FSA bans and fines IFAs for UCIS advice

20 July 2011 2:23 pm | By Nicole Blackmore

The FSA has banned former Best Advice Financial Planning directors Paul Banfield and Anthony Moss from holding any significant influence functions and fined Banfield £10,500 for giving unsuitable advice about unregulated collective investment schemes.

Banfield has also been prohibited from being an investment adviser.

The FSA found that weaknesses in the firm’s systems and controls had resulted in customers being exposed to the risk of receiving unsuitable advice.

It says as Moss and Banfield were directors at the firm, it was their responsibility to ensure systems and controls met FSA standards. Moss was also the firm’s compliance officer, while Banfield was its investment adviser.

The FSA found that at least 22 customers were advised to invest in UCIS but found no evidence that the firm either understood the regulatory requirements relating to the promotion of these investments or took reasonable care to ensure customers received suitable advice.

In one instance, a customer was advised to cash in a number of existing investments and reinvest in several UCIS through an offshore bond. Best Advice failed to consider whether she was eligible to invest in a UCIS or adequately assess her attitude to risk.

It also failed to assess her existing investments before making a recommendation, despite the fact that she specifically requesting such an assessment. The client was 87 at the time and more than 80 per cent of her funds were reinvested in UCIS.

During its investigation both Moss and Banfield admitted to the FSA that they did not fully understand the regulatory restrictions on UCIS despite their firm recommending them to customers.

Although UCIS are not authorised schemes there are regulations surrounding their promotion. Therefore people carrying on regulated activities in relation to them, such as giving a personal recommendation, are subject to FSA regulation.

The FSA says Moss would have been fined £20,000 but this was not enforced as he provided evidence of financial hardship. Best Advice was dissolved in July 2011.  

FSA head of retail enforcement Tom Spender says: “UCIS are rarely suitable for retail investors. Many are characterised by a high degree of volatility, illiquidity or both – and are therefore usually regarded as speculative investments. Even when they are recommended they are unsuitable for anything more than a small share of a portfolio.

“We want firms to read the details of this case, along with the findings of our review and other recent publications on UCIS, and learn from them. We have seen a proliferation of firms offering UCIS so it is absolutely vital they do their homework before recommending these schemes to investors.”

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