Final Notice
On , the Financial Conduct Authority issued a Final Notice to ABACUS MANAGEMENT LTD
FINAL NOTICE
ABACUS MANAGEMENT LTD
Lester House
21 Broad Street
Bury
Lancashire
BL9 0DA
ACTION
1.
By an application dated 31 July 2019 (“the Application”), Abacus Management Ltd
(“Abacus” or “the Applicant”) applied under section 55A of the Act for Part 4A
permission to carry on the regulated activities of:
a.
agreeing to carry on a regulated activity;
b.
seeking out, referrals and identification of claims or potential claims
(personal injury claim; financial services or financial product claim; housing
disrepair claim; claim for a specified benefit; criminal injury claim;
employment related claim);
c.
advice, investigation or representation in relation to a financial services or
financial product claim
2.
The Application is incomplete.
3.
For the reasons set out below, The Authority has decided to refuse the
Application.
SUMMARY OF REASONS
4. By its Warning Notice dated 16 June 2021, the Authority gave notice that it
proposed to refuse the Application and that Abacus was entitled to make
representations to the Authority about that proposed action.
5. As no representations have been received by the Authority from Abacus within the
time allowed by the Warning Notice, the default procedures in paragraph 2.3.2 of
the Authority’s Decision Procedure and Penalties Manual apply, permitting the
Authority to treat the matters referred to in its Warning Notice as undisputed and,
accordingly, to give a Decision Notice.
6. Abacus has failed to respond to requests for the provision of information considered
by the Authority to be necessary to allow the Application to be determined. The
last request included a statement to the effect that Abacus must contact the
Authority within 10 business days, or the Authority would recommend to the
Authority’s Regulatory Transactions Committee (“RTC”) that Abacus receive a
Warning Notice. No response was received.
7. The Authority must therefore determine the Application based upon the information
received to date, in circumstances where its requests for information have not been
met. Having reviewed that information, the Authority cannot ensure that Abacus
satisfies, and will continue to satisfy, the threshold conditions.
8. Authorised firms (and those seeking authorisation) are expected to engage with
the Authority in an open and cooperative way. The failure to provide the requested
information during the authorisation process raises concerns that Abacus would fail
to do so if the Application were to be granted.
9. The failure to provide the information raises concerns as to whether Abacus:
a. can be effectively supervised by the Authority as required by threshold
condition 2C; and
b. has appropriate financial and non-financial resources, given Abacus’s failure
to provide the Authority with the requested information as required by
threshold condition 2D
DEFINITIONS
10. The definitions below are used in this Warning Notice.
“the Act” means the Financial Services and Markets Act 2000;
“the Application” means the application referred to in paragraph 1 above;
“the Authority” means the body corporate previously known as the Financial
Services Authority and renamed on 1 April 2013 as the Financial Conduct Authority;
“the RTC” means the Authority’s Regulatory Transactions Committee;
“the RDC” means the Authority’s Regulatory Decisions Committee;
“SUP” means the Supervision section of the Authority’s handbook;
“SYSC” means the Senior Management Arrangements, Systems and Controls
section of the Authority’s handbook; and
“the Tribunal” means the Upper Tribunal (Tax & Chancery Chamber).
FACTS AND MATTERS
11. Claims management companies that operate exclusively in the financial products
sector were required to apply in ‘application period 1’ i.e. between 1 April and 31
May 2019.
12. Abacus, which the Authority understands operates exclusively in the financial
products sector, applied for authorisation on 31 July 2019.
13. The director of the firm, Ms Zenib Hameed (the ‘Director’), applied to perform the
SMF29 Function.
14. From the date of the firm’s application to February 2020, the Authority and the firm
had been corresponding mainly in relation to the landing slot during the which the
firm should have applied to the FCA for authorisation. The Authority arranged a
visit to the firm on 19 February 2020. On 18 February 2020 the Director cancelled
the visit as she had to attend a hospital appointment with her brother. The
Authority rescheduled the visit but cancelled it on 13 March 2020 due to the
pandemic. From March 2020 through to the date of this paper, the Director has
continually failed to either provide or not substantively respond to requests for
information and documents in relation to the firm. The Director has continually
maintained that she has been unable to do so as she has been working as a nurse
for the NHS, caring for her brother on a full time basis (albeit stating that this did
not impact on her ability to manage the firm) and the impact of the pandemic has
made keeping the business going difficult (for example, in relation to being able to
keep the office open for staff, and the challenges of travelling to and from the
office).
15. In addition, throughout the application process, the Authority tried to engage the
Director and speak to her to understand the firm’s business activities and assess
the competency of the Director to fulfil the SMF29 function for the firm. This
included arranging an interview with the Director on 6 May 2021, which the Director
cancelled on the day of the interview. Throughout April and May 2021, the FCA had
repeatedly requested that the Director call the Authority at a time of her choosing
(including, if more convenient for her, the weekend) to understand the firm’s
general business activities, trading status and operations. The Director responded
intermittently to emails but did not return calls to the Authority.
Information Requests
16. The application form asks for the firm to provide the Authority with various financial
documents including a copy of the firm’s latest end of year accounts, opening
balance sheet, forecast closing balance sheet, monthly cash flow forecast and
monthly profit and loss forecast to enable the Authority to calculate whether the
firm is meetings its prudential requirements.
17. The firm sent in the following documents with its application: an opening balance
sheet, a cashflow document, a profit and loss document and another balance sheet.
