Almost £900m in dormant funds are expected to be unlocked for charities through the expansion of the Dormant Assets Scheme, the Financial Conduct Authority has said.

The scheme’s expansion is estimated to unlock a further £880m after it was widened to include dormant investment assets and client money, the regulator said.

The first phase of the expansion, which covered insurance, pensions and securities, saw changes made in August 2022.

A consultation for the second phase ended in July last year and the FCA said it received 14 responses from stakeholders including trade bodies, investment firms and insurance firms.

“Most respondents were either supportive of or neutral to the proposals,” the FCA said.

The FCA consulted on amendments to its rules addressing the discharge of firms’ client money to charity and creating tracing requirements.

One proposal raised the question of whether firms participating in the DAS should be required to first attempt to transfer client money to the scheme before attempting to pay away to charity.

“There was a mixed response to this question,” the FCA said.

“Several respondents strongly supported the proposed priority afforded to the DAS, believing it would bring clarity to, and benefit, both consumers and the DAS. 

“Other respondents strongly opposed the proposal, arguing that firms should retain discretion and that mandating priority to the DAS would deter firms from participating.”

The FCA decided not to impose a requirement granting priority to the DAS over the existing provision that allows an investment firm to pay away allocated but unclaimed client money to a registered charity.

“We are mindful of deterring participation in the DAS given the scheme’s considerable benefits to society and recognise there may be circumstances where a participant firm has a valid reason for choosing to pay away client money to charity, even though it may meet the criteria for transfer to the DAS,” the FCA said.

Another proposal suggested requirements for firms to take reasonable steps to trace clients prior to transferring client money balances to the DAS.

“We are introducing these rules as consulted on,” the FCA said.

“We believe the consistency between these provisions and those that apply when firms pay away dormant client money to charity will aid clarity and allow firms to streamline processes.”