FINAL NOTICE

FS Claims Ltd

The Leeming Building
Ludgate Hill
Leeds
West Yorkshire
LS2 7HZ

ACTION

1. By an application dated 27 April 2019 (“the Application”), FS Claims Ltd (“FS

Claims”) applied under section 55A of the Act for Part 4A permission to carry on
the following regulated activities:

a. 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); and

b. advice, investigation or representation in relation to a financial services or

financial product claim.

2. The Application is incomplete.

3. The Authority has refused the Application.

SUMMARY OF REASONS

4. By its Warning Notice dated 29 November 2019, the Authority gave notice that it

proposed to refuse the Application and that FS Claims was entitled to make
representations to the Authority about that proposed action.

5. As no representations were received by the Authority from FS Claims 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 applied, permitting the
Authority to treat the matters referred to in its Warning Notice as undisputed and,
accordingly, to give a Decision Notice.

6. By its Decision Notice dated 27 December 2019 (“the Decision Notice”), the

Authority gave FS Claims notice that it had decided to take the action described
above.

7. FS Claims had 28 days from the date the Decision Notice was given to refer the

matter to the Upper Tribunal. No referral was made to the Upper Tribunal within
this period of time or to date.

8. Under section 390(1) of the Act, the Authority, having decided to refuse the

Application and there having been no reference of that decision to the Tribunal,
must give FS Claims a final notice of its refusal.

9. FS Claims failed to respond to four separate requests for the provision of

information considered by the Authority to be necessary to enable the Authority to
determine the Application. These requests were made over a six-week period, and
three of the requests included a statement that FS Claims must contact the
Authority or the Authority would recommend to the Authority’s Regulatory
Transactions Committee (“RTC”) that FS Claims be given a Warning Notice.

10. The Authority has therefore determined 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 FS Claims
satisfies, and will continue to satisfy, the threshold conditions for which the
Authority is responsible.

11. 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 raises concerns that FS Claims would fail to do so if the Application
were to be granted.

12. The failure to provide the information means that the Authority cannot ensure that

FS Claims will satisfy, and continue to satisfy, the threshold conditions for which
the Authority is responsible, in relation to all the regulated activities for which FS
Claims would have permission. In particular, the Authority cannot ensure that FS
Claims:

a. can be effectively supervised by the Authority as required by threshold

condition 2C;

b. has appropriate human resources, given FS Claims’ failure to provide the

Authority with the requested information as required by threshold condition
2D; and

c. will conduct its business with integrity and in compliance with proper

standards as required by threshold condition 2E.

DEFINITIONS

13. The definitions below are used in this Final 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 Financial Conduct Authority

“CASS” means the Client Assets section of the Authority’s handbook

“CMCOB” means the Claims Management: Conduct of Business section of the
Authority’s handbook

“the Decision Notice” means the decision notice dated 27 December 2019 given to
FS Claims by the Authority

“the FOS” means the Financial Ombudsman Service

“FS Claims” means FS Claims Ltd

“IFA”’ means an independent financial advisor

“the RDC” means the Authority’s Regulatory Decisions Committee

“the RTC” means the Authority’s Regulatory Transactions 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

“the Upper Tribunal” means the Upper Tribunal (Tax & Chancery Chamber)

“the Warning Notice” means the warning notice dated 29 November 2019 given to
FS Claims by the Authority

FACTS AND MATTERS

14. The Application was received by the Authority on 27 April 2019.

15. Further information was requested from FS Claims under section 55U(5) of the Act.

16. Details of all relevant communications between the Authority and FS Claims are set

out below.

17. Between 23 May 2019 and 6 August 2019, the Authority sent FS Claims one email,

four letters and made one telephone call in an attempt to obtain information from
FS Claims that would assist the Authority in determining the Application.