These documents did not provide the Authority with a coherent picture of the firm’s
finances. For example, the firm entered the FCA perimeter with temporary
permission, having previously been authorised under the CMR to trade since 30
March 2017 whereupon it should have commenced trading. However, the balance
sheet as at 30 September 2018 suggests that the firm had undertaken no
commercial activities since authorisation. In fact, the balance sheet describes the
firm as ‘dormant’ for the year ending 30 September 2018. Further, it is not clear
how the mentioned balance sheet, which has £100 of assets, can be reconciled with
the detailed balance sheet since that balance sheet seems to detail total assets in
excess of £100,000. In the business plan that was provided with the application,
the only reference to the balance sheet was that the company had a £10,000
investment from the Director from savings, with no finance outstanding. Since the
financial documents are not explained, it is also not clear to the Authority whether
these are statements representing historic fact or future forecast.
18. On 2 December 2019, the Authority sent an information request to the firm asking
it to provide a worked calculation detailing how it meets the prudential
requirements with reference to the applicable rules by 16 December 2019, as well
as information on the firm’s business plan, fee charging and financial promotions.
On 19 December 2019 the firm responded and stated that “we are a class 2 firm
and the prudential resources requirement for us is one sixth of our overhead’s
expenditure in the last financial year. I have injected more capital to the company
to ensure I meet the requirement.” Whilst the firm was able to identify that it is a
class 2 firm and that it would have to hold reserves of one sixth of the overheads
expenditure, it failed to show the Authority the calculation it had performed to
determine its overheads requirement and therefore what its prudential resources
requirement would be.
19. On 13 March 2020, the Authority cancelled a proposed second the visit due to the
pandemic. On the same day, the Authority requested the same information on the
firm’s wind down plan, financial resource, non-financial resources, the active claim
ledger and recordings in relation to case files; this was to be provided by 27 March
2020. This was not received.
20. On 6 May 2020 a request for information was made using the Authority’s formal
powers under s.165 FSMA for similar information requested on 13 March; this was
to be provided by 20 May 2020. The Director responded on 21 May and stated that
the impact of the pandemic meant she or her staff were unable to provide the
requested information as the office was closed, including access to the requested
information. The Director emailed again on 10 June 2020 and said that due to the
lockdown restrictions and her employment as a nurse she was unable to provide a
response, but would endeavour to provide the information by 24 June 2020
following two weeks of annual leave from her role as a nurse. On 25 June 2020,
the Director emailed noting that she was unable to provide the requested
information but would do so on 26 July 2020. This was not received.
21. On 16 July 2020, the Authority asked for similar information requested on 13 March
2020; to be provided by 30 July 2020. That communication also set out the
attempts to obtain information from the firm unsuccessfully in the period January
2020 to June 2020. In response the firm submitted various financial statements,
but these were duplicates of what had already been submitted with the original
application and were considered inadequate for the reasons mentioned above.
22. On 7 August 2020, the Authority requested information about the firm’s records
management upon discovering that the Director had been dealing with clients via
telephone and email in the evenings; to be provided by 21 August 2020. The
Authority asked the firm to produce all call recordings from January 2020 and
provide proof that the equipment being used to communicate with the firm belongs
to the firm. The rules and guidance on record keeping under CMCOB 2.3.2R, CMCOB
2.3.3G and CMCOB 2.3.4R were brought to the firm’s attention in the request. The
firm replied on 24 August 2020 and said that it would obtain the information from
its systems and a third party.
23. In reply, on 24 August 2020, the Authority requested further information about the
firm’s complaints log to evidence the complaints had been dealt with, copies of
emails to clients and information as to how the firm was resourced; to be provided
by 31 August 2020. On 8 September 2020, the firm replied and stated that it was
unable to send over the information because it was waiting for a third party and
that it would be able to send the information over by the Friday of that week. That
self-imposed deadline was never met. On 14 September 2020 the firm stated that
it was awaiting information from a third party to respond to the records
management queries from the Authority (but did attach information on FOS
complaints.
24. On 21 September 2020, the Authority again requested information on how the firm
was being managed, and for evidence that the firm was meeting its prudential
requirements; to be provided by 25 September 2020. This information was not
provided by the deadline.
25. On 26 March 2021, the Authority spoke with the Director to request an interview
to better understand the firm’s application and to introduce a new case officer. The
Director agreed to an interview in principle. An email followed to arrange the
interview in order to discuss the status of the client book, the operating status of
the firm, the firm’s business plan, the firm’s systems and controls, and the firm’s
financial position. This was to be provided by 2 April 2021, but no response arrived
within the given deadline.
26. On 6 April 2021, the Authority emailed the firm with a reminder of the request sent
on 26 March 2021. The Director was asked to respond as soon as possible, and in
any event, by close of business on 7 April 2021. On 7 April 2021 the Director replied
to confirm availability on 6 May 2021 or 7 May 2021 for an interview. The Authority
replied on the same day to preliminarily confirm the date of the interview as 6 May
2021 and to request a short call to discuss the possibility that the interview could
be brought forward in time. The Director was asked to call the case officer when
convenient. The Authority followed this up with two phone calls to the Director and
the firm which were not answered; voicemails were left. On 11 April 2021 the
Director emailed to confirm her availability on 6 May 2021 only.
27. On 12 April 2021, the Authority emailed the Director to again request a short call
to understand the firm’s trading activities and to arrange an earlier interview with
the Director; to be provided by 19 April 2021. The following documents were
requested: the firm’s latest set of internal management accounts, the firm’s most
recent verified accounts to assist with its application for authorisation and an
update on the status of the firm’s client book. A separate request was made to
confirm when the (overdue) 2019 and 2020 CMC Regulatory Returns (CMC 001)
would be submitted. The firm did not respond.
