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FCA publishes guidance to firms seeking to limit their liabilities

Updated: Mar 13, 2022

The FCA has warned firms using company or insolvency law to manage their liabilities that they could face regulatory action if their proposals unfairly benefit them at the expense of their customers.

In the proposed guidance the FCA has made it clear to firms seeking to limit their liabilities that they should provide the best possible outcome for customers. Failure to do so could result in the FCA objecting to the firm’s proposals in court or using its regulatory powers, where appropriate.

The FCA told firms it expected to be informed as soon as a firm was considering a scheme of arrangement or other compromise to manage its liabilities. In response to various requests, the FCA has said it is unlikely to issue ‘letters of non-objection’ to firms’ restructuring proposals. Each firm's proposal to manage their liabilities however will be assessed on a case-by-case basis to ensure both regulatory obligations are met and that customers are treated fairly.

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 don’t meet this obligation."

Firms and all other interested parties are invited to provide their views on the proposed guidance until 1 March 2022 before the guidance is finalised

Read the guidance consultation here

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