The Financial Conduct Authority has banned five directors of advice firms, and fined them over £1mn, after they caused significant losses to pension clients.
It follows a 300-page judgment issued by the Upper Tribunal in which the five directors unsuccessfully challenged the FCA’s decisions.
The tribunal found Andrew Page, Thomas Ward, Aiden Henderson, Robert Ward and Tristan Freer had failed to act with integrity “having either acted dishonestly or recklessly”.
Each had been directors at failed financial advice firms: Financial Page Ltd, Henderson Carter Associates Limited, and Bank House Investment Management Limited. Three of them were financial advisers.
The City watchdog said the firms provided unsuitable advice to more than 2,000 customers, with losses of more than £50mn.
The FCA said the firms caused customers to place their pensions in high-risk financial products in self-invested personal pensions in which Hennessy Jones, an unauthorised firm, had a significant financial interest.
Speaking at a briefing this morning (May 9), FCA executive director of enforcement and market oversight Mark Steward, said: “We think this is a very significant case and a real wake up call for many IFAs across the country who think they can get away with lax KYC, not only with their customers, but with people who are outside the regulator’s perimeter.
“There are some real lessons to be learned here, which is why we want this decision to be understood loud and clear.”
In the decision published on Friday (May 6), the tribunal made some observations on some of the client files and experiences that the clients had.
It found the directors did not consider the actual circumstances of the customers such as looking at whether they were ill or unemployed or if there had been any bereavements.
“We think that’s a very, very valuable and helpful appendix that the tribunal has added to the judgment itself with some really pertinent comments about the failures of the advisers in this case. We really do hope that the lessons of this decision are heard loud and clear across the industry.”
These customers had been referred to the firms by Hennessy Jones which was also involved in designing the pension advice process used by these firms.
Although consumers have now been compensated by the Financial Services Compensation Scheme, the FCA said as well as the negative impact on consumers, this also affected other firms which have to contribute to the costs of the FSCS.
The tribunal found that all the five individuals allowed their “instincts and values to be overridden” and their judgment to be compromised for personal financial gain.
The regulator said the directors “failed to scrutinise” where their customers’ pension funds were being invested and this has led to very large penalties being imposed for directors of small IFA firms.
Steward said: “No reputable financial adviser should recommend that people put their entire pension savings in high-risk investments.