28. On 16 April 2021, the Authority sent the Director a MS Teams calendar request for
the FCA Interview on 6 May 2021. The firm did not respond.
29. On 21 April 2021, the Authority emailed the Director a reminder of the previous
emails. Attached to that email was a letter advising the firm of the implications for
the firm’s application for authorisation should it not respond to the Authority’s
requests promptly. That letter was also sent to the address the firm provided on
application, which was returned to sender. The Director was again asked to call the
case officer as soon as possible. The firm did not respond. The Authority followed
this up with two phone calls to the Director and the firm, with voicemails left, which
the firm did not respond to. The attached letter was also sent via recorded delivery
to the firm’s registered office address, but the letter was returned as sender gone
away. The letter was inadvertently not sent to the firm’s principal place of business,
but it had been sent both by email and to the firm’s registered office.
30. On 30 April 2021, the Authority emailed the firm with a reminder of the requests
made in previous emails. The Director was also reminded of the agreed interview
on 6 May 2021 and was sent the agenda. The Director was asked to confirm the
number the Director would be dialling from, the name of any attending legal
advisors and to arrange a test call (to ensure the software that would be used to
record the interview would work as planned.). This was to be provided by 5 May
2021. The Director was also asked to call the case officer as soon as possible. On
6 May 2021, the day of the agreed interview, the Director emailed to say that she
was unable to attend the meeting. The Director said that she had been working for
the NHS as a nurse since April 2020; that she was intending to reduce her working
hours from the end of May; that when she “last spoke to the FCA in September
2020” some staff had been “let go” and “some activities are on hold”; that the firm
“had 25 clients awaiting payment; and that the firm is “temporarily closed” and
was aiming to “fully re-open” by 21 June 2021, subject to the Government’s
pandemic guidance. None of the previously requested information was provided.
31. We have had not further correspondence from the firm.
32. The Authority has not been able to gather general information on the firm’s
business arrangements and how the firm complies with the FCA’s Handbook as the
firm has failed to respond substantively to communications from the Authority.
Based on the materials provided, The Authority has also been unable to determine
whether the firm is meeting its prudential requirements, and whether it is solvent.
IMPACT ON THRESHOLD CONDITIONS
33. The Authority considers that, having regard to all the circumstances, it cannot be
satisfied that the firm will satisfy, and will continue to satisfy the threshold
conditions for which the Authority is responsible as required by s55B(3) of FSMA.
In particular, the Authority does not consider the threshold conditions of ‘Effective
Supervision’, and ‘Appropriate Resources’ to have been met.
Effective Supervision
34. The Authority has requested information which it considers vital to the assessment
of Abacus’ application. Abacus has failed to provide information on several
occasions despite multiple requests and there are still critical pieces of information
which remain outstanding as at the date of this paper.
35. In the course of correspondence, and in response to requests for information or to
attend an interview, the Director has relied variously on the pandemic, her duties
as a nurse and carer as reasons to explain why she has been unable to provide the
materials requested, or attend interviews at the case team’s request.
36. The Authority recognises that these factors will impact on the firm’s ability to supply
information to an extent. However, they cannot explain the firm’s failures in their
entirety, many of which have been outstanding since 2019.
37. There have been occasions where the Director has agreed, in principle to provide
the materials which the Authority has requested, and on deadlines which are
convenient to her. The implication of volunteering an alternative deadline to
respond to the Authority’ request is that the Director believed she was capable of
meeting it, notwithstanding the effect of the pandemic or her duties variously as a
nurse or carer. In any event, even these self-imposed deadlines have not been met
and, as alluded to below, there are materials which have still not been submitted.
38. The information which has previously been requested and remains outstanding is
as follows:
a) Evidence the firm is meeting the prudential requirements
b) A statement explaining how the firm will satisfy the Authority that it will
be able to meet the Effective Supervision Threshold Conditions
c) Evidence of calls made and emails sent to clients from January 2020 to
August 2020
37. The materials requested are critical to enable the Authority to make an assessment
about whether the firm is meeting the Threshold Conditions. As the information has
never been supplied, the Authority has been unable to conduct its assessment in
relation to the firm’s financial position.
38. The firm has also not engaged or responded to the Authority’s repeated requests
for a conversation about its trading and operational status.
39. It is the Authority’s view that the firm’s lack of constructive engagement is
indicative of the firm’s inability to meet the ‘Effective Supervision’ threshold
condition A firm that seeks Part 4A authorisation should be ready, willing and
organised to comply with the requirements of the regulatory system under which
it will be operating. In the Authority’ view, the conduct displayed by the firm clearly
shows that it is not ready, willing and organised.
40. For Abacus to meet the “Appropriate Resources” threshold condition, the firm must
also be able to demonstrate that it has adequate financial resources. As the firm
has not provided sufficient information on its finances to assure the Authority that
the firm has adequate financial resources, the Authority cannot be satisfied that
the firm meets the appropriate financial resources element of this Threshold
Condition.
Non-financial resources
41. In order for Abacus to meet the “Appropriate Resources” threshold condition, the
firm must also be able to demonstrate that its human resources are adequate and
appropriate.
The Authority
remains concerned about the adequacy and
appropriateness of the firm’s human resources. There is a still a considerable
quantity of materials that the Authority has requested which as at the date of the
paper remain outstanding. The principal contact at the firm who was responsible
for arranging delivery of these materials is the Director. The narrative above shows
that the Director has failed to supply the materials, or, supplied incorrect or
incomplete materials which suggests that she is either not properly in control of
the business or she is unaware of her obligations to the regulator.
