The Financial Conduct Authority has warned firms they should not be using company and insolvency law to minimise their liabilities.
In proposed guidance, published today (25 January), the regulator said it had seen an increase in firms developing ‘Schemes of Arrangements', particularly when it comes to redress liabilities and that firms have requested a ‘letter of non-objection' in relation to these proposals.
The regulator, however, said it "would be unlikely to ever issue" such a letter and believes firms should be providing the best possible outcome for customers, which would be "providing the maximum amount of funding possible to meet compensation claims by customers".
The FCA said it would reject proposals in court and use regulatory powers, including enforcement actions for misconduct by firms or their senior managers, when appropriate.
Sarah Pritchard, executive director of markets at the FCA, said: "Under existing company and insolvency law, firms have options to limit their liabilities. When making use of these, they still have a responsibility to treat their customers fairly.
"We will take action against firms that do not meet this obligation. The guidance we are consulting on should help firms understand our expectations and ultimately help firms to avoid proposing compromises that are unacceptable to us because they fail to provide the best possible outcome for consumers."
This consultation is open until 1 March 2022.
