The Financial Conduct Authority (FCA) has announced that it intends to impose a variety of bans, fines and censures on three firms and five individuals. In each case, the FCA believes that the firm and their advisers failed to act with integrity when giving pension advice.
A Gloucestershire-based firm has been fined £311,639, while firms based in Cheshire and Shropshire have been publicly censured, and these two firms only escaped significant fines because they are in liquidation and would not have the means to pay a monetary penalty.
All five of the individuals have been prohibited from carrying out any role within financial services and will be required to pay fines of between £52,725 and £416,558.
The main criticisms the FCA makes of the firms are:
- They operated a pension review and advice process which involved outsourcing important functions to two unauthorised third parties. The FCA makes it clear that it is not alleging any wrongdoing is made against these two third parties, or against any of their directors or senior management. In the regulator’s eyes, the fault lies squarely with the authorised firms that inappropriately delegated these functions
- The firms marketed themselves as offering independent investment advice based on a comprehensive and fair analysis of the whole market, when in reality customers were recommended to transfer their pension savings into Self Invested Personal Pension schemes that invested in high risk, illiquid assets which were unlikely to be suitable, and where the underlying assets were not regulated by the FCA
- Two of the directors of one of the third parties were directors of the companies that issued these underlying assets, but the three firms that have been punished took no steps to manage these conflicts of interest or to disclose the conflicts of interest to customers
- The firms did not have appropriate systems and controls and compliance arrangements to oversee and monitor the advice being provided
- The firms completed pension transfer business even though they were not authorised to do so
The FCA says that four of the five individuals, all directors of the firms in question:
- Knew that the products they were recommending were unlikely to be suitable for retail customers, except in very limited circumstances and “acted recklessly in closing their minds to the obvious risks”
- Acted dishonestly by providing false and/or misleading information to the FCA, in some cases on more than one occasion
The largest fine is reserved for a de-facto director of the Shropshire-based firm, who is said to have tried to exert influence over the information that his firm disclosed to the FCA. The regulator adds that it found that this de-facto director encouraged his fellow director to withhold important information and deliberately drafted communications that were false and/or misleading.
The FCA has so far been unable to enact these sanctions, as all five individuals and the firm which is not in liquidation have all indicated that they will appeal the FCA’s findings to the Upper Tribunal.
As of January 29 2019, the Financial Services Compensation Scheme had paid compensation of £26.8 million to 1,106 customers of these firms.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article