The Financial Conduct Authority has banned two former directors of an IFA firm from carrying out any regulated activity after they were found to have submitted false declarations claiming that a number of customers were “high net worth”.

On six occasions, the first director went as far as to submit fabricated information, such as falsifying figures for fictitious properties. On a further 27 occasions, he incorrectly claimed to have seen evidence of the customers’ net worth; and on another occasion, he submitted false information about his own financial circumstances to the SIPP provider – he himself did not qualify as ‘high net worth’. This director held the CF10 (Compliance Oversight) function for the firm.

The second director falsely claimed to have seen evidence of his customers’ net worth status on 48 occasions – again he admitted to the FCA that he simply accepted the word of his customers that they possessed the necessary net worth.

The FCA says that, by encouraging more customers to invest in a particular company’s shares via the SIPP, the two directors “generated substantial fees and commissions” and that their customers suffered financial losses. These shares were unlisted securities of a renewable fuels company which the SIPP provider considered to be high risk, non-standard investments and which could only be purchased via the SIPP if high net worth declarations were completed by the customers. The shares in this company subsequently became worthless, thus illustrating their high-risk nature.

To be considered high net worth, an investor had to have an annual income of £100,000 or more or hold net assets to the value of £250,000 or more (excluding the investor’s pension and primary residence).

The Leeds-based firm of which the pair were directors is now in liquidation. The two directors held equal shareholdings and together held a controlling interest.

The false declarations were made to a well-known self-invested personal pension (SIPP) provider, which had no knowledge of their actions, and no blame can be attached to the SIPP provider here.

The Final Notice for the first director says:

“[name]’s deliberate misrepresentations to another market participant over a prolonged period, for personal gain and to circumvent safeguards for non-HNWIs, meant that his conduct fell below the standard expected of those working in the financial services industry.

The ability of SIPP Providers and other financial firms to trust, and rely upon, signed declarations made by other market participants is of fundamental importance to the integrity of the UK’s financial system. In the light of the serious nature of his dishonest misconduct, the Authority considers that [name] poses a serious risk to consumers and the integrity of the UK financial system and is not a fit and proper person to perform any function in relation to any regulated activities carried on by an authorised person, exempt person or exempt professional firm.”

The Notice for the second director says:

“[name]’s knowing misrepresentations to another market participant over a prolonged period, for personal gain, meant that his conduct fell far below the standard expected of those working in the financial services industry. The ability of SIPP Providers and other financial firms to trust and rely upon signed declarations made by other market participants is of fundamental importance to the integrity of the UK’s financial system. For the reasons set out herein above, [name] has demonstrated that he lacks the integrity expected under the regulatory system. In the light of the serious nature of his misconduct, the Authority considers that [name] poses a serious risk to consumers and the integrity of the UK financial system and is not a fit and proper person to perform any function in relation to any regulated activities carried on by any authorised person, exempt person or exempt professional firm.”

FCA Executive Director of Enforcement and Market Oversight, Mark Steward, said:

“Both advisers knew, or should have known, that what they were doing lacked integrity and betrayed the high standards expected by the FCA. They have no place in the financial services industry.”

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 of the facts, circumstances or legal position may change after publication of the article