18. The Authority informed FS Claims of its concerns in relation to the Application by

telephone on 23 May 2019 and email on 24 May 2019. In summary, the Authority’s
concerns communicated by way of the telephone call and email were that:

a. The client money procedures submitted with the Application had not

provided adequate assurance of the security of client money.

b. FS Claims stated it would conduct 100% of its sales via the internet but had

not provided any examples of the material it intended to use, or explained
how it would ensure that material is fair, clear and not misleading.

c. FS Claims had not provided:

i.
details of how FS Claims would ensure compliance with CMCOB 4 and
CMCOB 6 with regard to pre-contractual and contractual information;

ii.
a vulnerable persons policy;

iii.
monthly cash flow and profit and loss calculations;

iv.
a financial resources calculation as set out in CMCOB 7; or

v.
controller information.

d. FS Claims had not identified any conduct risks, or explained the controls it

would put in place to mitigate conduct risks.

e. The monitoring programme and compliance procedures that had been

provided were generic and not tailored to the proposed business.

f.
FS Claims did not explain how it would ensure customers would be informed
that they could complain to the Financial Ombudsman Service (“FOS”) for
free without using a claims management company.

g. FS Claims’ business plan stated that file reviews would be outsourced to an

independent financial advisor (“IFA”) specialising in final salary pension
investments. FS Claims had not explained how it would satisfy itself that the
IFA would be competent to perform those reviews either at authorisation or
on an ongoing basis.

h. FS Claims’ opening balance sheet included a figure for a sales income asset

before trading had even commenced, and made no reference to the paid-
up share capital mentioned elsewhere in the Application. Further, the
opening balance sheet was identical to the closing balance sheet.

i.
The individual form for FS Claims’ sole director did not include a date of
birth, provided no indication of any recent experience of running a claims
management company, and did not explain how the sole director intended
to gain the experience necessary to conduct claims management activities
by the date of authorisation.

19. The Authority’s email dated 24 May 2019 also requested that FS Claims:

a. either provide a timescale for when it would address the Authority’s

concerns or consider withdrawing the Application; and

b. confirm how it wished to proceed by 7 June 2019.

20. On 7 June 2019, FS Claims emailed the Authority to request another two weeks to

provide a timescale for a response. Accordingly, the Authority expected to receive
a timescale for a response by 21 June 2019.

21. FS Claims failed to provide a timescale for a response by 21 June 2019.

22. On 27 June 2019, the Authority sent a letter to FS Claims under cover of an email

requesting that FS Claims provide the following information in support of the
Application by 4 July 2019:

a. details of how FS Claims will ensure the security of client money and

compliance with the rules in CASS 13, including but not limited to how FS
Claims will carry out the daily internal and external client money
reconciliations;

b. examples of the material FS Claims intended to use to market its services,

and how it will ensure that material is fair, clear and not misleading (CMCOB
3);

c. pre-contractual and contractual information as set out in CMCOB 4 and

CMCOB 6 respectively;

d. a vulnerable persons policy;

e. FS Claims’ assessment of the conduct risks, and how it proposes to mitigate

those risks;

f.
monthly cash flow and profit and loss calculations;

g. a prudential resources calculation as set out in CMCOB 7;

h. controller information;

i.
a compliance monitoring programme and compliance procedures tailored to
FS Claims;

j.
an explanation of how FS Claims will ensure customers know they can
complain to the FOS for free without using a claims management company;

k. how FS Claims will satisfy itself that the individuals performing file reviews

are competent to perform those reviews, at authorisation and on an ongoing
basis;

l.
opening and closing balance sheets which properly reflect the expected
activity of FS Claims in its first year, and the financial position of FS Claims
at the start and end of the first year of authorisation;

m. details showing how FS Claims’ sole director has the experience necessary

to conduct claims management activities; and

n. the sole director’s date of birth.

23. FS Claims failed to provide the information by 4 July 2019.

24. On 5 July 2019, the Authority sent a letter to FS Claims under cover of an email,

noting the lack of a response to its request for the information on 27 June 2019
and informing FS Claims that a failure to provide the information would result in
the Application being determined based upon the information received to date, and
that this might result in a recommendation to the RTC that it issue FS Claims with
a Warning Notice proposing to refuse the Application. No response was received to
this correspondence by the stated deadline of 19 July 2019.

25. On 13 July 2019, FS Claims responded to the Authority by way of an email stating:

“we have sought further assistance from a specialist compliance firm for our
application to ensure that we can ensure a complete application at the earliest
opportunity. We have a further meeting this week, by which time I hope to provide
a definite timescale to when you can expect the outstanding information requested
and therefore complete the application.”

