Secrets & lies: The struggle to whistleblow

The FSA is big on whistleblowing, or so it claims. But these adviser testimonies suggest the regulator is rather letting the industry down, writes Laura Miller.

In November, Professional Adviser revealed how an IFA company director tried five years ago to stop wrongdoing in his industry and was shocked by the reaction he received from life companies and the FSA.

Testimonies volunteered by IFAs in the months that followed point to ongoing regulatory failings and a widespread culture of don’t ask, don’t tell....

Director of a Bedfordshire IFA (name withheld)

“I had been on at a client about IHT planning for years, to no avail. Sadly she contracted cancer and entered hospital, when I learnt she was taking out a trust. Despite serious concerns from myself and her accountant she signed the forms to transfer £750,000 to the Cayman Islands 11 days before she died.

Concerned, I attended a seminar by the lawyer who designed and sold the trust. Asked whose professional indemnity insurance covered it, he said: “That’s not relevant, we’re giving clients a ladder to climb out of a hole. If they choose to fall off that ladder that’s their problem.”

I had suspicions it was fraud. Fortunately myself and the executors stopped the transfer of most of my client’s assets. But about 20 such trusts were written, most above £1m. Given the potential loss to UK investors – and that the scheme was promoted by a national brokerage – I felt it was my duty to tell the FSA.

Before it even considered investigating it wanted a written complaint and the three full files I’d gathered. I felt the regulator wanted a one man band to do its job for it. In the end the FSA did nothing and I doubt I’d waste my time again in a 
similar situation.

The lawyer has been suspended from the Law Society and subsequently barred.

I despair that our regulators seem intent on making it virtually impossible for the honest IFA to work effectively while ignoring situations where there is a real possibility of significant losses to investors.”

Julian Pruggmayer, IFA owner of Financial Risk Management

“A client worked for a large employer with a good pension scheme, where the company paid in 6% if the employee paid 3%. An individual who did not reveal himself as unauthorised, advised her not to join it.

Using paperwork from an authorised friend of his at an IFA firm, rather than consolidating her four current pensions – which she had already paid charges on – , he set up yet another pension at more cost.