New UK Financial Conduct Authority webpages on consumer redress liabilities

The U.K. Financial Conduct Authority has published two new webpages relating to consumer redress liabilities. The first webpage provides an update for firms on what they should and should not do to tackle polluting behavior and how to meet their redress liabilities. Polluter behavior is described as when a firm or individual takes steps that leave behind potential or actual redress liabilities generated in the course of their regulated activities. To prevent and address this behavior, the FCA expects firms to have adequate financial resources to be able to provide redress as part of complying with Principle 4 (Financial prudence) and the threshold conditions. While there will be occasions when firms are genuinely unable to meet their liabilities, they should not seek to leave their liabilities behind and should provide robust reasons for the actions and decisions they intend to take and be prepared to evidence those. The webpage provides further information on what firms should expect from the FCA if they are required to provide consumer redress, which includes having to take further action to avoid polluter behavior or seek a voluntary requirement that aims to mitigate ongoing harm to consumers or markets. The second webpage explains how to identify and report polluting behavior. The FCA provides six main examples of polluting behavior: (i) basic phoenixing; (ii) lifeboating; (iii) fronting; (iv) sales at an undervalue; (v) restructuring; and (vi) proceeds of sale not being applied to redress. Regulated firms, financial advisers, compliance firms and other financial advice organizations are encouraged to speak out and report to the FCA any firm or individual suspected of providing poor advice, products or services, or attempting to phoenix to avoid their liabilities to consumers. Firms are also expected to carry out thorough due diligence and compliance checks on all advisers they recruit to ensure no poor advice has been given previously.

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