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Court rejects IFA’s plea to overturn FCA restriction

An adviser’s challenge over the FCA’s decision to suspend its regulatory permissions has been rejected by a court.

Sussex Independent Financial Adviser has not been allowed to resume its core business or sell its assets after a judge sitting in the Upper Tribunal refused to lift regulatory restrictions.

Judge Swami Raghavan said the company does not have the means to pay its debts of more than £447,000, which are owed to four former clients.

In April, the FCA imposed regulatory restrictions on the adviser over concerns that the company could soon run out of money.

The City watchdog was concerned that the liability the firm had to Financial Services Ombudsman over 2009/2010 advice concerning pension transfers to Sipp could impact its ability to meet rules on minimum capital requirements.

Raghavan said in a decision published on Thursday: “There can be no dispute that when the FOS awards are properly accounted for as liabilities, as indicated by Sussex’s own management accounts, the company has a very significant deficit and appears insolvent.”

Does advice firms’ capital adequacy go far enough?

The court report revealed that the FCA did not regard Sussex as “fit and proper” and the company did not meet the threshold condition of suitability.

Sussex was accused of writing to FOS complainants and encouraging them to settle for less than the full amount. The company was also thought to have continued to “pay significant dividends while not paying” the FOS awards.

The adviser firm disagreed and maintained it had sufficient resources. It referenced an unresolved complaint it had made to the FOS regarding its Professional Indemnity Insurer, “which might yet come out in [its] favour.”

But the court ruled it was not clear when, or if, Sussex IFA would be compensated by the insurer.

Sussex argued its offer to pay reduced sums “reflected the reality” of the firm’s financial situation and said there was nothing “untoward”about paying dividends to its shareholder.

However, Raghavan said: “I cannot accept that the possibility of a successful payout arising from a successful FOS decision relating to PII cover makes the difference Sussex says it does.”

Sussex argued that the FCA’s actions against it would likely force the business to close down and it would lose the confidence of its clients.

The firm suggested in the event of its close-down, its former clients would have to go to Financial Services Compensation Scheme and would get less than the settlement sums it was offering.

The court case was heard in the Royal Courts of Justice, London on 16 July 2019.

Sussex IFA director Karl Hopper-Young says: “Our insolvency is questionable as we were not given permission to settle with the claimants even though they emailed the Judge direct on the day, requesting that we did not have our permissions suspended, and that the FCA approve our agreement. We also have a live PI claim in with the FOS.

It appears we should as a firm hold over £460,000 in reserve in the event of a situation like this happening.

We have managed to now provide 100 per cent of the claims plus interest at 8 per cent to settle the claims and eagerly await approval from the FCA to allow this to happen and restore our permissions.

We believe we have been honest and honourable and should be supported not disgraced or verbally stoned by our peers.”

The FCA declined to comment.


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There are 4 comments at the moment, we would love to hear your opinion too.

  1. It can’t afford to pay the claims, but CAN afford to pay dividends.


  2. Julian Stevens 26th July 2019 at 4:32 pm

    A combination of Sussex IFA being in debt to the tune of £447,000 and its ability to trade having been severely restricted is pretty much game over, isn’t it? And where’s the money to pay dividends coming from?

  3. Karl Hopper-Young 26th July 2019 at 5:15 pm

    Don’t believe all you read. We were not given the opportunity to reply. We will do so shortly.
    It’s not as sensational as stated and in context you will see we did the right thing and continue to do the right thing. Support your colleagues don’t malign them .

    • Daniela Esnerova 26th July 2019 at 5:51 pm

      Hello Karl. I have just forwarded you my email from this morning, where I reached out to Sussex IFA asking for a comment. I am keen to include your statement, once I do get it. Many thanks. Daniela

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