The Financial Conduct Authority has rejected an application for authorisation from a claims management company. Its principal concerns were over the competence of the firm’s director and over another individual – the director’s husband – who was connected to a firm that was subject to FCA action in the past.
The husband and wife were previously 50% owners in a financial advisory firm. In June 2013, the FCA agreed a voluntary variation of permissions with the firm after it was found to have given unsuitable pension transfer advice. The firm then entered liquidation in March 2015 as a result of the volume of claims it received relating to its pension advice.
Then, in January 2017, the husband was banned by the Insolvency Service from acting as a company director for nine years, again as a result of the conduct displayed by his advisory firm.
The claims management company commenced trading in late 2013 after being authorised by the Claims Management Regulator at the Ministry of Justice. It submitted 166 compensation claims to the Financial Services Compensation Scheme on behalf of clients who believed that they had previously suffered loss as a result of the advisory firm’s conduct, so there is evidence that the CMC was engaged in a form of phoenixing, which the FCA announced plans to outlaw in May 2021.
The wife admitted to the FCA in an interview that her husband would play a significant role at the CMC were its authorisation application to be approved, in that he would speak to customers and would also provide technical support to his wife.
In March 2017, the CMR requested that the CMC stopped using the client database of the husband’s former advisory firm for marketing purposes. However, the FCA’s investigations revealed that the company ignored an instruction from the CMR to delete this data, and that instead it was retained for future use.
During an interview with the FCA, the wife was unable to clearly describe her regulatory responsibilities as a director and could not identify key FCA rules relating to pension suitability. She also claimed at this stage that the reason her husband had been disqualified related to his bankruptcy, when in fact it was for reasons connected with his conduct in a regulated role.
In this interview, she also asserted that all clients were informed of the fact that her husband was involved in pursuing claims against his former firm, but the FCA found evidence to contradict this in client files.
There was also significant non-disclosure on the CMC’s application to the FCA, in that it failed to mention that:
- The wife was a shareholder of a firm that had entered liquidation
- The advisory firm had been subject to action by the FCA
This rejection demonstrates that the FCA is a much tougher regulator than the previous Claims Management Regulator, as the CMR previously authorised the firm.