On 7 June 2022, the FCA published Policy Statement 22/6 ‘Preventing claims management phoenixing by financial services firms’ (PS22/6). In PS22/6 the FCA sets out final rules for claims management companies (CMCs) and its feedback to the responses to its earlier consultation in Consultation Paper 21/14 (see our earlier blog here).

The final FCA rules being introduced by PS22/6 are intended to address a particularly egregious type of phoenixing but, they do not replace or make redundant the rigorous gateway checks that are part of the authorisations work to keep individuals out of the FCA perimeter where they are seeking to evade responsibility for past failure. The rules prohibit CMCs from carrying out regulated claims management activity, in certain circumstances, on claims and potential claims to the Financial Services Compensation Scheme (FSCS), where the CMCs have relevant connections to the claims. The rules also require CMCs to routinely notify the FCA of connections they have to financial services firms that could be relevant for these purposes.

The rules in PS22/6 apply to:

• Current and former financial services firms who carry on activities that are protected by the FSCS.
• Current and prospective CMC firms carrying on FCA-regulated claims management activity for claims about financial products and services that are protected by the FSCS.

The new rules mean that:

• CMCs are prohibited from carrying on any regulated claims management activity in respect of a claim or potential claim to the FSCS if:
  • Any employee or controller of the CMC, or any member of the CMC’s governing body, was directly involved in or had responsibility for managing the financial services activity that is the subject of the claim or potential claim; and/or
  • A controller or member of the CMC’s governing body is related to a person who was directly involved in or had responsibility for managing the financial services activity that is the subject of the claim or potential claim; and/or
  • The CMC or a member of its governing body has transferred or agreed to transfer a financial benefit to a person who was directly involved in or had responsibility for managing the financial services activity that is the subject of the claim or potential claim.
• CMCs will be required to notify the FCA of:
  • Any financial services activity that an employee or controller of the CMC, or any member of its governing body, is or was directly involved in or responsible for managing.
  • Any controller or member of the firm’s governing body who is related to a person who is or was directly involved in or responsible for managing financial services activity.

The rules within PS22/6 come into force on 7 July 2022.