IMPORTANT NOTICES
43. This Final Notice is given under section 390(1) of the Act
Authority contacts
44. For more information concerning this matter generally, contact Tina Archer,
Manager, Claims Management Companies Department at the Authority (direct line:
020 7066 9188 / email: tina.archer@fca.org.uk).
[leave blank]
on behalf of the Authority
ANNEX A – REGULATORY PROVISIONS RELEVANT TO THIS WARNING NOTICE
1. Section 55A(1) of the Act provides for an application for permission to carry on one
or more regulated activities to be made to the appropriate regulator. Section
55A(2) defines the “appropriate regulator” for different applications.
2. Section 55B(3) of the Act provides that, in giving or varying permission, imposing
or varying a requirement, or giving consent, under any provision of Part 4A of the
Act, each regulator must ensure that the person concerned will satisfy, and
continue to satisfy, in relation to all of the regulated activities for which the person
has or will have permission, the threshold conditions for which that regulator is
responsible.
3. The threshold conditions are set out in schedule 6 of the Act. In brief, the threshold
conditions relate to:
(1)
Threshold condition 2B: Location of offices
(2)
Threshold condition 2C: Effective supervision
(3)
Threshold condition 2D: Appropriate resources
(4)
Threshold condition 2E: Suitability
(5)
Threshold condition 2F: Business model
Relevant provisions of the Authority’s Handbook
4. In exercising its powers in relation to the granting of a Part 4A permission, the
Authority must have regard to guidance published in the Authority’s Handbook,
including the part entitled Threshold Conditions (“COND”). The main considerations
in relation to the action specified are set out below.
5. COND 1.3.2G(2) states that, in relation to threshold conditions 2D to 2F, the
Authority will consider whether a firm is ready, willing and organised to comply on
a continuing basis with the requirements and standards under the regulatory
system which will apply to the firm if it is granted Part 4A permission.
6. COND 1.3.3AG provides that, in determining the weight to be given to any relevant
matter, the Authority will consider its significance in relation to the regulated
activities for which the firm has, or will have, permission in the context of its ability
to supervise the firm adequately, having regard to the Authority’s statutory
objectives. In this context, a series of matters may be significant when taken
together, even though each of them in isolation might not give serious cause for
concern.
7. COND 1.3.3BG provides that, in determining whether the firm will satisfy, and
continue to satisfy, the Authority threshold conditions, the Authority will have
regard to all relevant matters, whether arising in the United Kingdom or elsewhere.
Threshold Condition 2C: Effective Supervision
8. COND 2.3.3G states that, in assessing the threshold condition set out in paragraph
2C of Schedule 6 to the Act, factors which the Authority will take into consideration
include, among other things, whether it is likely that the Authority will receive
adequate information from the firm to determine whether it is complying with the
requirements and standards under the regulatory system for which the Authority
is responsible and to identify and assess the impact on its statutory objectives; this
will include consideration of whether the firm is ready, willing and organised to
comply with Principle 11 (Relations with regulators) and the rules in SUP on the
provision of information to the Authority.
Threshold condition 2D: Appropriate Resources
9. COND 2.4.2G(2) states that the Authority will interpret the term 'appropriate' as
meaning sufficient in terms of quantity, quality and availability, and 'resources' as
including all financial resources (though only in the case of firms not carrying on,
or seeking to carry on, a PRA-regulated activity), non-financial resources and
means of managing its resources; for example, capital, provisions against liabilities,
holdings of or access to cash and other liquid assets, human resources and effective
means by which to manage risks.
10. COND 2.4.2G(2A) provides that, ‘non-financial resources’ of the firm include human
resources it has available.
11. COND 2.4.2G (3) states that high level systems and control requirements are in
SYSC. The Authority will consider whether the firm is ready, willing and organised
to comply with these and other applicable systems and controls requirements when
assessing if it has appropriate non-financial resources for the purpose of the
threshold conditions set out in threshold condition 2D.
Threshold condition 2E: Suitability
12. COND 2.5.2G(2) states that the Authority will also take into consideration anything
that could influence a firm's continuing ability to satisfy the threshold conditions
set out in paragraphs 2E and 3D of Schedule 6 to the Act. Examples include the
firm's position within a UK or international group, information provided by overseas
regulators about the firm, and the firm's plans to seek to vary its Part 4A permission
to carry on additional regulated activities once it has been granted that permission.
13. COND 2.5.4G(2)(c)G states that examples of the kind of general considerations to
which the Authority may have regard when assessing whether a firm will satisfy,
and continue to satisfy, threshold condition 2E include, but are not limited to,
whether the firm can demonstrate that it conducts, or will conduct, its business
with integrity and in compliance with proper standards.
14. COND 2.5.6G provides that examples of the kind of particular considerations to
which the Authority may have regard when assessing whether a firm will satisfy,
and continue to satisfy, this threshold condition include, but are not limited to,
whether the firm has been open and co-operative in all its dealings with the
Authority and any other regulatory body (see Principle 11 (Relations with
regulators)) and is ready, willing and organised to comply with the requirements
and standards under the regulatory system (such as the detailed requirements of
SYSC and, in relation to a firm not carrying on, or seeking to carry on, a PRA-
regulated activity only, the Prudential Standards part of the Authority’s
Handbook)in addition to other legal, regulatory and professional obligations; the
relevant requirements and standards will depend on the circumstances of each
case, including the regulated activities which the firm has permission, or is seeking
permission, to carry on.
