LONDON (Reuters) - Britain’s markets watchdog has begun asking 13,000 firms how close are they to going bust because of the coronavirus pandemic to avoid being saddled with unexpectedly “lumpy” compensation bills.
The Financial Conduct Authority (FCA) will send the questionnaire to firms like financial advisers and wealth funds, its executive director of supervision, Megan Butler, said on Thursday.
“One of the key reasons...is to help us get a really strong sense of the financial wellbeing of this industry so we can understand who are most proximate to failure,” Butler told a webinar held by financial advice industry body PIMFA.
“Then we can size the potential harm associated with that.”
Any compensation due to investors would be partly paid by the Financial Services Compensation Scheme, which is accountable to the FCA.
FCA interim CEO Christopher Woolard has said that not all the firms the watchdog regulates will survive the pandemic.
Butler warned financial advisors that she was seeing “unacceptable” practices continuing as fraudsters take advantage of the pandemic.
Some firms were trying to avoid their liabilities to investors by closing down and opening new companies, while others were pre-emptively setting up new companies before complaints about an existing firm crystalised, she said.
“A recent and particularly egregious development is the practice of advisors leaving financial advice firms that have run up liabilities... only to re-emerge in claims management firms to pursue claims against the advice they themselves had given.”
PIMFA CEO Liz Field said such practices were totally unacceptable.
The FCA has announced in advance the exact email addresses it will use to send the questionnaire to avoid concerns that it was part of a scam to obtain sensitive data.
Reporting by Huw Jones; Editing by Kirsten Donovan