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The FSA has fined one IFA firm and censured another for advice failings on unregulated collective investment schemes (UCIS) and geared traded endowment polices (GTEPs).
Specialist Solutions was fined £35,000 for failing to adequately assess customers were eligible to receive UCIS promotions and not ensuring they were given suitable advice to invest in them.
The FSA says it uncovered the issues with Specialist Solutions as part of its thematic review into the promotion of UCIS in 2010.
In October 2010 the FSA ordered the firm to appoint a skilled person to review promotions and advice given to customers to invest in UCIS in 2008 and 2009.
The firm recommended UCIS to 101 customers who invested a total of over £11m in one or more of the three UCIS funds promoted by the firm during that time.
Specialist Solutions failed to comply with legislation governing the promotion of UCIS, and in nearly 50% of the 20 files reviewed to date for suitability the advice given to customers was found to be unsuitable, the FSA says.
Specialist Solutions must contact customers for whom it may have been unsuitable to invest in UCIS to offer redress to any who have suffered detriment.
The FSA has also publicly censured The Matrix Model Group for failings in relation to sales of a GTEP product.
The Matrix Model Group did not take reasonable care to ensure the suitability of its advice in recommending the GTEP product, says the regulator.
The firm failed to match customers' attitudes to risk to the product profile and did not communicate the risks involved with the GTEP product to customers, the FSA says.
Issues with The Matrix Model Group's advice on GTEPs came to the FSA's attention during a thematic review of GTEPs in 2007.
The Matrix Model Group has since contacted all of its GTEP customers to complete new customer fact-find documents and will subsequently contact those customers who may have received unsuitable advice.
Tom Spender, head of retail enforcement at the FSA, says the regulator's thematic work on both UCIS and GTEPs has uncovered a number of cases where there have been serious failings in the quality and suitability of advice given to customers.
Specialist Solutions was originally fined £50,000 but agreed to settle at an early stage and therefore qualified for a 30% discount.
The FSA originally sought to impose a fine of £45,000 on The Matrix Model Group. However, The Matrix Model Group provided verifiable evidence that this would cause serious financial hardship.
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Defies belief.
Two interesting points: 1. Notwithstanding the above, the FSA still expects us to consider these sorts of ‘flaky’ products if we are to retain our independent status. Why? So they can fine us if we advise on them, or confiscate our independent status when we don’t? 2. The Adviser manages to stump up £35k in fines while the provider can plead poverty for £45k. What sort of provider can’t raise £45k? Why are they even allowed to trade if they are so skint? What sort of Capital Adequacy do they have? Aren’t they in breach on this score anyway? What is the regulator waiting for – another Key data? Close them down now, before some real damage is done. I don’t want another FSCS levy thank you very much.
Posted by: Harry Katz
UCIS Mis-selling
Specialist Solutions is fined £35k for mis-selling £11m to over 100 clients - they almost certainly made a lot of money flogging the UCIS funds to anyone and everyone, so £35k is not even a slap on the wrist! Where is the deterrent?
Posted by: Hmmm
Two matrices
Harry, I think you are confusing The Matrix Model Group (an IFA) with Matrix Group, the respected private equity and boutique fund house. Keith
Posted by: Keith Robertson
judge ye not lest you shall be judged
What are the qualifications and time served experiences of those that judged the advice to be defective? I am appalled by the majority of self satisfied responses to this news item.
Posted by: Terence P O'Halloran
Consumer Detriment?
The fines were issued for unsuitable advice but did the investors lose any money? Are we to assume that the FSA now regulates products and irrespective of future returns, can deem anyone in breach as a matter of opinion.However,consideration of these type of products will be mandatory in future to retain Independence.
Posted by: Peter Taylor
A couple of points...
@ Harry There's nothing wrong with considering UCIS, ETFs, Life Settlements etc and coming to the conclusion "No, not going to touch these". @ Peter There are extremely strict regulations determining who can, and more importantly who cannot have UCIS advised/sold to them. You should perhaps read the FMSA2000 Chapter 8 Part XVII Chapter II and the SI 2001 No 1060 Part III 21 and 23. The FSA didn't fine SS based on investors losing money - they fined them for making promotions which are expressly prohibited!
Posted by: You must be joking
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Unsuitable Advice
I find it incredible that Matrix have been let off so to speak because a fine would cause financial hardship. What about the clients who may find themselves in financial hardship due to unsuitable advice. Is it the case that firms will escape fines because they cannot afford to pay, maybe if they kept their house in order and not give out poor advice they would be in a better financial position.
Posted by: Duncan Philp