ABACUS MANAGEMENT LTD
Lester House
21 Broad Street
Bury
Lancashire
BL9 0DA
ACTION
1.
By an application dated 31 July 2019 (“the Application”), Abacus Management Ltd
(“Abacus” or “the Applicant”) applied under section 55A of the Act for Part 4A
permission to carry on the regulated activities of:
a.
agreeing to carry on a regulated activity;
b.
seeking out, referrals and identification of claims or potential claims
(personal injury claim; financial services or financial product claim; housing
disrepair claim; claim for a specified benefit; criminal injury claim;
employment related claim);
c.
advice, investigation or representation in relation to a financial services or
financial product claim
2.
The Application is incomplete.
3.
For the reasons set out below, The Authority has decided to refuse the
Application.
SUMMARY OF REASONS
4. By its Warning Notice dated 16 June 2021, the Authority gave notice that it
proposed to refuse the Application and that Abacus was entitled to make
representations to the Authority about that proposed action.
5. As no representations have been received by the Authority from Abacus within the
time allowed by the Warning Notice, the default procedures in paragraph 2.3.2 of
the Authority’s Decision Procedure and Penalties Manual apply, permitting the
Authority to treat the matters referred to in its Warning Notice as undisputed and,
accordingly, to give a Decision Notice.
6. Abacus has failed to respond to requests for the provision of information considered
by the Authority to be necessary to allow the Application to be determined. The
last request included a statement to the effect that Abacus must contact the
Authority within 10 business days, or the Authority would recommend to the
Authority’s Regulatory Transactions Committee (“RTC”) that Abacus receive a
Warning Notice. No response was received.
7. The Authority must therefore determine the Application based upon the information
received to date, in circumstances where its requests for information have not been
met. Having reviewed that information, the Authority cannot ensure that Abacus
satisfies, and will continue to satisfy, the threshold conditions.
8. Authorised firms (and those seeking authorisation) are expected to engage with
the Authority in an open and cooperative way. The failure to provide the requested
information during the authorisation process raises concerns that Abacus would fail
to do so if the Application were to be granted.
9. The failure to provide the information raises concerns as to whether Abacus:
a. can be effectively supervised by the Authority as required by threshold
condition 2C; and
b. has appropriate financial and non-financial resources, given Abacus’s failure
to provide the Authority with the requested information as required by
threshold condition 2D
DEFINITIONS
10. The definitions below are used in this Warning Notice.
“the Act” means the Financial Services and Markets Act 2000;
“the Application” means the application referred to in paragraph 1 above;
“the Authority” means the body corporate previously known as the Financial
Services Authority and renamed on 1 April 2013 as the Financial Conduct Authority;
“the RTC” means the Authority’s Regulatory Transactions Committee;
“the RDC” means the Authority’s Regulatory Decisions Committee;
“SUP” means the Supervision section of the Authority’s handbook;
“SYSC” means the Senior Management Arrangements, Systems and Controls
section of the Authority’s handbook; and
“the Tribunal” means the Upper Tribunal (Tax & Chancery Chamber).
FACTS AND MATTERS
11. Claims management companies that operate exclusively in the financial products
sector were required to apply in ‘application period 1’ i.e. between 1 April and 31
May 2019.
12. Abacus, which the Authority understands operates exclusively in the financial
products sector, applied for authorisation on 31 July 2019.
13. The director of the firm, Ms Zenib Hameed (the ‘Director’), applied to perform the
SMF29 Function.
14. From the date of the firm’s application to February 2020, the Authority and the firm
had been corresponding mainly in relation to the landing slot during the which the
firm should have applied to the FCA for authorisation. The Authority arranged a
visit to the firm on 19 February 2020. On 18 February 2020 the Director cancelled
the visit as she had to attend a hospital appointment with her brother. The
Authority rescheduled the visit but cancelled it on 13 March 2020 due to the
pandemic. From March 2020 through to the date of this paper, the Director has
continually failed to either provide or not substantively respond to requests for
information and documents in relation to the firm. The Director has continually
maintained that she has been unable to do so as she has been working as a nurse
for the NHS, caring for her brother on a full time basis (albeit stating that this did
not impact on her ability to manage the firm) and the impact of the pandemic has
made keeping the business going difficult (for example, in relation to being able to
keep the office open for staff, and the challenges of travelling to and from the
office).
15. In addition, throughout the application process, the Authority tried to engage the
Director and speak to her to understand the firm’s business activities and assess
the competency of the Director to fulfil the SMF29 function for the firm. This
included arranging an interview with the Director on 6 May 2021, which the Director
cancelled on the day of the interview. Throughout April and May 2021, the FCA had
repeatedly requested that the Director call the Authority at a time of her choosing
(including, if more convenient for her, the weekend) to understand the firm’s
general business activities, trading status and operations. The Director responded
intermittently to emails but did not return calls to the Authority.
Information Requests
16. The application form asks for the firm to provide the Authority with various financial
documents including a copy of the firm’s latest end of year accounts, opening
balance sheet, forecast closing balance sheet, monthly cash flow forecast and
monthly profit and loss forecast to enable the Authority to calculate whether the
firm is meetings its prudential requirements.
17. The firm sent in the following documents with its application: an opening balance
sheet, a cashflow document, a profit and loss document and another balance sheet.
