The FCA's proposals to name firms under investigation would be a 'blunt instrument' in the regulatory toolkit, according to a leading campaigner in the BSPS scandal.
Al Rush, principal of Echelon Wealthcare, based in Port Talbot, said: "It might hurt someone who is genuinely innocent but as with BSPS you had a lot of advisers saying to steel workers 'if you heard anything wrong the FCA would have told you'.
"A lot of steelworkers contacted the FCA at the end of 2017, and asked 'Can you tell me whether or not the adviser was being investigated'".
The FCA was not able to tell them and the steelworkers took their advisers' reassurance at face value.
"Many steelworkers would have been saved a great deal of financial loss if the FCA had been clear with them in 2017," said Rush
"The problem is the FCA is judge and jury; it marks its own homework so there's nobody to say the FCA is doing the right thing."
For instance, if there was an adviser with a single complaint against them, then they should be treated completely differently to an adviser who was advising dozens of steelworkers on bad investments, effectively depriving them of their pension.
The problems with the BSPS scandal have been cited as a defence by the FCA against criticisms from parliamentarians that the measures, outlined in CP24/2 will destroy many reputations of innocent financial firms, if the FCA names firms under investigations at the outset, rather than later in the day, typically when a warning notice is issued.
In a letter addressed to the House of Lords financial regulation committee, the regulator said: "In 2022, the House of Commons Public Accounts Committee criticised our approach to enforcement as lacking sufficient deterrence in their report into the British Steel Pension Scheme (BSPS) and called on us to publish lists of those under investigation where there is a continuing risk to consumers."
However, City advisers have been extremely critical, saying it will destroy many innocent firms, whose business model relies on a reputation of trust and financial competence; chancellor Jeremy Hunt also intervened this week, asking the FCA to have a 're-look' at its proposals.
During 2017, BSPS members were asked to decide where to put their pensions, as British Steel Pension Scheme was being restructured, following financial difficulties of its sponsor Tata Steel.
About 8,000 of the 130,0000 members transferred out of the scheme, with transfers collectively worth about £2.8bn.
But there were concerns about the suitability of such transfers, which led to the FCA intervening and stopping these firms from conducting their transfer advice business.
The FCA set up a redress scheme for people who were advised to transfer out of BSPS between May 26 2016 and March 29 2018.
melanie.tringham@ft.com
