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Topics: UCIS| FSA| enforcement
Pave Financial Management is to have its permissions cancelled by the FSA following the mis-selling of unregulated collective investment schemes (UCIS), with two of its directors also being punished.
In decision notices published on its website this week, dated 3 November, the FSA said the company's sales model and practices exposed customers to "a very significant risk of financial loss despite no evidence that they could sustain such losses".
Some customers were advised to remortgage their homes to raise funds to invest in UCIS with no documented assessment of their capacity to sustain losses, while others were advised to switch from existing pension schemes and to establish SIPPs where the underlying investments included high concentrations of UCIS.
The case has been referred to the Upper Tribunal, which will make a final decision on Pave and its directors.
The failings at the Somerset-based company occurred between 15 November 2005 and 4 August 2010.
One of the directors, Timothy Pattison, has been fined £90,000 and prohibited from carrying out any regulated activities because he is "not a fit and proper person in terms of a lack of integrity and a lack of competence and capability".
Meanwhile, the another director, Stephen Hocking, has been prohibited for the same reason, although he avoided a penalty of £25,000 by proving this would cause "serious financial hardship".
As a result of these planned enforcement actions, the FSA concluded Pave would not have adequate human resources to continue operating it, and has therefore decided to cancel its permissions.
The regulator said Pattison "closed his mind to the risks associated with advising Pave's customers to invest so heavily in UCIS", leading to at least 65 clients putting their money into such products.
In one case, Hocking increased the risk profile of a vulnerable elderly client and advised her to surrender six of her eight bonds totalling £885,000 and to re-invest the proceeds including a total of £680,200 into two UCIS funds.
The FSA concluded both would pose a "serious risk to consumers" if they were allowed to continue carrying out regulated activities.
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IFA's publically guilty before hearing
Apparently the UCIS recommended were Arch Cru Private Finance IC Ltd and EEA Life Settlements. I am dismayed that the FSA have not delayed action given the contents of the Report and Financial Statement for the Arch fund (now SPL)fund issued to the Channel Islands Stock Exchange on the 9th August 2011. The following is a link to the report, http://www.cisx.com/download_news.php?newsID=178817 Before anybody comments on this matter I would suggest they read pages 4 and 5 of the report. People could also look up the following New Model Adviser article Arch faces legal battle over failed Cru funds by Jun Merrett on Aug 11, 2011 at 13:11 which was written immediately following the publication of the report, but pages 4 and 5 of the actual report are even more revealing. For some inexplicable reason the FSA do not want to acknowledge the actions detailed in the report or the fact that Arch Financial Products LLP were not only the fund manager for the Guernsey ICC Ltd company but also CAPITA’s delegated fund manager for the CF Arch Cru UK authorised OEIC’s and therefore responsible for CAPITA’s continued investment of the UK authorised OEIC’s funds into the “unregulated” Guernsey ICC Ltd companies. The FSA’s ignoring of the report might have something to do with the fact that as CAPITA are the Authorised Corporate Director of the UK OEIC’s then they have legal liability for Arch Financial Product LLP’s actions in the UK. So one of the UCIS funds was the Guernsey based Arch cru Private Finance IC Ltd closed ended investment company. A company that CAPITA ended up having over a 75% shareholding in through continuous purchases of shares via the FSA authorised UK based CF Arch Cru OEIC funds Very few bloggers seem to understand that just because UCIS are unregulated by the FSA does not mean that all UCIS we are some sort of dodgy back room deal. Indeed Arch cru Private Finance IC Ltd was Authorised and Regulated by the Guernsey Financial Services Commission, a look at the biographies of the 7 Commissioners of the Guernsey Financial Services Commission shows that 3 are currently UK FSA authorised individuals – Lord Howard Flight, Dr Cees Schrauwers and Richard Hobbs. If IFA’s cannot trust that funds that have a connection with Guernsey are well run then maybe Margaret Cole of the FSA/FCA would like to make a similar statement to the one she recently made about the life settlement funds and say that any fund with connections to Guernsey are toxic, that should set the cat amongst the pigeons in the fund management world. No one without knowing the full facts can make an informed comment about the rights and wrongs regarding the actual advice Pave provided to their clients, but it is not the advice that has caused the underlying problems in the Arch Cru funds and for the FSA to try and divert responsibility for 20,000 investors losses in the FSA UK authorised OEIC version of the funds onto the IFA community is disgraceful, when the real reasons are in the Report and Financial Statement for year ending 31 March 2011 released to the Channel Islands Stock Exchange on the 9th August
Posted by: john doe