These documents did not provide the Authority with a coherent picture of the firm’s
finances. For example, the firm entered the FCA perimeter with temporary
permission, having previously been authorised under the CMR to trade since 30
March 2017 whereupon it should have commenced trading. However, the balance
sheet as at 30 September 2018 suggests that the firm had undertaken no
commercial activities since authorisation. In fact, the balance sheet describes the
firm as ‘dormant’ for the year ending 30 September 2018. Further, it is not clear
how the mentioned balance sheet, which has £100 of assets, can be reconciled with
the detailed balance sheet since that balance sheet seems to detail total assets in
excess of £100,000. In the business plan that was provided with the application,
the only reference to the balance sheet was that the company had a £10,000
investment from the Director from savings, with no finance outstanding. Since the
financial documents are not explained, it is also not clear to the Authority whether
these are statements representing historic fact or future forecast.
18. On 2 December 2019, the Authority sent an information request to the firm asking
it to provide a worked calculation detailing how it meets the prudential
requirements with reference to the applicable rules by 16 December 2019, as well
as information on the firm’s business plan, fee charging and financial promotions.
On 19 December 2019 the firm responded and stated that “we are a class 2 firm
and the prudential resources requirement for us is one sixth of our overhead’s
expenditure in the last financial year. I have injected more capital to the company
to ensure I meet the requirement.” Whilst the firm was able to identify that it is a
class 2 firm and that it would have to hold reserves of one sixth of the overheads
expenditure, it failed to show the Authority the calculation it had performed to
determine its overheads requirement and therefore what its prudential resources
requirement would be.
19. On 13 March 2020, the Authority cancelled a proposed second the visit due to the
pandemic. On the same day, the Authority requested the same information on the
firm’s wind down plan, financial resource, non-financial resources, the active claim
ledger and recordings in relation to case files; this was to be provided by 27 March
2020. This was not received.
20. On 6 May 2020 a request for information was made using the Authority’s formal
powers under s.165 FSMA for similar information requested on 13 March; this was
to be provided by 20 May 2020. The Director responded on 21 May and stated that
the impact of the pandemic meant she or her staff were unable to provide the
requested information as the office was closed, including access to the requested
information. The Director emailed again on 10 June 2020 and said that due to the
lockdown restrictions and her employment as a nurse she was unable to provide a
response, but would endeavour to provide the information by 24 June 2020
following two weeks of annual leave from her role as a nurse. On 25 June 2020,
the Director emailed noting that she was unable to provide the requested
information but would do so on 26 July 2020. This was not received.
21. On 16 July 2020, the Authority asked for similar information requested on 13 March
2020; to be provided by 30 July 2020. That communication also set out the
attempts to obtain information from the firm unsuccessfully in the period January
2020 to June 2020. In response the firm submitted various financial statements,
but these were duplicates of what had already been submitted with the original
application and were considered inadequate for the reasons mentioned above.
22. On 7 August 2020, the Authority requested information about the firm’s records
management upon discovering that the Director had been dealing with clients via
telephone and email in the evenings; to be provided by 21 August 2020. The
Authority asked the firm to produce all call recordings from January 2020 and
provide proof that the equipment being used to communicate with the firm belongs
to the firm. The rules and guidance on record keeping under CMCOB 2.3.2R, CMCOB
2.3.3G and CMCOB 2.3.4R were brought to the firm’s attention in the request. The
firm replied on 24 August 2020 and said that it would obtain the information from
its systems and a third party.
23. In reply, on 24 August 2020, the Authority requested further information about the
firm’s complaints log to evidence the complaints had been dealt with, copies of
emails to clients and information as to how the firm was resourced; to be provided
by 31 August 2020. On 8 September 2020, the firm replied and stated that it was
unable to send over the information because it was waiting for a third party and
that it would be able to send the information over by the Friday of that week. That
self-imposed deadline was never met. On 14 September 2020 the firm stated that
it was awaiting information from a third party to respond to the records
management queries from the Authority (but did attach information on FOS
complaints.
24. On 21 September 2020, the Authority again requested information on how the firm
was being managed, and for evidence that the firm was meeting its prudential
requirements; to be provided by 25 September 2020. This information was not
provided by the deadline.
25. On 26 March 2021, the Authority spoke with the Director to request an interview
to better understand the firm’s application and to introduce a new case officer. The
Director agreed to an interview in principle. An email followed to arrange the
interview in order to discuss the status of the client book, the operating status of
the firm, the firm’s business plan, the firm’s systems and controls, and the firm’s
financial position. This was to be provided by 2 April 2021, but no response arrived
within the given deadline.
26. On 6 April 2021, the Authority emailed the firm with a reminder of the request sent
on 26 March 2021. The Director was asked to respond as soon as possible, and in
any event, by close of business on 7 April 2021. On 7 April 2021 the Director replied
to confirm availability on 6 May 2021 or 7 May 2021 for an interview. The Authority
replied on the same day to preliminarily confirm the date of the interview as 6 May
2021 and to request a short call to discuss the possibility that the interview could
be brought forward in time. The Director was asked to call the case officer when
convenient. The Authority followed this up with two phone calls to the Director and
the firm which were not answered; voicemails were left. On 11 April 2021 the
Director emailed to confirm her availability on 6 May 2021 only.
27. On 12 April 2021, the Authority emailed the Director to again request a short call
to understand the firm’s trading activities and to arrange an earlier interview with
the Director; to be provided by 19 April 2021. The following documents were
requested: the firm’s latest set of internal management accounts, the firm’s most
recent verified accounts to assist with its application for authorisation and an
update on the status of the firm’s client book. A separate request was made to
confirm when the (overdue) 2019 and 2020 CMC Regulatory Returns (CMC 001)
would be submitted. The firm did not respond.
