Think regulated firms are risk free……Think again!

In my 9 years at FRP, I can quickly allay any concerns that restructuring work in the financial services sector may be uneventful and dull, as my experience has been quite the opposite.

What is the core work that I have done?

• City Financial – Achieved an accelerated sale of UK and Irish UCITs to prevent material disruption and losses to customers;
• Ipagoo – Processed a distribution to customers following the Court of Appeal’s decision that there was no statutory trust over customer funds;
• Vesta – Obtained a court order to delay full disclosure under SIP 16 in order not to prejudice a £1.5m+ transaction;
• Monneo (Special Administration) – Recovered over €18m of safeguarded funds from numerous overseas jurisdictions and €4m from the general estate which will benefit customers via the top – up obligation. This has led to a recently approved Distribution Plan which includes an interim distribution and the setting of a Hard Bar Date; and
• Argentex (Special Administration) – Appointment over a foreign exchange provider involving the reconciliation and distribution of both relevant funds and client monies, and the winding down of a future foreign exchange contract trade book.

Why does it matter?

The government appears to be encouraging the FCA to ease the regulatory burden in this sector to generate a more competitive and innovative environment. While attempts to promote growth are always welcomed, this approach will need to be balanced against protecting customers and maintaining integrity in the marketplace.

What have I learned?

The FCA – An understanding and appreciation of the vital work the FCA does supervising over 40,000 firms, while working with limited resources. The positive outcomes on the above cases (and others) would not have been achieved without their regular engagement and pragmatic cooperation.  

Customers – When firms fail, customers can face distress and hardship when they fall outside protection from the Financial Services Compensation Scheme. Clear and timely communication, transparency and the acceleration of funds back to customers is key.

FRP’s core services – Our forensics and contentious teams at FRP play a critical role e.g. the reconciliation of customer funds and undertaking detailed investigations where applicable. Our financial advisory (e.g. valuation) and corporate finance teams also play a key role in achieving positive outcomes. 

Staffing – A skeleton of a firm’s staff is often needed to ensure an orderly wind down of operations. It is the staff who hold the integral knowledge and, therefore, a consensual and collaborative approach is the most beneficial. 

Lawyers – A strong working relationship based on mutual respect and trust is imperative to overcome regulatory hurdles and to navigate the myriad legislation under regimes such as the Payment and Electronic Money Special Administration Regime. 

Moving forward

When regulated firms fail, it can have serious consequences for vulnerable customers who may have been misinformed and are ill-prepared. Prevention will always be the best remedy and I will be watching closely to see the impact of any proposed regulatory changes by the FCA on the competitive landscape, whilst balancing the need to keep firms appropriately supervised. In the interim, we continue to be well-placed at FRP, with our core service offerings and financial services experience, to continue helping distressed firms and customers in this sector.