14Apr

The Financial Conduct Authority has refused an application for authorisation from a Grantham-based firm, largely because of concerns the regulator identified with the firm’s director in his previous employments.

The firm was seeking a very wide range of different permissions, which included a number of specialist areas:

  • Pension transfer and opt out advice
  • Peer-to-peer agreements
  • Debt counselling
  • Mortgage advice
  • Investment advice

The firm’s authorisation application explained that there would only be one director, and that he would also carry out the compliance oversight and anti-money laundering roles.

At one of his previous firms, this prospective director was found to have failed to adequately monitor the effectiveness of pension transfer advice. 426 drawdown customers were advised to invest in complex areas such as life settlements, structured products and Unregulated Collective Investment Schemes (UCIS), and this led to the individual being fined £35,000 and banned from holding a significant influence role at any firm that promoted and/or recommended UCIS or structured capital at risk products to retail customers.

Officially, this prohibition was no longer in force, but the FCA was entitled to consider the prospective director’s past disciplinary history when assessing his new firm’s authorisation application.

The individual in question attempted to address some of the FCA’s main concerns by giving details of file reviews that would be carried out by external consultants. However, the regulator says some of his answers as to what level of support would be provided by these consultants were inconsistent. In any case, listing the file checks that a third party will carry out does not in any way demonstrate that the management of the firm itself understands the products and services they are offering and has the necessary skills, expertise and competence.

The FCA also comments that the firm’s application did not include an anti-money laundering procedure or a vulnerable customers procedure and that the compliance monitoring procedure was too generic and was not tailored to the specific way the firm would operate. The regulator adds that it considers that a vulnerable customers policy is particularly important for a firm that might be advising customers who are approaching retirement.

Another observation made by the FCA was that he was unable to demonstrate any experience in the area of anti-money laundering oversight.

At one point, the prospective director of the firm told the FCA that “he would set up all the firm’s systems and controls after authorisation.”

This did not impress the FCA, who say in response:

“In the Authority’s view, this demonstrates that the firm is not ready, willing and organised to comply with regulatory requirements, as the appropriate systems and controls, policies and procedures should be in place prior to authorisation.”

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