FCA bans adviser for failing to disclose investment interests

In September 2014, the Financial Conduct Authority (FCA) banned Peter Carron from working in financial services, as well as fining him £300,000. Mr Carron failed to disclose to his clients that he had a personal interest in his investment recommendations, and also made a number of unjustifiable claims about the likely rates of return from these investments. 11 clients of Mr Carron lost considerable sums as a result.

Mr Carron appealed an original FCA decision on the matter to the Upper Tribunal (Tax and Chancery Chamber), but on July 22 2014, that appeal was rejected.

Mr Carron was a senior adviser at St James’s Place Wealth Management Plc (SJP), one of the UK’s largest financial advisory practices. He also owned majority stakes and held the position of Director in three other firms: Primrose Associates Limited, a mortgage brokerage; Evaluate Technologies Limited, which offered online mortgage sourcing services; and Comment Technologies Limited, a technology company related to social networking sites aimed at businesses.

Over a six year period, commencing in 2004, Mr Carron advised 11 SJP clients to invest in these three companies. However, when they all went into liquidation between May and August 2010, the 11 clients lost £2.2 million of the £2.4 million they had invested between them.

Mr Carron failed to inform any of his clients of his personal interest in the investments, i.e. that he owned and controlled the companies in question; and also told investors to expect a minimum return of 10% on their investment. Even when he knew that his three companies were in financial difficulty, in January 2009, he continued to recommend these investments.

The FCA also comments that Mr Carron falsely allowed his clients to believe that SJP had endorsed the investments, that his primary motivation was to secure funding for his companies rather than to protect clients’ interests, and also that he failed to assess whether this type of investment was suitable for his clients.

SJP has paid a total of £1.9 million in compensation to the affected clients. The FCA has stressed that it has no reason to fault SJP’s conduct in this matter, and has not taken any action against the firm.

In August 2014, Mr Carron was also banned by the High Court from acting as a director or controlling/managing any company for a period of 13 years.

Tracey McDermott, director of enforcement and financial crime, said of Mr Carron’s conduct:

“People go to advisers because they want expert help on how to make the most of their money. They are entitled to expect that their adviser will act in their best interests, not his own. Advisers should think very carefully and make clear and full disclosure if they are intending to advise clients to invest in ventures in which they have an interest.”

Most financial advisers would not expect to find themselves in the same position as Mr Corcoran, i.e. where they own other companies and are in a position to offer investment opportunities in those companies. However, this episode highlights two important issues: firstly that advisers must fully disclose to their clients any conflicts of interest which may arise as a result of business activities; and secondly that the risks of any course of action must be thoroughly explained, and promises of a particular rate of return cannot be given unless that return really is 100% guaranteed.

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.