Fitting in with its ongoing work to protect consumers from and seek redress for unsuitable defined benefit pension transfer advice, the FCA has launched civil proceedings against a former director of the IFA Estate Matters Financial Limited (“EMF”) (which is now in liquidation) and his partner.

The FCA is claiming that EMF advised consumers to transfer out of their defined benefit pensions where it was not in their best interests to do so, breaching the requirements of the Financial Services and Markets Act 2000 (“FSMA”). It says the former director and co-owner of EMA was knowingly concerned in these FSMA contraventions and engaged in action resulting in the removal of EMF’s assets, leaving it unable to meet potential liabilities for unsuitable advice. 

The FCA has applied for a restitution order requiring the director to compensate consumers who have suffered loss as a result of the unsuitable advice. In the meantime it has secured a freezing injunction against him and also his partner, on the basis that she may be holding or controlling assets owned by him - protecting £7m worth of assets pending the final hearing.

The FCA has long been tackling the issue of poor quality in some of the advice market for pension transfers and also of attempts by regulated financial advice firms and individuals seeking to avoid liabilities to consumers, in particular by dissolving firms through which the advice was given.

By taking direct action against former directors (and their partners who may hold relevant assets), the FCA is increasing the likelihood of recovery for the consumers, and it will also support the work of its ‘phoenixing’ group which seek to identify and prevent such individuals re-emerging to provide advice elsewhere, free of their earlier liabilities.

The FCA advises regulated firms, individuals and consumers to be vigilant against the risk of phoenixing (for example by reporting suspicions and by checking its Register and Warning List). Taking direct civil action against former directors should act as a further deterrent for this type of detrimental behaviour.

This article was written by Suzanne Padmore and Alice Ridge.