The Financial Services Regulatory Partners Phoenixing Group have met to discuss the progress which they have seen in tackling phoenixing in financial services since the group was launched in April this year.
Members reported that they are sharing data more regularly to identify and prevent phoenixing[1] – the practice of firms and individuals deliberately seeking to avoid their liabilities or poor conduct history by closing down firms only to re-emerge in a different legal entity. The practice can have a devastating impact on the individual consumers concerned and a knock-on effect on the wider economy.
Members of the group include the Financial Conduct Authority (FCA), the Financial Ombudsman Service (the Ombudsman), the Financial Service Compensation Scheme (FSCS) and the Insolvency Service and the Accountant in Bankruptcy. Both the FCA and FSCS updated the group on their recent work to use data analytics and, eventually, machine learning, to identify and predict trends and instances of phoenixing. This will be a particular focus for the group in the months ahead, alongside improving current processes for alerting each other to early indicators of firms that could be phoenixing.
In the last 12 months, the FCA reported that it had prevented phoenixing when two notices were issued warning firms that their applications would be refused because of concerns, leading to the withdrawal of their applications. In five other cases, one financial adviser and four financial advice firms withdrew their applications once the FCA discussed phoenixing concerns with them. Data from the Ombudsman had proved particularly critical to these successes. Similarly, INSS reported successful interventions supported by FCA data as well as the FSCS’s insights, which spotlight individuals who have circulated through various firms.
Sarah Rapson, Director of Authorisations at the FCA, said: 'I am very encouraged by the early successes that collaboration through the working group has already delivered and am confident we can achieve more through data sharing, analytics and, in the future, machine learning.'
Debbie Enever, Head of External Relations at the Financial Ombudsman Service, said: 'Phoenixing can create significant issues for consumers and undermines other businesses. We’re pleased that our data is helping the FCA prevent it. Action to tackle this issue needs to be coordinated and we are proud to continue to work with partners through this group to ensure consumers are treated fairly.'
Alex Kuczynski, Chief Corporate Affairs Officer at FSCS, said: 'We are pleased at the good progress we are making to help prevent phoenixing and are encouraged that other members of the working group have found our data useful. We hope our findings will help protect consumers.'
Richard Dennis, Chief Executive at the Accountant in Bankruptcy, said: 'It is good to see how we as regulators coming together can achieve so much more in terms of our delivering our objectives and proper protection for the public than we can individually. We look forward to seeing how much further such joint initiatives can take us.'
Simon Button, Assistant Director for the Insolvency Service, said: 'Working collaboratively with our partners at FCA and FSCS means that not only are we more effective at sharing intelligence and co-ordinating activities to tackle phoenixing but together we are helping to thwart financial misconduct and prevent further abuse of the corporate and insolvency regimes.'
The working group will next meet formally in May 2020.