The Analysis Editor’s Letter
Taking down the phoenixes in the year to come
Stephen Kiely Editor, CCRMagazine
stephen@ccrmagazine.co.uk
As 2019 came a close, senior regulators met to discuss the crucial issue of phoenixing in financial-services firms. Members of
the Financial Services
Regulatory Partners Phoenixing Group reported they are sharing data more regularly to identify and prevent phoenixing – the practice of firms and individuals deliberately seeking to avoid their liabilities or poor conduct history by closing down firms only to re-emerge in a different legal entity. Members of the group include the
Financial Conduct Authority (FCA), the Financial Ombudsman Service,
Financial Service Compensation Scheme (FSCS), the Insolvency Service, and the Accountant in Bankruptcy. Both the FCA and FSCS updated the
group on their recent work to use data analytics and, eventually, machine learning, to identify and predict trends and instances of phoenixing. This will be a particular focus for the group in the months ahead, alongside improving current processes for alerting each other to early indicators of firms that could be phoenixing. In the last 12 months, the FCA reported
that it had prevented phoenixing when two notices were issued warning firms that their applications would be refused because of concerns, leading to the withdrawal of their applications. In five other cases, one financial adviser and four financial-advice
when two notices were issued warning firms that their applications would be refused because of concerns, leading to the withdrawal applications
In the last 12 months, the FCA reported that it had prevented
phoenixing of their
firms withdrew their applications once the FCA discussed phoenixing concerns with them. Data from the Ombudsman had proved particularly critical to these
successes. Similarly, INSS reported successful interventions supported by FCA data as well as the FSCS’s insights, which spotlight individuals who have circulated through various firms.
February 2020 the Sarah Rapson, director of authorisations
at the FCA, said: “I am very encouraged by the early successes that collaboration through the working group has already delivered and am confident we can achieve more through data sharing, analytics and, in the future, machine learning.” Debbie Enever, head of external relations
at the Financial Ombudsman Service, said: “Phoenixing can create significant issues for consumers and undermines other businesses. We are pleased that our data is helping the FCA prevent it. Action to tackle this issue needs to be coordinated and we are proud to continue to work with partners through this group to ensure consumers are treated fairly.” Richard Dennis, chief executive at the
Accountant in Bankruptcy, added: “It is good to see how we as regulators coming together can achieve so much more in terms of our delivering our objectives and proper protection for the public than we can individually. We look forward to seeing how much further such joint initiatives can take us.” The working group will next meet formally
in May 2020. It is indeed positive to see that the regulators
can work together to share resources and lessons, and, ultimately, to bring a successful resolution to a problem which affects so much of the industry.
After all, phoenixing is responsible for an unequal market, in which
some companies have taken an unfair advantage, meaning that those who play by the rules lose out. As we look forward to an exciting new year for the industry, the
UK as a whole, and for CCR, we cannot allow such injustice to go without redress. Enjoy the magazine!
www.CCRMagazine.com 3
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