Update for consumers on Philips Trust Corporation

A significant number of consumers were affected when the Philips Trust Corporation (PTC) went into administration in April 2022. This case has been very distressing for those who have lost money.

While PTC itself was not regulated by the FCA, we have received a lot of questions about whether we can act against the building societies which introduced customers to predecessor companies.

We’ve considered very carefully if we can take action. We have concluded that in this instance we cannot. We know that this will be disappointing for consumers, and so we want to set out why that is.

Background to the case

A number of building societies had a relationship with the Estate Planning Group (EPG), which was the parent company of The Will Writing Company and the Family Trust Corporation.

These societies referred customers to The Will Writing Company and the Family Trust Corporation for will writing and estate planning services, including the setting up of trusts.

It is important to set out that while the building societies are regulated by us, these introductions were not for activities we regulate. We do not decide what activities fall within our remit. This is decided through legislation. Government and Parliament has not legislated to include the type of estate planning trust services provided by the companies within the activities regulated by the FCA.

In a trust, assets – such as property or investments – are held and managed by one person or people (the trustees) to benefit others (the beneficiary). In this case, customers of the Will Writing Company who wanted to set up a trust were referred to the Family Trust Corporation. The Family Trust Corporation administered the trusts, including managing investments where relevant.

In 2018, the Will Writing Company entered administration. Its assets were purchased by the owners of PTC, a separate company. The Will Writing Company’s failure led to the Family Trust Corporation being unable to generate income. As a result, it resigned as trustee of the trusts set up for its customers.

Customers were given 3 options at this point – one of which was to appoint PTC as their replacement trustee. A number of customers opted to do so.

When PTC later went into administration, it emerged[2] that there were significant concerns over how it had operated the trusts – including the fact that it had moved the underlying money from lower to higher risk investments. This meant that, unfortunately, a lot of its customers face potential investment losses, or have had to pay for legal advice to remedy any issues with the trusts.

The role of the FCA

We regulate building societies. Because the original referrals to the Will Writing Company and The Family Trust Corporation came from building societies – and because of the losses facing consumers – we have looked very carefully at whether there is any action we could take.

The work we have carried out includes:

• A review to fully assess the role of the building societies, seeking clarification to ensure we had a full picture of the circumstances in which customers were introduced to parts of the EPG group of companies.
• Engagement with relevant external parties, including the administrators of PTC and the Financial Ombudsman Service, considering any decisions that the Ombudsman has made on complaints.
• Reviewing information provided to us and comparing that to the existing information we have, clarifying any areas as required and ensuring that we had a clear picture of the issues in this matter.
• Reviewing and considering information provided to us directly by affected consumers.

Our power to take action against the building societies 

Based on the evidence we’ve seen, the building societies were not carrying out a regulated activity when they referred customers to companies which were part of the EPG.

Our understanding is that it was the actions of PTC, not the building societies, which caused customers to experience investment losses. We can’t hold the building societies responsible for the actions of PTC, which did not exist at the point that the building societies referred customers to the EPG.

We have also looked at other angles, such as whether the building societies breached any of our principles for business[3], which set the broad, minimum standards firms we regulate must meet. However, from the evidence we have seen it does not seem that any of the relevant principles would have applied to the introductory activities of the building societies. The Consumer Duty was not in force and cannot be applied retrospectively. We have not seen evidence that the actions of the building societies in relation to the introductions made to the EPG may have breached these or any other FCA requirements.

We understand that this will be deeply disappointing for customers who have lost out. But we can only take action when we have evidence that activities are within our remit and that our rules may have been breached. Without meeting this criterion, we do not have the legal power to act.

Although we have reached this conclusion, some of the building societies involved have told us that they are exploring some possible support to affected customers on a voluntary basis. This is at an early stage and so we can’t provide further details currently. 

Following our previous correspondence, we have also written to the APPG on Personal Banking and Fairer Financial Services today to provide further detail on our position. The administrators[2] have the ability to assess the role of PTC and its directors; this is currently ongoing. Customers who are affected should continue to engage with them. We will continue to monitor this situation and consider any further information as it arises, along with the findings from the insolvency proceedings.

Update - August 2024

The Leeds, Nottingham, Newcastle and Saffron building societies have put in place a significant voluntary financial support initiative to help their customers, whose trusts are affected by the collapse of PTC. They are working with the administrators, who have contacted those affected to obtain initial information and consent to share data with the societies. Once this process is completed, customers will be contacted with details of next steps. 

We also note that the other societies with affected customers, which account for a significantly smaller number of customers, are addressing the matter on an individual basis and impacted customers should contact these societies directly.