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BSPS redress scheme likely to be challenged at court by campaigners – Money Marketing

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Campaigners are gearing up to challenge the Financial Conduct Authority’s case work that underpins the British Steel Pension Scheme (BSPS) redress scheme.
FS Legal partner Gareth Fatchett told Money Marketing that the redress scheme could face a judicial review.
Fatchett is part of the British Steel Adviser Group (BSAG) that has been set up over concerns about the regulator’s approach to BSPS compensation.
The group submitted evidence to the now concluded Public Accounts Committee’s inquiry into BSPS.
In one of its letters it said: “We are part of a membership group called BSAG, a 100 plus independent financial advisers who are deeply worried about the Financial Conduct Authority’s direction of travel regarding their proposed BSPS redress scheme. Our members comprise individuals, partnerships, and firms.”
The FCA set out plans to deliver £71.2m of compensation to former BSPS members who received unsuitable advice to transfer out of the fund via redress scheme.
The scheme will apply to 343 adviser firms and is expected to be in place by early 2023.
The regulator found that 46% of the advice it reviewed relating to BSPS was unsuitable.
Yet, Fatchett argued that this figure might be wrong.
According to BSAG it has particular concerns about the scoring of 65 files called “group 2” by the FCA.
It adds the regulator has scored 28 of these as “unsuitable”. BSAG found 15 of them and asked independent industry experts to review them.
The output of these re-reviews reversed the “unsuitable” assessment to “suitable” or in a handful of cases to “unclear”, it claims.
Fatchett added that the FCA has not disclosed information about the tools, methods, processes, independence of data, differing data entry cohorts, and the different Conduct of Business rules it used to assess suitability.
The FCA disagreed with this critique, stating it set out the processes it used to collect and assess advice in its consultation paper.
It stressed the independent analysis from statistician Dr Susan Purdon explaining how the results meet the widespread test required to use the s.404 power.
Fatchett stressed that there might have been a significant number of unsuitable advice but does not believe it can be so uniform.
“It seems to me they used a very robotic analysis process and just kicked out a decision without taking into account any of the individual circumstances of the firms,” he said.
Fatchett explained that there are three ways forward for the FCA: sticking with the original plan and launch the scheme as outlined in the CP, slightly amend it and make it less aggressive or just scrap it altogether.
He said: “We think on balance, it’s almost inevitable they will launch the scheme now because of the parliamentary pressure that they’re under.
“If we’re right, the 47% of unsuitability should in fact be somewhere near 17%, at which point it wouldn’t hit the threshold.”
BSAG believes that if it could track down these remaining 13 unsuitable files from group 2, this would reduce the headline “unsuitable” rate down even further.
Therefore, Fatchett said any redress scheme would not meet the legal thresholds.
The Consumer Redress Schemes sourcebook (CONRED), part of the FCA Handbook, states: “A comparison of the advantages and disadvantages of a consumer redress scheme against other available tools will form part of the decision-making process.
“The Act provides a range of other tools (e.g. imposition of requirements on a firm under section 55L to take remedial action in respect of past conduct) and the FCA will need to consider which power is most appropriate in the circumstances.
“As a public body, the FCA will also have regard to general administrative law principles such as proportionality and reasonableness.
“For example, the extent to which firms have already provided redress will be a factor to which the FCA will have regard (e.g. following enforcement action or the implementation of a voluntary industry redress scheme).”
Fatchett added: “The moment the FCA implements the redress scheme, the firms will bring an application for judicial review, based upon the way it’s been done.
“The firms are going to say that the data upon which the FCA rely, which is the 46% of unsuitability, is wrong.
“It seems to me that we are right at the start of a court challenge.”
Responding to this argumentation, a spokesperson for the FCA told Money Marketing:
“We need to meet strict legal tests to implement a redress scheme. An independent QC has advised that these tests have been met.
“We have also carried out a robust analysis of a sample of the suitability of advice to former British Steel members, supported by independent analysis from a respected statistician.
“We have consulted widely on the scheme and are currently considering responses before making a final decision on whether to proceed.
“The circumstances around British Steel Pension Scheme transfers were exceptional, with former members receiving significantly higher levels of unsuitable advice compared with other cases.”
“However firms who have provided suitable advice, and are able to demonstrate they have done so, will not have to pay redress.”
The FCA has placed 101 firms under the scope of its emergency British Steel rules yesterday (22 August).
In April it intervened to stop some British Steel firms from disposing assets to avoid paying compensation.
The rules came into force on 27 April 2022 and will continue until 31 January 2023.
There are 2 comments at the moment, we would love to hear your opinion too.
Like everything else the upper floors of Endeavour House are filled with incompetence, ignorance and arrogance
I am led to believe the findings of the BSAG are a far more accurate reflection !
The trouble is these directors and mangers who fill the upper floors at the FCA will revert to type and do their own thing anyway, and fairness thrown from the roof top ….everyone looses !!
Being seen to do something to satisfy the narcissistic behaviour of the FCA and those feckless MP’s that really do not understand how the FCA has and is operating.
FCA Scapegoating others for your its own failures yet again.
Direct comparison with the Connaught case, except the FCA and FOS staff were complicit in a cover up of the FSA’s criminal behaviour.
How is it that the FCA can instruct a regulated bank to steal client funds and blame it on a mis selling by IFA’s agenda?
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