FCA consults on changes to guidance for insolvency practitioners

The FCA is seeking feedback on its proposed amendments to FG21/4 – Guidance for insolvency practitioners (IPs) on how to approach regulated firms. The amendments are to reflect legal, regulatory and economic changes since 2021 and to clarify certain elements of the existing guidance. A draft of the amended guidance is set out in the Annexes to the consultation paper but the key proposals are:

• changes to the existing guidance to include reference to the Consumer Duty and setting out the FCA’s expectation that IPs conduct the affairs of the firm in a way that is compatible with the Duty requirements;
• updates to the guidance on pre-insolvency checks. The FCA expects prospective IPs to search the FS register to determine the regulatory status of a firm and to check for previous registered or trading names a firm may have had;
• clarification that the appointment of a liquidator must be notified to the FCA in all cases, whether the proceedings are voluntary (MVL or CVL) or compulsory;
• changes to ensure that the existing guidance aligns with the FCA’s Compromises Guidance;
• updates to include references to the payments and e-money special administration regime;
• updates on the availability of FSCS protection for customers of payments and e-money firms – IPs should avoid giving customers misleading impressions on the FSCS protection they can receive if a credit institution holding safeguarded funds fails. Whilst FSCS protection may be available for some customers, it depends on the particular facts of the case. Where FSCS protection is available, IPs should liaise with the FSCS, including to consider whether clients/creditors need to be involved;
• updates to the existing guidance to reflect the FCA’s understanding of the Ipagoo decision so that IPs are aware of and understand the need to top-up the asset pool where there is a shortfall in safeguarded relevant funds;
• new guidance in anticipation of the expanded Dormant Asset Scheme (DAS) to advise IPs that they should liaise with the authorised reclaim fund if the failed firm was a participant in the DAS and is holding customer records in relation to dormant funds transferred to the authorised reclaim fund.

The consultation closes on 30 April 2024 and the FCA intends to publish the finalised amended guidance later this year.