I am writing to you regarding the role of introducers in the British Steel Pension Scheme (BSPS) scandal as I am concerned about the regulation of them, and enforcement over their activities, within the financial system, and what role each of the regulators current play. Given the seriousness of this issue, I have sent this to the three of you and I would appreciate individual responses from the FCA, FOS and FSCS on these matters.

Introducers usually pass on clients to firms which are regulated to carry out specific financial activities, such as pension transfers. In return, they receive a fee or commission should the client receive services from them.

As you will know, introducers have been widely reported to have played a key role in the mis-selling surrounding BSPS transfers. While in many cases the introducers were authorised and regulated IFAs, in some cases they were not, so they don’t have to have any oversight by the FCA nor are their clients protected by the FOS or FSCS. Indeed, in the past, there have been concerns and action from regulators on unauthorised introducers who had misled consumers into thinking they were regulated bodies or had even put money into risky investments which later failed. In 2017, the FCA launched legal action against two pension introducers for misleading customers.

I am deeply concerned at the number of BSPS mis-selling cases that involve introducers, and the fact that they often act at the margins of regulation. We have been told of one example being an unauthorised introducer, Celtic Wealth Management, who allegedly referred at least 75 steelworkers to Active Wealth (UK) Ltd.  Active Wealth was declared in default by the FSCS and the FSCS has since paid out compensation to those who have claimed. However, even though the two parties acted together in the misselling, only one was liable to pay compensation to the claimants. This has limited the amount that steelworkers have been able to claim back.

We have also been informed that the FOS is wholesale failing to uphold any introducer complaints where there is no written evidence of advice being given by the introducer, and a refusal to uphold any complaints that there was a joint venture between the introducer and the Pension Transfer Specialist (PTS) even where more than 30 clients of the same firm have complained that they were verbally advised to transfer by the introducer, never spoke to the PTS and the introducer and PTS shared in the transfer fee.  In one case, the PTS was given a room in the offices of the introducer and physically walked the clients into the office for the inevitable advice to transfer.

I hope you agree that regulated introducers should have been aware of the problems with what they were doing. They were aware that almost all of their clients were advised to transfer and they received a benefit as a result. FCA advice has regularly suggested that transferring away from defined benefit pension schemes is often not the best course of action, and may only be so in around 10% of cases. So, if an introducer passed over 10 steelworkers to a pension transfer specialist, then they should have expected only one, maybe two, to have transferred. If the numbers were higher than this, the introducer should have known that there was a risk of inappropriate advice being given to their clients, and they should have investigated or notified the relevant regulator.  They should certainly not have turned a blind eye and continued to refer clients where they knew the outcome was not in the clients’ best interests.  One can only assume that the lure of fees drove this behaviour and I cannot imagine that you could wish for them to benefit from that.

In situations where the introducer is unregulated, I am concerned that there could have been collusion between the introducer and adviser to offer inappropriate advice. In such instances, the introducer acts as a salesman for the firm and receives commission regardless of the quality of advice given, but currently only the adviser is being penalised for providing inappropriate advice, and the introducers are facing no sanctions for bringing the client along.

This brings up some questions for the regulators, and therefore, I would be grateful if you could provide answers to these queries.

To the FCA, FOS and FSCS:

• For regulated advisers, do you have rules in place to regulate or authorise their work as introducers?
• What advice or guidance do you provide to unauthorised introducers on how to appropriately conduct their activities?
• Where either rules or guidance have not been followed, have you taken legal, or enforcement, action against any introducers who have been involved in BSPS misselling and/or do you plan to do so in the future?

To FOS and FSCS:

• In what percentage of BSPS cases that you have awarded compensation for, have introducers been involved in the case?
• And in these cases, how many introducers have been authorised advisers?
• In how many cases has an introducer been liable for compensation or faced criminal prosecution?

To FCA:

• How many reports of unauthorised financial activity have you received in relation to BSPS, and how many of those are firms/individuals acting as introducers?
• In a 2017 update from your website, you say that:

“In response to concerns about the financial advice BSPS members were receiving, the FCA held four seminars in Swansea and Doncaster for advisers who specialise in pension transfers. 151 advisers attended these seminars, in which the FCA set out the standards it expects when pension transfer advice is given to consumers and the responsibilities firms have when dealing with unregulated introducers. The FCA also wrote to 148 authorised financial advisers in these locations explaining its expectations when advisers refer their clients to pension specialists.”

Can we see a copy of the advice provided in writing to the 148 authorised financial advisers?

• And how many of these authorised financial advisers have been involved in BSPS complaints, whether as pension transfer specialists, or introducers?

• While I understand you are unable to comment on the specifics of the proposed redress scheme, would it be possible to include the role of introducers within the scheme?

While all of these questions will hopefully increase understanding of this area, I am particularly concerned about the role of authorised advisers acting as introducers in some of these cases. As the FCA provided advice to 148 authorised advisers who refer clients to pension specialists in 2017 (introducing), if any of these firms have been involved in misselling after that advice was given, then they should face serious action as there is no excuse for their actions. They are currently not being held to account by the FOS nor by you.

I also wish to make a broader point about the authorisation that regulators give to firms, which firms understandably use as endorsements in their marketing to potential clients. An introducer, who may also be an authorised IFA, could feature the phrase “Authorised and regulated by the Financial Conduct Authority” on their website or promotional material.

However, they may only be regulated to perform certain activities, such as investments, rather than DB pension transfers. This could have the effect that a consumer believes the firm is fully regulated by the FCA, when they may not be regulated to provide the services that they are doing. In this instance, there could be the greater consequence that any transactions may not be eligible for compensation by either the FOS or FSCS.

I would be grateful for your views on this topic, and any work you are doing to improve how your brandings are being used by firms to make it clearer which activities they are regulated to perform.

In your role as regulators to protect consumers, I urge you to do all you can to hold introducers to account for the parts they have played in this scandal.