The Financial Conduct Authority has warned two unnamed individuals they could face fines over their “seriously flawed advice model” which saw them fail to perform due diligence on an unauthorised introducer.
In a warning notice published yesterday (March 6), the City watchdog said it contacted the two individuals - both partners at the same advice firm - back in September proposing to take action.
It said this action would be the imposition of a financial penalty, but the FCA did not disclose the size of the fines the two individuals could be facing.
Both partners held approved person status at their firm.
The FCA said they engaged in reckless conduct between October 1, 2015 and July 31, 2016, which demonstrates they lack integrity.
“Individual A and Individual B recklessly permitted the firm to operate a seriously flawed advice model for defined benefit pension transfers in partnership with an unauthorised introducer firm,” the regulator said.
“The firm failed to gather sufficient information from clients, or take into account information on the onward investment scheme, in order to provide suitable pension transfer advice.”
The FCA said the two also failed to assess “obvious deficiencies” in their transfer advice and the risks of detriment it posed to clients, as well as failed to perform sufficient and adequate due diligence on introducers and the investments which they promoted to clients.
In addition, the regulator said the two individuals failed to respond to warning signs they received around obvious deficiencies in their transfer advice.
Specifically, the FCA said 'Individual B' failed to address the risk that clients introduced to the firm by the introducer would be encouraged to transfer out of their defined benefit pension schemes and invest in “high-risk, illiquid and unregulated investments” which were unlikely to be suitable for them.
The City watchdog added: “Notwithstanding the obvious indications he received of the introducer’s material financial interest in promoting those investments.”
The notice said both individuals have failed to comply with regulatory requirements, deducing that their clients have not received suitable advice and were not treated fairly.
ruby.hinchliffe@ft.com
