FCA launches task group to crack down on phoenixing

The Financial Conduct Authority (FCA) has launched a working group, alongside other regulatory firms, in a bid to tackle the sinister art of phoenixing in the financial services space.

Phoenixing is when a firm or an individual will try to avoid a poor reputation by closing down, or resigning, to re-emerge later on under a new name.

The FCA said this practice can have a ”devastating impact on the individual consumers concerned and a knock-on effect on the wider economy.”

Sit down meeting

Representatives of the Financial Services Compensation Scheme (FSCS), the Financial Ombudsman Service, the Insolvency Service and Scotland’s Accountant in Bankruptcy joined the FCA to discuss approaches to tackling phoenixing and how they can work together more closely in the future by more effectively sharing data and intelligence on individuals and firms.

This is the first time that they have come together as a group and in a formal way to discuss and agree to work together to tackle the issue.

Shared responsibility

Sarah Rapson, director of authorisations at the FCA, said: “We have a shared responsibility to protect consumers and by working closely together we can prevent firms and individuals from deliberately avoiding their liabilities.”

Alex Kuczynski, Chief Corporate Affairs Officer at the FSCS, said: “This is a great opportunity for the FSCS to share its knowledge and insights. This working group will support better outcomes for both consumers and levy payers who have to step in to fund FSCS’s compensation, and fully aligns with the ‘Prevent’ pillar of our strategy for the 2020s.”

Richard Dennis, chief executive at the Accountant in Bankruptcy, said: “Insolvency and other business rescue tools can play a vital part in preserving economic value. But they must not be used simply to escape responsibilities to consumers and other businesses. AIB will do whatever they can to help the other members of the group combat such behaviour.”

Debbie Enever, head of external relations for the Financial Ombudsman Service said: “It is very frustrating for consumers to find that a business has phoenixed to avoid its responsibilities. We’re pleased to be working with our partners to help to ensure that businesses are held accountable for their actions.’

Finally, Gareth Allen, assistant director of the Investigation and Enforcement Services at the Insolvency Service said: “Deliberate abuse of the insolvency process by directors to prejudice creditors through phoenixism strikes at the heart of economic confidence and we welcome the opportunity to strengthen our collaboration with other members of the group to address this practice.”