On 12 May 2021 the FCA published its finalised guidance for insolvency practitioners (IPs) on how to approach insolvencies of regulated firms (FG21/4). The guidance aims to achieve better outcomes on firm failures by helping IPs to understand how to deal with regulated firms in line with the FCA’s expectations.
If an IP is appointed over a regulated firm, the IP takes control of the firm which continues to have regulatory requirements and responsibilities. The new guidance is therefore designed to help IPs ensure regulated firms meet their ongoing regulatory obligations following appointment. This includes treating customers fairly, returning client assets/customer funds and consumer redress.
The guidance is aimed at IPs appointed (or looking to be appointed) over firms solely authorised or registered by the FCA. It may also be relevant from the perspective of conduct regulation for IPs appointed over firms that are dual regulated by the FCA and PRA.
The FCA has engaged with the Insolvency Service, recognised professional bodies and other authorities on this guidance.
The guidance takes effect from 12 May 2021. Available to download below.
Feedback Statement
The FCA also published a Feedback Statement that illustrates the changes made to the finalised guidance. This is available to download below.
Some takeaways from the statement are –
- The FCA expect the IP to understand the firm’s regulated activities and know what regulatory requirements apply to it, or have a plan to gain an understanding of these.
- Creditor committees – An IP should take reasonable steps (in accordance with relevant legislation) to ensure appropriate representation from all types of creditors and clients.
- With regard to FCA consent to out of court administrator appointments – it is at an IP’s discretion as to how much information they supply with their consent request. Furthermore, the FCA consent must accompany the filed NOA or be filed with the court along with the NOIA as applicable.
- No dedicated insolvency contact address has been established as a regulated firm failure involves multiple specialist teams at the FCA and the FCA consider the general firm.queries@fca.org.uk email address to be the appropriate contact.
- The guidance encourages IPs to manage clients’ expectations by informing them of any FSCS coverage that may be available for distribution costs and the eligibility criteria for this. The FCA have also reminded IPs to consider any risks relating to money laundering.
- Sale of client or customer data – The guidance reminds IPs to consider the obligations under data protection legislation. This includes backing up company data and systems in accordance with relevant legislation. The FCA expects an IP to notify them in good time, with sufficient details, if they are planning to sell client or customer data. In practice, the FCA would expect this notification as early as possible giving them enough opportunity to understand the implications before taking any action needed. The guidance does not make any judgement on CMCs; rather it details steps for the IP to take when considering to sell the client book to a CMC, including referring to their joint statement with the ICO on dealing with personal data.
- Cancellation of permissions – The FCA expect an IP to ensure that a firm has the relevant permissions appropriate for the current state of the firm. If an IP is unable to access Connect, they should contact them by email to firm.queries@fca.org.uk. While firms remain authorised, they are subject to supervisory oversight.