28. On 16 April 2021, the Authority sent the Director a MS Teams calendar request for
the FCA Interview on 6 May 2021. The firm did not respond.
29. On 21 April 2021, the Authority emailed the Director a reminder of the previous
emails. Attached to that email was a letter advising the firm of the implications for
the firm’s application for authorisation should it not respond to the Authority’s
requests promptly. That letter was also sent to the address the firm provided on
application, which was returned to sender. The Director was again asked to call the
case officer as soon as possible. The firm did not respond. The Authority followed
this up with two phone calls to the Director and the firm, with voicemails left, which
the firm did not respond to. The attached letter was also sent via recorded delivery
to the firm’s registered office address, but the letter was returned as sender gone
away. The letter was inadvertently not sent to the firm’s principal place of business,
but it had been sent both by email and to the firm’s registered office.
30. On 30 April 2021, the Authority emailed the firm with a reminder of the requests
made in previous emails. The Director was also reminded of the agreed interview
on 6 May 2021 and was sent the agenda. The Director was asked to confirm the
number the Director would be dialling from, the name of any attending legal
advisors and to arrange a test call (to ensure the software that would be used to
record the interview would work as planned.). This was to be provided by 5 May
2021. The Director was also asked to call the case officer as soon as possible. On
6 May 2021, the day of the agreed interview, the Director emailed to say that she
was unable to attend the meeting. The Director said that she had been working for
the NHS as a nurse since April 2020; that she was intending to reduce her working
hours from the end of May; that when she “last spoke to the FCA in September
2020” some staff had been “let go” and “some activities are on hold”; that the firm
“had 25 clients awaiting payment; and that the firm is “temporarily closed” and
was aiming to “fully re-open” by 21 June 2021, subject to the Government’s
pandemic guidance. None of the previously requested information was provided.
31. We have had not further correspondence from the firm.
32. The Authority has not been able to gather general information on the firm’s
business arrangements and how the firm complies with the FCA’s Handbook as the
firm has failed to respond substantively to communications from the Authority.
Based on the materials provided, The Authority has also been unable to determine
whether the firm is meeting its prudential requirements, and whether it is solvent.
IMPACT ON THRESHOLD CONDITIONS
33. The Authority considers that, having regard to all the circumstances, it cannot be
satisfied that the firm will satisfy, and will continue to satisfy the threshold
conditions for which the Authority is responsible as required by s55B(3) of FSMA.
In particular, the Authority does not consider the threshold conditions of ‘Effective
Supervision’, and ‘Appropriate Resources’ to have been met.
Effective Supervision
34. The Authority has requested information which it considers vital to the assessment
of Abacus’ application. Abacus has failed to provide information on several
occasions despite multiple requests and there are still critical pieces of information
which remain outstanding as at the date of this paper.
35. In the course of correspondence, and in response to requests for information or to
attend an interview, the Director has relied variously on the pandemic, her duties
as a nurse and carer as reasons to explain why she has been unable to provide the
materials requested, or attend interviews at the case team’s request.
36. The Authority recognises that these factors will impact on the firm’s ability to supply
information to an extent. However, they cannot explain the firm’s failures in their
entirety, many of which have been outstanding since 2019.
37. There have been occasions where the Director has agreed, in principle to provide
the materials which the Authority has requested, and on deadlines which are
convenient to her. The implication of volunteering an alternative deadline to
respond to the Authority’ request is that the Director believed she was capable of
meeting it, notwithstanding the effect of the pandemic or her duties variously as a
nurse or carer. In any event, even these self-imposed deadlines have not been met
and, as alluded to below, there are materials which have still not been submitted.
38. The information which has previously been requested and remains outstanding is
as follows:
a) Evidence the firm is meeting the prudential requirements
b) A statement explaining how the firm will satisfy the Authority that it will
be able to meet the Effective Supervision Threshold Conditions
c) Evidence of calls made and emails sent to clients from January 2020 to
August 2020
37. The materials requested are critical to enable the Authority to make an assessment
about whether the firm is meeting the Threshold Conditions. As the information has
never been supplied, the Authority has been unable to conduct its assessment in
relation to the firm’s financial position.
38. The firm has also not engaged or responded to the Authority’s repeated requests
for a conversation about its trading and operational status.
39. It is the Authority’s view that the firm’s lack of constructive engagement is
indicative of the firm’s inability to meet the ‘Effective Supervision’ threshold
condition A firm that seeks Part 4A authorisation should be ready, willing and
organised to comply with the requirements of the regulatory system under which
it will be operating. In the Authority’ view, the conduct displayed by the firm clearly
shows that it is not ready, willing and organised.
40. For Abacus to meet the “Appropriate Resources” threshold condition, the firm must
also be able to demonstrate that it has adequate financial resources. As the firm
has not provided sufficient information on its finances to assure the Authority that
the firm has adequate financial resources, the Authority cannot be satisfied that
the firm meets the appropriate financial resources element of this Threshold
Condition.
Non-financial resources
41. In order for Abacus to meet the “Appropriate Resources” threshold condition, the
firm must also be able to demonstrate that its human resources are adequate and
appropriate.
The Authority
remains concerned about the adequacy and
appropriateness of the firm’s human resources. There is a still a considerable
quantity of materials that the Authority has requested which as at the date of the
paper remain outstanding. The principal contact at the firm who was responsible
for arranging delivery of these materials is the Director. The narrative above shows
that the Director has failed to supply the materials, or, supplied incorrect or
incomplete materials which suggests that she is either not properly in control of
the business or she is unaware of her obligations to the regulator.
