19th May 2025
As the UK economy continues to seesaw between recession, standing still or growing there has been a real trend in businesses that provide a statutory, or critical, public service, or supply to the public, to come under significant pressure.
This has led to financial regulators, very wisely, forming the opinion that the standard procedures, such as an Insolvency Act administration, will not provide the outcome that we require for this type of organisation.
Hence the introduction of various special administration regimes (SAR).
Generally, the hope is that the regimes will improve the result for the key stakeholders (often the public).
The objectives of the regimes are also tailored to the sector and often vary from those stated in normal circumstances. More and more sectors now have special administration regimes available to them which include investment banks, the water industry, energy companies, postal services, payment and electronic money providers.
We would not be surprised to see this expand in years to come to include the wider education sector, which is currently experiencing a high level of stress and attracting a lot of attention since the change of government.
Special administrations always require significant sector know-how and the regimes (new and existing) themselves still bring challenges with them.
Grabbing headlines
The regime that grabs most of the headlines is in the financial sector where both the Financial Conduct Authority (FCA) and the Financial Services Compensation Scheme (FSCS) play key roles.
Despite macroeconomic challenges it remains one of the largest sectors in the UK, attracting a lot of investment and would be disruptors. The technology around it is racing forward, and other countries are looking to capitalise on any opportunities that over regulation, or slow adoption of new technologies, may create.
Given the potential rewards, it is also a sector that attracts more bad actors than any other. So, regulating this space is not easy and the FCA very rarely gets any thanks.
It is clearly in its interest to prevent failures, but often once bad actors have been caught or new case law is accepted, it is sometimes the only route left. Their colleagues at the FSCS then often play a key role alongside the Special Administrators.
Top takeaways
The FSCS protects eligible customers by paying their share of the costs of transferring their assets to a new firm, up to the FSCS limit of £85,000 per eligible customer.
Once they have deemed that their protection is available, they usually seek a place on the clients’ and creditors’ committee and will collaborate directly with the administrators throughout the life of the case.
The FSCS worked with experienced colleagues at Leonard Curtis, Andrew Poxon, Hilary Pascoe and myself, when we were appointed as Special Administrators to leading stockbrokers SVS Securities and wealth management firm Blankstone Sington.
Ideally customers won’t have any direct engagement with the FSCS. During the special administration process, the aim is for their assets and money to be transferred to a new broker, when they will once again have access to their money.
In SVS, we managed to be the first ever special administrators to transfer all the clients and assets to a single broker and in so doing ensured the process was as swift and cost effective as it could be.
Other Leonard Curtis appointments in recent years include Liberty Sipp, Forthplus Pensions and, most recently, e-money provider Nvayo, handled by London-based partner Dane O’Hara with support from Andrew and myself.