FSA concerns over Clarkson Hill ability to pay redress

27 January 2011 | By Natalie Holt

Clarkson Hill had its regulatory permissions varied due, in part, to a failure to show it could pay up to £4.8m in redress for unsuitable advice.

A supervisory notice, dated November 23, 2010, reveals Clarkson Hill gave unsuitable investment advice relating to unregulated collective investment schemes, venture capital trusts and enterprise investment schemes.

The IFA firm has been unable to conduct regulated activities since December 3.

The notice reveals FSA concerns about the firm dating back to September 2009, when a skilled persons report was carried out looking at Clarkson Hill’s compliance, complaints procedure, financial promotions and corporate governance.

It states Clarkson Hill notified the FSA on May 28 it had a capital deficit of about £588,000.

The company told the regulator the deficit would be plugged by the proposed sale of all or part of the business to another firm and that an offer was likely by November 8.

As part of its due diligence, the prospective buyer, unnamed in the notice, reported concerns that Clarkson Hill had given unsuitable advice to clients.
This prompted a review by the FSA in July.

The FSA reviewed a sample of 17 transactions out of a total of 138 files relating to unregulated collective investment schemes, VCTs and enterprise investment schemes.

The files accounted for a total of £8.4m of client investments between June 2008 and May 2010.

The regulator says: “Based on the sample review, the FSA deemed a very high proportion of these cases to be unsuitable, leaving Clarkson Hill potentially liable for up to £4.8m in redress to consumers.”

Clarkson Hill filed its retail mediation activities return for the period to September 30, which shows its capital deficit has increased to £622,456.

The FSA says: “Clarkson Hill has failed to rectify, or demonstrate that it is able to rectify, this deficit other than through the investment by the prospective purchaser.”

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