significant liabilities to consumers, in particular redress liabilities.
The guidance published by the FCA (on 25 January 2022) has made it clear to firms seeking to limit their liabilities that they should provide the best possible outcome for customers, which will include providing the maximum amount of funding possible to meet compensation claims by customers. Failure to do so may result in the FCA objecting to the firm’s proposals in court. The FCA will also use its regulatory powers, including enforcement actions for misconduct by firms or their senior managers, when appropriate.
Going forward, firms should inform the regulator as soon as they are considering a scheme of arrangement or other compromise to manage liability and the FCA will review each proposal on a case-by-case basis to ensure firms are meeting their regulatory obligations.
Sarah Pritchard, Executive Director of Markets at the FCA, said:
'Under existing company and insolvency law, firms have options to limit their liabilities. When making use of these, they still have a responsibility to treat their customers fairly. We will take action against firms that don’t meet this obligation. The guidance we are consulting on should help firms understand our expectations and ultimately help firms to avoid proposing compromises that are unacceptable to us because they fail to provide the best possible outcome for consumers.'