26. FS Claims did not contact the Authority the following week with a “definite

timescale” as to when the information would be provided.

27. On 22 July 2019, the Authority sent a letter to FS Claims by way of email and

recorded delivery, noting the lack of a response to its requests for information on
27 June 2019 and 5 July 2019, informing it that a failure to provide the information
would result in the Application being determined based upon the information
received to date, and that this might result in a recommendation to the RTC that it
issue FS Claims with a Warning Notice proposing to refuse the Application. No
response was received to this correspondence by the stated deadline of 5 August
2019.

28. On 31 July 2019, FS Claims responded stating: “The compliance firm I’ve instructed

has a bit of a back log, which is slowing things down somewhat. I’ll email you next
week to give you an update with an estimated timescale on getting all the
information to you.”

29. On 6 August 2019, the Authority sent a letter to FS Claims by way of email and

recorded delivery, noting the lack of a response to its requests for the information
and informing it that a failure to provide the information would result in the
Application being determined based upon the information received to date, and
that this might result in a recommendation to the RTC that it issue FS Claims with
a Warning Notice proposing to refuse the Application. No response was received to
this correspondence by the stated deadline of 20 August 2019.

30. On 13 August 2019, FS Claims responded to the Authority by way of email stating:

“The relevant person at the compliance firm is on annual leave at the moment,
which is causing further delays. They should be back next week. I’ll email you once
they’re back and I have a better idea of time.”

31. On 29 August 2019, FS Claims sent a further email to the Authority stating: “I’ve

actually moved to a different Compliancy firm, as the one I had initially instructed
have too large a back log which is causing delays. I should know by next week from
the new firm with a timescale.”

32. On 4 September 2019, the Authority telephoned FS Claims and informed it that it

was the Authority’s view that FS Claims had been given ample opportunity to
provide the information but had failed to do so and that the Authority would
therefore proceed to determine the Application.

33. On 23 October 2019, the Authority made a final attempt to contact FS Claims by

telephone. However, the call was not answered by FS Claims. Consequently, the
Authority left a voicemail and sent an email to FS Claims asking it to contact the
Authority. FS Claims failed to respond to the Authority’s voicemail or email.

IMPACT ON THRESHOLD CONDITIONS

34. The regulatory provisions relevant to this Final Notice are referred to in Annex A.

35. FS Claims failed to respond to four separate requests for the provision of

information considered by the Authority to be necessary to enable the Authority to
determine the Application. These requests were made over a six-week period and
three of these requests included a statement that FS Claims must contact the
Authority or the Authority would recommend to the RTC that FS Claims be given a
Warning Notice.

36. The Authority has therefore determined 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 FS Claims
satisfies, and will continue to satisfy, the threshold conditions for which the
Authority is responsible.

37. 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 raises concerns that FS Claims would fail to do so if the Application
were to be granted.

38. The failure to provide the information means that the Authority cannot ensure that

a. can be effectively supervised by the Authority as required by threshold

condition 2C;

b. has appropriate human resources, given FS Claims’ failure to provide the

Authority with the requested information as required by threshold condition
2D; and

c. will conduct its business with integrity and in compliance with proper

standards as required by threshold condition 2E.

IMPORTANT NOTICES

39. This Final Notice is given under section 390(1) of the Act.

40. Sections 391(4), 391(6) and 391(7) of the Act apply to the publication of

information about the matter to which this Notice relates. Under those provisions,
the Authority must publish such information about the matter to which this Notice
relates as the Authority considers appropriate. The information may be published
in such manner as the Authority considers appropriate. However, the Authority may
not publish information if such publication would, in the opinion of the Authority,
be unfair to you or prejudicial to the interests of consumers or detrimental to the
stability of the UK financial system.

41. The Authority intends to publish such information about the matter to which this

Final Notice relates as it considers appropriate.

Authority contacts

42. For more information concerning this matter generally, contact Mike Baker,

Manager, Claims Management Companies Department at the Authority (direct line:
020 7066 1026 /email: mike.baker@fca.org.uk).

Hilary Bourne
on behalf of the Regulatory Transactions Committee

ANNEX A – REGULATORY PROVISIONS RELEVANT TO THIS FINAL 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 titled 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)(a) 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.