The Financial Conduct Authority has said it stepped in to prevent a firm that advised on British Steel pension transfers from paying out dividends and disposing of assets without its permission.

In December last year, the FCA warned firms it would take action it deemed necessary against firms that attempt to avoid redress liabilities: "Being unable to compensate consumers and transferring these costs to other market participants via the Financial Services Compensation Scheme levy is unfair and places an unnecessary burden on other firms.

"Where we see firms attempt to do this, we will take action to stop it."

The watchdog said it was concerned AJH Financial Services does not have sufficient financial resources to pay potential redress to clients and appeared to have paid out dividends rather than retain its assets.

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With regards to its decision to act against AJH Financial Services, the regulator added: "We will act to prevent firms from disposing of assets which may be required to pay redress. We will look to impose requirements where firms have not acted in accordance with the expectations in our Dear CEO letter or have attempted to phoenix or put in place structures to avoid potential redress liabilities.

"We will continue to monitor firms who have advised on BSPS transfers and take action where necessary."

The FCA is set to consult on a redress scheme for former members of the British Steel Pension Scheme next month. The redress scheme will be limited to BSPS transfer advice given between 1 March 2017 and 31 March 2018, which the regulator said was a "highly exceptional case".

The FCA said its analysis indicated significantly more unsuitable advice (almost half at 47%) than observed in reviews of higher-risk firms in non-BSPS cases (around one-fifth at 17%).

AJH Financial Services has the option to refer the FCA's decision to the Upper Tribunal (Tax and Chancery Chamber).