The Financial Conduct Authority today used emergency powers to block many of the financial advice firms who gave advice to members of the British Steel Pension Scheme (BSPS) from selling assets to avoid paying compensation.

The FCA says it has introduced emergency rules without consultation because of the risk that some firms will take steps to get rid of their assets if the rules were consulted on first. 

The measures will apply from the 27 April.

The FCA is concerned that some of the BSPS advice firms are disposing of assets to avoid having to pay compensation to BSPS members.

In recent months the FCA has blocked a number of advice firms individually from disposing of assets.

The FCA is currently investigating 343 advice firms over allegations they may have given unsuitable pension transfer advice to BSPS members.

Last month the FCA announced it planned to introduce a redress scheme for former BSPS members which it estimates will mean £71.2m in compensation to BSPS members wrongly advised to transfer their pension. 

The new temporary measures apply to firms that advised five or more BSPS members to transfer out of the pension scheme between 26 May 2016 and 29 March 2018. 

The requirements mean that “in-scope” firms have to report to the FCA whether they can meet the potential cost of the BSPS redress. Firms will then have to comply with the asset restriction rules until they confirm to the FCA that they have sufficient resources to pay their potential redress bill. The requirements will not apply to some firms, the FCA said.

If the BSPS proposed redress scheme goes ahead, the FCA may later consult on extending the asset retention until firms have paid all the compensation owed.  

Sheldon Mills, executive director of consumers and competition at the FCA, said: “Firms who gave poor advice to British steelworkers must ensure that they retain assets and funds to pay redress under our proposed scheme.

"We are using these emergency powers today to prevent firms from avoiding paying any redress that is due to their customers and to help reduce the potential burden on the Financial Services Compensation Scheme. We will act swiftly if the rules aren’t being followed.”