FSA fines three advisers £31,500
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The FSA has fined three individuals at Pace Financial Management for failures that led to the firm being used for financial crime.
Paul Armitage, Huw Evans and Brian Smith are all partners and approved persons of Pace, a Sheffield-based firm of independent financial advisers and mortgage brokers.
Armitage and Evans were fined £17,500 and Smith was fined £14,000 for failing to have appropriate systems and controls in place.
The FSA says the partners failed to effectively supervise the other partners at the firm who had been delegated specific responsibilities such as the recruitment and supervision of employees.
They also failed to effectively supervise mortgage advisers at the firm or to put in place effective file checking procedures which enabled a fourth partner, who has since left the firm, to carry out financial crime with a mortgage adviser working for Pace.
The partners also failed to put in place an effective recruitment process, to enable an adequate assessment of the calibre of new employees, leaving the firm vulnerable to unsuitable individuals.
The fourth partner that left Pace joined Belmont Regency Limited in Derby, a limited company with two directors conducting personal investment business.
In January 2008, he was arrested on suspicion of fraud that had taken place during the time he worked at Pace.
He was placed under enhanced supervision by Belmont and subsequently dismissed in November 2008, when he was charged with fraud related offences dating back to the time he worked at Pace.
The adviser was convicted in March 2010 of 15 fraud related offences.
The FSA says no financial crime took place at Belmont but the appointment of a dishonest adviser was indicative of Belmont’s inadequate recruitment vetting, placing the firm at increased risk of being used for financial crime and of potential customer detriment.
Belmont failed to keep adequate records as to the training and competency of its advisers and of the suitability of its advice, as well as failing to ensure that it adequately reviewed the competence of its advisers and the suitability of the advice they were giving.
It also failed to have suitable procedures in place for recording training and competence of its advisers.
The FSA says it also had concerns regarding Belmont’s ability to ensure the suitability of its advice to its customers and found in some cases that it failed to adequately record and update customer information.
Belmont would have faced a fine of £17,500, but due to the financial difficulties the firm would have faced the fine was dropped.
FSA director of enforcement and financial crime Margaret Cole says: “By lacking the essential systems and controls to meet the FSA’s standards, Pace put itself at risk of financial crime and this was taken advantage of by two dishonest and unscrupulous employees.
“The Belmont case illustrates the importance of stringent vetting procedures, as the firm took on an adviser that had already committed financial crime and could have done so at Belmont.
“The financial industry depends upon honesty and integrity and these cases underline the importance of approved persons within the FSA’s regime conducting their affairs appropriately, to protect their firms and their customers from similar situations.”
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Readers' comments (11)
Julian Stevens | 7 Jul 2010 12:18 pm
Pots and kettles, pots and kettles.......
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Anonymous | 7 Jul 2010 12:33 pm
Julians right. Obviously dont know the details of the case, but presumably the FSA authorised the said individual in the new firm AFTER he had committed the previous crime....and yet they seem to think that the new firm should have spotted it, when they didnt themselves?!?!
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terry | 7 Jul 2010 12:39 pm
Do I assume the Treasury will fine Mr. Sants for not doing his job properly while he is with the FSA . He has been responsible for many management failings over the years.
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Financial criminals awards team | 7 Jul 2010 12:41 pm
"Financial Crime"?
Here is a suggestion for the FSA, the FOS and the FSCS whereby they could ensure that their own systems and controls meet the FSA's standards in that they are not exposed to or do not encourage financial crime.
It is quite simple really. All consumers must sign a statement of truth whether they apply for a mortgage or claim compensation.
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Ex Park Row adviser | 7 Jul 2010 1:14 pm
Without knowing the full details of the case, there seems to be no justice as the FSA have effectively fined me well in excess of that sum by taking notice of the inaccurate MI Data supplied by KPMG following the Business Review which has resulted in me waiting for nearly 8 months to be re-authorised (with no end in sight!).
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"SAVE THE FSA" | 7 Jul 2010 1:17 pm
How dare any one criticize the FSA!
They walk on water , they turn water in to wine, their forgiving naturte is such that the Banks are forgiven and last but not least they show us the shinning path to redemeption..............RDR.
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Anonymous | 7 Jul 2010 1:21 pm
I do know of the situation and what is outragous is that if the individual jailed for 5 years is checked on the FSA register and looks at disciplinary history it shows as no matches. Why have such a register if it is not updated.
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Alasdair Sampson | 7 Jul 2010 1:27 pm
A statement of truth?
Sorry, how does that work?
Is it anything like the declaration that is on every mortgage application, or policy application, or every investment application? Is that what is meant?
And how much reliance would be placed on the declaration of truth that the complainant would have to sign I wonder. The FOS would no doubt take the view that the declaration was too long and in too complicated language for anyone to understand.
The complaint system is flawed by the simple facts (a) there is no cost disincentive to the complainant from making spurious complaints, (b) there is no criminal law sanction for telling untruths in a complaint, and (c) there is no independent appeal system against the decisions of adjudicators.
But please dont go away with the idea that its only complaining clients who tell the odd porky. IFAs do too - I have handled enough complaints to know.
And the FSA itself is not immune from the charge either. In a recent FSA meeting I invited an enforcement team to have the evidence of its Supervision colleagues, which I described as factually incorrect, submitted to the RDC by sworn affidavit. Telling porkies in a sworn Affidavit is tantamont to perjury which is a criminal offence. I was advised that it is not FSA standard practice to use affidavits - so I said that I would be inviting the RDC to draw the adverse conclusion that the FSA supervision evidence could not be relied upon.
Anyone being pursued by the FSA and having to attend a compelled interview - do insist as I do for clients on full disclosure of the "evidence" they intend to put to you at interview. I have seen a copy email used as "evidence" which I had to question as being doctored.
The system is intended to be relatively informal -and false evidence is just part of the price you pay for that unfortunately.
IFA defence services 01560 322191
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Simon Webster | 7 Jul 2010 2:00 pm
In response to anonymous earlier:
The rule book is so thick I am not sure but at the moment does the FSA authorise mortgage advisers individually or only investment advisers?
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Phil Castle | 8 Jul 2010 12:38 pm
To Simon Webster - The rule book (not that I've read it for a while) only requires authorisation of investment advisers and approved persons. Theoretically, you could have a firm with 100 mortgage advisers, none with MAQ or CEMAP and just one approved person who has MAQ or Cemap.
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