FCA is consulting on a new requirement that would mean personal investment firms subject to IPRU(INV) 13 would need to calculate potential redress liabilities towards customers and hold capital against them. It remains concerned about the risks of firms and individuals phoenixing and thereby avoiding potential liabilities, and so is proposing to introduce a polluter pays requirement. Firms will need not only to consider actual complaints, but also trends that might lead to compensation claims. Any firm that does not hold sufficient capital buffers will face an asset retention requirement.
FCA has written to CEOs of relevant firms stressing its expectations, and noting that it will be particularly searching where firms apply to vary or cancel permissions, or where individuals formerly at advisory firms are looking to set up their own firms.
FCA is also adding to its reporting requirements, to require firms to make greater disclosures of potential liabilities.
Unusually, there is a 16 week consultation period, as FCA says it needs to “get it right”.