.jpg)
The Financial Services Authority (FSA) today publicly censured The Garrison Finance Centre Limited (Garrison) for failing to communicate clearly the risks of complex investment products - geared traded endowment policies (GTEPs) – to their customers.
Garrison is in liquidation so the FSA has instructed the liquidator to write to the firm’s GTEP customers informing them they may have received unsuitable advice and could be entitled to make a claim. The FSA has waived the £35,000 fine it would have imposed so that the money can be used to meet customer claims.
The FSA’s investigation found a number of failings in relation to Garrison’s advice and sales to customers. Garrison failed to:
- communicate adequately why a GTEP was suitable for a customer and the risks associated with it;
- demonstrate why its recommendations were suitable as it did not gather and/or document adequate information to support its recommendations; and
- show that customers’ attitude to risk was commensurate with the GTEP’s risk profile.
The FSA sees the failings as particularly serious because a number of customers re-mortgaged their homes to purchase a GTEP following advice from Garrison.
Furthermore, of the files the FSA reviewed, only one customer was warned that further capital injections could be required to support the GTEP should it under-perform.
Margaret Cole, the FSA’s director of enforcement and financial crime, said:
"Geared traded endowment policies are complex investment products with significant risks attached to them. Garrison failed to make this clear to its customers so many of them may have received unsuitable advice. It’s for this reason that we’re censuring the firm. We would have also fined them but decided the money would be best served meeting any compensation claims.
"This is the second GTEP-related case we’ve published this year. Advisers currently offering or considering offering complex investment products should look at the details of these cases and act to ensure they’re treating their customers fairly. Anything less will result in strong action from the FSA.”
Garrison was a small financial advisory firm based in Richmond, North Yorkshire.
The investigation follows a thematic review of GTEPs conducted by the FSA's Small Firms and Contact Division which began in 2007.
