Advisers must also be on the alert for "increasingly sophisticated" scammers, and ensure that they have sufficient oversight of their appointed representatives and the products and services that they recommend, according to the letter. They should be particularly careful about introductions from introducers or 'lead generators', particularly those with influence over the final investment choice; and about non-standard investments.
Pension scams expert Ben Fairhead of Pinsent Masons, the law firm behind Out-Law, said: "This ties in with recent coverage around the losses suffered by British Steel pension scheme members, as well as increased burdens on the Financial Services Compensation Scheme (FSCS) as a result of failing regulated entities".
"In the scams context, so much activity is driven by unregulated introducers with limited assets and no insurance that any involvement of a regulated adviser – even peripherally – inevitably comes in for greater scrutiny. We are seeing increased action on that front from claims management companies in particular," he said.
The FCA is becoming increasingly concerned that some advisers among those offering DB transfer advice, have insufficient PII and financial resources to cover their business activities. "Where this is the case, it increases the risk of firms being unable to put things right where they have caused harm to their clients," Gupta said in the letter.
"The inability to compensate consumers, and the transfer of these costs to other market participants via the FSCS levy, is unfair and places an unnecessary burden on other firms. It also threatens confidence and participation in financial services markets," she said.
In some cases, the PII that they do have in place excludes or places limits on particular business lines, or requires firms to pay 'excess' on claims set "at such a level as to render the cover materially ineffective", according to the letter.
The FCA's temporary ban on the promotion of unlisted speculative 'mini bonds' came into force on 1 January, ahead of a proposed consultation on permanent rules. These products can now only be marketed to investors known to firms as sophisticated or having high net worth status, and only if the associated risks, costs and third party payments made from funds raised are clearly explained.