What firms shouldn't do

  • Fail to take reasonable steps to consider, provision for and address actual and potential redress liabilities whether by ring-fencing proceeds of sale, holding adequate run-off cover and/or capital to meet any redress liabilities.
  • Distribute assets (for example, dividends paid to directors/shareholders) when there are potential or actual redress liabilities that have not been provisioned for appropriately.
  • Sell client banks or assets where a fair, independent valuation has not been obtained as part of the sale process (for example, when a nominal amount or below market value is paid by the receiving firm for the transferred assets).
  • Fail to undertake a customer contact exercise in a timely manner informing customers about any intended changes (like the sale of a client bank) that may impact their ability to consider the consequences to them individually and act to protect themselves against financial loss (like lodging a complaint before the firm dissolves or cancels).
  • Fail to notify the FCA via a SUP 15 notification[3] about anything we ought to be made aware of (like the intention to sell or purchase the client bank or transfer assets).
  • Change the ownership structure without prior FCA approval or alter the corporate structure to separate assets and consumer liabilities (for example, the transfer of assets to a holding company that is outside the regulatory perimeter).
  • Appoint Senior Managers without ensuring they have the relevant experience or skills needed to run the business or inserting individuals into the business who have no real involvement to obscure the identities of the actual firm management.

What to expect from the FCA if you are in this situation

In line with our Consumer Duty[6], firms must act in good faith, avoid causing foreseeable harm, and enable and support retail customers to pursue their financial objectives. When we engage with a firm, whether as part of ongoing supervision or at the gateway, we expect it to clearly outline why it took a particular course of action in relation to redress liabilities and how it considered customers' interests in taking those decisions/actions. 

At the gateway assessment stage, we will apply more scrutiny where we identify a greater risk of polluter behaviour. This includes closely examining the fitness and propriety of Senior Manager candidates. We will ask more questions, request evidence and may need more time for assessment to ensure risks are understood and adequately mitigated. If we do not consider that the risks have been adequately mitigated, we may refuse the application. 

We systematically use information from a broad range of sources to tailor our questions and actions we take with individual firms. These include, for example, consumer feedback, information from firms and their trade associations, insight from other regulatory organisations, complaints data, information from MPs and whistleblowers, and our firm and consumer contact centre.  

We will:

First published: Last updated: 14/01/2025


Source URL: https://www.fca.org.uk/firms/redress-liabilities-polluter-pays/update-firms

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