Phoenix’ companies are described by Ellis as firms who fold to avoid their client and regulatory responsibilities but then re-open under a different name with the same personnel.
“I think this kind of practice is going to catch on, and it is important that the FSA moves now to deal with it before we begin to see clients ripped off and the reputation of the industry undermined,” he said.
Ellis added that one way in which the FSA could prevent the practice was to bar directors and owners of such firms from applying to run a regulated IFA firm.
FSA managing director David Kenmir said: “The actions being taken by individuals in what may be considered ‘phoenix’ situations are not necessarily unlawful as such, even if they might appear ‘unfair’ or unethical in terms of the system as a whole.
“So our position depends upon the specific circumstances of any individual case, although we continue to keep a close watch for the general implications for industry as a whole.”
Richard Angliss, managing director of sourcing system Homebuyer, commented: “It was not until recently that I began to notice the emergence of these types of firms.
“Obviously the sooner this problem is dealt with the better for the industry as whole. Keeping public confidence high must be a priority for both IFAs and the FSA.”
