If you sell your IFA business, as opposed to shares in a limited company, you may need to close down your existing structure. This may be a sole trader, partnership or LLP structure.

Alternatively, the business and assets of a corporate entity may have been sold to the purchaser leaving the shell company behind.

FCA authorisation

If you’ve sold the business and assets of your firm, you’ll still retain your FCA authorisation; it will be up to you to apply to the FCA for de-authorisation. The FCA have a defined process for this that you’ll be required to go through. One of the key questions the FCA will ask when considering whether de-authorisation is appropriate, is what arrangements have been put in place to deal with complaints arising from advice given in the past.

Who is liable for prior advice?

Generally, buyers will not assume liability for prior advice, meaning you will remain responsible. The financial responsibility for prior advice is usually addressed by taking out run-off cover; this provides professional indemnity insurance cover for the benefit of the clients of the business.

Do you have professional indemnity insurance?

The FCA will look at a number of factors when dealing with de-authorisation requests. One of the key factors is whether or not there are sufficient resources in place to deal with prior advice problems. Of course, having professional indemnity insurance will help with meeting this requirement.

For sole traders and general partnerships (i.e. not limited liability), it’s very important that run-off cover is considered at an early stage. There are two reasons for this:

Firstly, the purchaser may not be prepared to take on prior advice liabilities. Sole traders and unlimited partners could face potentially significant liabilities if they don’t have the benefit of insurance.

Secondly, even if the purchaser is prepared to take on prior advice liabilities, it’s not possible to transfer prior advice liabilities without the consent of each and every client with a potential claim against the business. A buyer may agree to meet those liabilities, but if they go out of business, the client can still come back to the original adviser.

If a limited company (or LLP) has sold its business and assets, then it will also face the question of prior advice liabilities. De-authorisation should be sought, particularly if the shareholders or officers of the company or LLP intend to continue to trade within the financial services sector. There is also, once de-authorisation has been permitted, the question of what happens to the corporate shell. Most sellers liquidate the company or LLP to extract the sale proceeds.


If you’re a member of a network, you will need to comply with the exiting procedures set by your network provider.

Often, the network will have a procedure in place when exiting, which you would have signed up to when you joined. Networks will provide a ‘consent to transfer’ letter, which will then be sent to the providers along with the novation. Usually, networks will also arrange for run-off cover to be put in place and for this reason insist on retaining client files.

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