IMPORTANT NOTICES
43. This Final Notice is given under section 390(1) of the Act
Authority contacts
44. For more information concerning this matter generally, contact Tina Archer,
Manager, Claims Management Companies Department at the Authority (direct line:
020 7066 9188 / email: tina.archer@fca.org.uk).
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on behalf of the Authority
ANNEX A – REGULATORY PROVISIONS RELEVANT TO THIS WARNING NOTICE
1. Section 55A(1) of the Act provides for an application for permission to carry on one
or more regulated activities to be made to the appropriate regulator. Section
55A(2) defines the “appropriate regulator” for different applications.
2. Section 55B(3) of the Act provides that, in giving or varying permission, imposing
or varying a requirement, or giving consent, under any provision of Part 4A of the
Act, each regulator must ensure that the person concerned will satisfy, and
continue to satisfy, in relation to all of the regulated activities for which the person
has or will have permission, the threshold conditions for which that regulator is
responsible.
3. The threshold conditions are set out in schedule 6 of the Act. In brief, the threshold
conditions relate to:
(1)
Threshold condition 2B: Location of offices
(2)
Threshold condition 2C: Effective supervision
(3)
Threshold condition 2D: Appropriate resources
(4)
Threshold condition 2E: Suitability
(5)
Threshold condition 2F: Business model
Relevant provisions of the Authority’s Handbook
4. In exercising its powers in relation to the granting of a Part 4A permission, the
Authority must have regard to guidance published in the Authority’s Handbook,
including the part entitled Threshold Conditions (“COND”). The main considerations
in relation to the action specified are set out below.
5. COND 1.3.2G(2) states that, in relation to threshold conditions 2D to 2F, the
Authority will consider whether a firm is ready, willing and organised to comply on
a continuing basis with the requirements and standards under the regulatory
system which will apply to the firm if it is granted Part 4A permission.
6. COND 1.3.3AG provides that, in determining the weight to be given to any relevant
matter, the Authority will consider its significance in relation to the regulated
activities for which the firm has, or will have, permission in the context of its ability
to supervise the firm adequately, having regard to the Authority’s statutory
objectives. In this context, a series of matters may be significant when taken
together, even though each of them in isolation might not give serious cause for
concern.
7. COND 1.3.3BG provides that, in determining whether the firm will satisfy, and
continue to satisfy, the Authority threshold conditions, the Authority will have
regard to all relevant matters, whether arising in the United Kingdom or elsewhere.
Threshold Condition 2C: Effective Supervision
8. COND 2.3.3G states that, in assessing the threshold condition set out in paragraph
2C of Schedule 6 to the Act, factors which the Authority will take into consideration
include, among other things, whether it is likely that the Authority will receive
adequate information from the firm to determine whether it is complying with the
requirements and standards under the regulatory system for which the Authority
is responsible and to identify and assess the impact on its statutory objectives; this
will include consideration of whether the firm is ready, willing and organised to
comply with Principle 11 (Relations with regulators) and the rules in SUP on the
provision of information to the Authority.
Threshold condition 2D: Appropriate Resources
9. COND 2.4.2G(2) states that the Authority will interpret the term 'appropriate' as
meaning sufficient in terms of quantity, quality and availability, and 'resources' as
including all financial resources (though only in the case of firms not carrying on,
or seeking to carry on, a PRA-regulated activity), non-financial resources and
means of managing its resources; for example, capital, provisions against liabilities,
holdings of or access to cash and other liquid assets, human resources and effective
means by which to manage risks.
10. COND 2.4.2G(2A) provides that, ‘non-financial resources’ of the firm include human
resources it has available.
11. COND 2.4.2G (3) states that high level systems and control requirements are in
SYSC. The Authority will consider whether the firm is ready, willing and organised
to comply with these and other applicable systems and controls requirements when
assessing if it has appropriate non-financial resources for the purpose of the
threshold conditions set out in threshold condition 2D.
Threshold condition 2E: Suitability
12. COND 2.5.2G(2) states that the Authority will also take into consideration anything
that could influence a firm's continuing ability to satisfy the threshold conditions
set out in paragraphs 2E and 3D of Schedule 6 to the Act. Examples include the
firm's position within a UK or international group, information provided by overseas
regulators about the firm, and the firm's plans to seek to vary its Part 4A permission
to carry on additional regulated activities once it has been granted that permission.
13. COND 2.5.4G(2)(c)G states that examples of the kind of general considerations to
which the Authority may have regard when assessing whether a firm will satisfy,
and continue to satisfy, threshold condition 2E include, but are not limited to,
whether the firm can demonstrate that it conducts, or will conduct, its business
with integrity and in compliance with proper standards.
14. COND 2.5.6G provides that examples of the kind of particular considerations to
which the Authority may have regard when assessing whether a firm will satisfy,
and continue to satisfy, this threshold condition include, but are not limited to,
whether the firm has been open and co-operative in all its dealings with the
Authority and any other regulatory body (see Principle 11 (Relations with
regulators)) and is ready, willing and organised to comply with the requirements
and standards under the regulatory system (such as the detailed requirements of
SYSC and, in relation to a firm not carrying on, or seeking to carry on, a PRA-
regulated activity only, the Prudential Standards part of the Authority’s
Handbook)in addition to other legal, regulatory and professional obligations; the
relevant requirements and standards will depend on the circumstances of each
case, including the regulated activities which the firm has permission, or is seeking
permission, to carry on.