Rockingham IFA fined £35k for exposing retirees to unsuitable advice

The Financial Services Authority (FSA) has fined Peterborough-based Rockingham Independent £35,000 and imposed partial bans on its directors and an adviser for exposing retirees to unsuitable advice.

Directors Stephen Hunt and Jonathan Edwards and adviser Gary Forster have been banned from selling complicated investments.

The FSA found a number of failures at the firm resulting in 426 customers near or at retirement age being potentially exposed to the risk of receiving unsuitable investment advice.

A year ago, Rockingham Retirement, which was registered with the FSA as Rockingham Independent, was ordered to cease all investment advising activities by the regulator.

In total, 39 investors were advised to invest in unregulated collective investment schemes (UCIS), after the firm failed to understand the regulatory restriction on the promotion of these investments.

Although UCIS are not authorised schemes there are regulations surrounding them, therefore people carrying on regulated activities in relation to them, such as giving a personal recommendation, are subject to FSA regulation.

UCIS cannot be promoted to the general public in the UK and should only be proposed to certain limited categories of investors such as sophisticated investors and high net worth individuals.

Rockingham also gave investors misleading descriptions of its pension draw down offering called the Retirement Income Tri-Investment Account (RITA), describing it as relatively low risk.

One of the underlying investments customers were offered to invest within the RITA wrapper was the ARM Bond, investing in senior life settlement policies which did not provide a capital guarantee.

Rockingham recommended the ARM Bond to cautious to moderately cautious customers and did not place restrictions on the amount placed in each underlying investment.

As a result, the FSA found examples where all of a customer's investment was placed in an ARM Bond, potentially leading to an inappropriate concentration of risk if that investment was a significant part of their overall wealth.

Rockingham made 426 advised sales in total during the relevant period, including 39 UCIS sales and over 200 ARM sales.

Hunt and Forster have been banned from holding the significant influence functions (SIF) and the controlled customer function (CF30) relating to any regulated activity promoting or recommending UCIS.

Edwards has been banned from performing compliance oversight in any regulated firm and from performing the customer function relating to any regulated activity promoting or recommending UCIS.

A fine of £20,000 would have been imposed on Edwards but for evidence that this would cause serious financial hardship.

Rockingham has stopped selling any UCIS or structured products and has also agreed to conduct a past business review to determine whether any of the sales were not suitable and whether any customer redress may be required.