Yesterday (Wednesday), Rational Foreign Exchange Limited (RFX) initiated special administration under the Payment and Electronic Money Institution Insolvency Regulations 2021, appointing Ed Boyle and Kristina Kicks of Interpath Ltd as joint special administrators (JSAs).
JSAs' Role in Managing Customer Claims during RFX Administration
RFX provides foreign exchange and payment services to both corporate and retail clients, holding authorization from the Financial Conduct Authority (FCA) to offer payment services under the Payment Services Regulations 2017 (PSRs). The company's directors determined insolvency and sought a special administration order from the court.
The JSAs' primary responsibilities include managing customer claims against RFX and facilitating fund distributions to customers when feasible. Customers are encouraged to reach out to the JSAs for concerns, questions, or updates. The JSAs will collect relevant information from RFX creditors and customers regarding payments made to or owed by the company.
Simultaneously, Xendpay Limited, a PSD Agent of RFX under common ownership, entered administration, with Boyle and Kicks overseeing its affairs.
On the same day, the FCA imposed its own initiative requirement on RFX, limiting its activities, as detailed on the FS Register. The Payment and Electronic Money Institution Insolvency Regulations 2021 introduced a special administration regime, similar to ordinary administration but with an additional objective of promptly returning customer funds.
In a website post, the FCA stated that the Financial Services Compensation Scheme does not cover payment services; instead, the PSRs impose safeguarding requirements on regulated payment firms. RFX, obligated to segregate customer funds, will undergo an assessment by the JSAs to distinguish safeguarded funds from those belonging to the firm.
Despite the special administration order, RFX maintains FCA authorization, with the JSAs acting as officers of the court and complying with insolvency laws. The appointed individuals are licensed insolvency practitioners with statutory objectives, including engagement with authorities such as the FCA.
Foreign exchange and payment services firm Rational Foreign Exchange (RFX) Ltd enters special administration. #PaymentServices #ForeignExchangehttps://t.co/uPL7kP0rkn
— Financial Conduct Authority (@TheFCA) November 30, 2023
Impact on Financial Firms: Over a Thousand Licenses Revoked
The FCA in the UK has expedited the process of revoking licenses from financial firms that are not actively using them, as reported by Finance Magnates. This measure, aimed at safeguarding consumers from heightened risks associated with such companies, has been applied over a thousand times, affecting 762 companies.
Recent data reveals that, as of October 16, 2023, the FCA impacted 1,100 individual business lines, with over 300 entities either voluntarily applying to cancel their licenses or having them revoked by the regulator. Previously, the FCA had a 12-month period to cancel a license after issuing the first warning, but now it can act within 28 days.
The FCA emphasizes that businesses must demonstrate active engagement in regulated activities, or risk losing their permissions. The report questions how a licensed firm, even one not utilizing its licenses, could potentially harm consumers.
