FCA reviewing whether to use redress powers for BSPS members

The Financial Conduct Authority (FCA) has not yet seen sufficient evidence to use its section 404 consumer redress powers in the case of the British Steel Pension Scheme (BSPS).

In response to a letter from Treasury Select Committee chair, Mel Stride, about utilising the powers, the watchdog’s chief executive, Nikhil Rathi, said it was undertaking further file reviews to explore whether evidence was sufficient for the measures.

Under section 404, the FCA has the power to require a firm to establish and operate a consumer redress scheme where it has seen “evidence of a widespread, or regular, failure by firms to comply with requirements” resulting in consumer losses.

In this case, there is concern that BSPS former members may have left the scheme after receiving unsuitable advice and lost out financially in their retirement, with analysis from the FCA released in June 2020 indicating that as much as 47 per cent of the advice given to members was not suitable.

However, the new letter from the FCA cautioned that the redress powers would represent a “significant intervention” and could have “far-reaching consequences”, such as leading professional indemnity insurers to raise the price of their cover or firms leaving the market to avoid facing redress measures.

The letter said FCA work on the BSPS case had so far included six face-to-face events for members in 2019, 36 past business reviews, around 30 enforcement investigations, surveying members and contacting former members.

In addition, the organisation said it was committing further resources to having a presence in steelworker communities, which is intended to raise awareness among former BSPS members and help them to raise complaints.

Rathi concluded: “We hope this work will enable the FCA board to take a decision on whether to proceed this calendar year. The board and its relevant committees have been regularly informed about progress in the BSPS matter.

“Board members have engaged directly with the relevant executive directors and teams at the FCA, discussing the options available to provide redress to BSPS members.

“In the meantime we are intensifying our work on the existing complaints-led approach to continue to support affected former BSPS members.”

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