On 12 May 2021 the FCA issued finalised guidance for insolvency practitioners who are tasked with managing insolvencies of regulated firms.
Aiming to help insolvency practitioners understand how to deal with firms in line with FCA requirements, the guidance covers the process from end-to-end including expectations in the pre-insolvency stage and specific procedures relating to insolvencies and restructuring. The aim of the guidance is to assist with the minimising of the impact of a failure of a regulated firm
The guidance is key reading for insolvency practitioners who, once appointed, will take control over management of the firm and be required to ensure the firm continues to meet its ongoing regulatory requirements and responsibilities.
The guidance emphasises the importance of early engagement with the FCA and stresses the expectation that an insolvency practitioner will engage with the FCA both prior to (with appropriate consent) and after appointment over a regulated firm. It covers the participation and notification requirements of the FCA in a number of different insolvency processes and identifies where the FCA has the ability to take steps to appoint insolvency practitioners itself. It also reinforces the duties owed by insolvency practitioners imposed by statute and other regulations.
Pre-insolvency, an insolvency practitioner should consider their ability and capacity to take an appointment over a regulated firm, consulting the FCA's Wind-Down Planning Guide and (where firms hold client assets) the CASS resolution pack. The FCA's consent is required for an 'out of court' appointment of administrators by the company or its directors (but not qualifying floating charge holders), such consent to be filed at court along with the Notice of Appointment or Notice of Intention to Appoint (where notice of intention to appoint is required to be given). The guidance also contains a template letter to be sent to the FCA seeking consent. The FCA also has rights of participation in other insolvency proceedings.
During the course of an appointment over a regulated firm an insolvency practitioner should continue to comply with the FCA Handbook and CASS rules (where applicable). The guidance emphasises the importance of communicating well with clients and stresses the FCA expectation that an insolvency practitioner should have a communication strategy in place. Continuity of supply, where possible, is key.
The FCA also advises an insolvency practitioner to contact the FSCS (where compensation under the scheme may be available to the firm) as early as possible, preferably in the pre-appointment stages, and the Ombudsman Service in relation to any complaints against the firm.
The guidance also covers the sale of client data and expectations of the FCA during such process.
Whilst the guidance focuses on helping insolvency practitioners who are appointed over FCA regulated firms, it may also be useful for those who are appointed over firms which are jointly regulated by the FCA and the PRA. It concludes with a useful checklist that will aid insolvency practitioners in ensuring they meet all of the firm's regulatory requirements.
To see the full guidance document please click here.
Co-written by Elliott Hill