The Financial Services Authority (FSA) has today fined IFA firm Specialist Solutions plc (Specialist Solutions) £35,000 for failing to assess adequately whether customers were eligible to receive promotions for Unregulated Collective Investment Schemes (UCIS) and failing to ensure that customers were given suitable advice to invest in them.
The FSA uncovered the issues with Specialist Solutions’ recommendations as part of its thematic review into the promotion of UCIS in 2010.
In October 2010 the FSA required Specialist Solutions to appoint a skilled person to review promotions of and advice given to customers to invest in UCIS during 2008 and 2009. During that period, Specialist Solutions recommended UCIS to 101 customers who invested a total of over £11 million in one or more of the three UCIS funds promoted by the firm. Specialist Solutions did not 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 expects Specialist Solutions to contact customers for whom it may have been unsuitable to invest in UCIS with a view to providing redress to any who have suffered detriment.
The FSA has also publicly censured The Matrix Model Group (UK) Limited (Matrix) for failings in relation to sales of a Geared Traded Endowment Policy (GTEP) product.
Matrix did not take reasonable care to ensure the suitability of its advice in recommending the GTEP product; 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 issues with Matrix’s advice on GTEPs came to the FSA’s attention during a thematic review of GTEPs in 2007. Matrix 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, commented:
“Our 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. Failure to give suitable advice around the sales of complex investment products is unacceptable as it puts consumers at real risk of financial detriment - we expect firms to be able to demonstrate that they give their customers appropriate, well considered advice.”
The FSA originally sought to impose a fine of £45,000 on Matrix. However Matrix provided verifiable evidence that this would cause serious financial hardship.
The FSA would have imposed a financial penalty of £50,000 on Specialist Solutions, but the firm agreed to settle at an early stage of the investigation and therefore qualified for a 30% discount.