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Ex-Financial Ltd adviser under fire over missing £500k redress

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A former Financial Ltd adviser has failed to pay around £500,000 in compensation to clients after recommending they buy into an unregulated collective investment scheme investing in waste and recycling.

The Sunday Times reports MFS Partnership partner Paul Herd owes David and Sheila Solomon a total of £497,177 after a Financial Ombudsman Service decision ruled Herd had given poor advice.

Six months after the ruling, no payment has been made.

In 2010 Herd recommended the clients transfer their pension pots into a Sipp with LV=, into an Isle of Man-based investment called the New Earth Solutions Recycling fund.

LV= wrote to Herd’s then network Financial Ltd raising concerns about the investment, and in turn Financial Ltd wrote to the Solomons in July 2011 saying it “had some concerns over the advice provided based on the documentation we have seen”.

But Herd had already written to the clients advising them to disregard any warning from Financial Ltd.

In his letter in April 2011, he wrote: “I am of the opinion that this fund remains completely suitable for you and should be held for at least another three to five years.

“Financial Ltd may invite you to unwind your investment and you should be mindful that this may entail early surrender penalties.

“I suggest that in these circumstances you simply telephone or put in writing your desire to continue with the investment, that you understand the risk involved with the fund and are happy with my advice.”

Investors in the New Earth have been prevented from redemptions since November 2013, and the fund went into administration in June this year.

Administrators Deloitte say: “There appears to be little prospect of any meaningful recovery from the fund’s investments.”

Herd declined to comment to the newspaper.

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Comments

There are 27 comments at the moment, we would love to hear your opinion too.

  1. Surely the network would have to meet this cost if Hurd gave the ‘advice’ whilst a member?

    • The Ombudsman can only award £150,000, so it is unclear why the complainants would be due £497,177 following an Ombudsman’s award.

      • Taken from the FOS website “Where we assess fair compensation as being more than £150,000, we can tell the business to pay £150,000 compensation (plus any interest and costs) – and recommend that the financial business pays the balance of the compensation. It is up to the financial business whether or not it pays the balance.”

        • Correct – but a recommendation is simply that. It is not an award. The FOS’s jurisdiction is capped for good reason and any recommendation it might make does not contitute ‘monies owed’. The correct position here, it seems, is that the complainants are owed £150,000 (probably, plus interest), but it is factually incorrect to say that they are owed any more than this (unless they have successfully pursued their claim in court).

  2. Where does poor advice finish and fraud start?

    In my dim and distant past S16 of the Theft Act referred to pecuniary advantage by deception – this case sounds similar to me. Perhaps depends on how much the adviser stood to gain by selling this ” investment”, clearly he did not run off with the capital, but the outcome for the client is just the same.

    • Your first question is the million-dollar one. If even some guy on the Internet is saying “it sounds similar to” rather than “I’m beyond reasonable doubt that it’s” then as a Crown Prosecution Service official I wouldn’t fancy my chances.

  3. Assuming that an investment such as this would surely be classified as about as off-piste as anything can possibly be, one wonders about Financial’s off-panel pre-approval (or rejection) process. Did it even have one?

  4. Is this the same guy (Paul John Herd) who is still listed as now directly authorised according to the FCA register under a new firm, but with a very similar name to MFS. There is also a Paul Herd (ex-Financial) and Paul James Herd (who seem to be the same – well were both at the same address – so I guy they could be son/father or brothers?). To me, Mr Heard seems to have potentially 3 listings on the FS Register based on similar names, so which one is the real Mr Herd and well done to our wonderful regulatory system for letting him get away with this for so long.

  5. Unregulated Investments Again 26th September 2016 at 9:56 am

    More disasters from regulated firms selling unregulated collective investments. This IOM based fund paying higher than average commission was for sophisticated investors only. I have been amazed to find that regulated advisory firms ever permitted this and also that trustees of SIPPs allowed the investment for retail clients. Why did LV permit this? Surely their duty as trustee was to say it was unsuitable for retail clients?

    • SIPP providers won’t provide suitability advice, that’s the job of the adviser. Appears this investment was made in 2010 before the FCA banned UCIS for retail clients, so it was probably permissible, but of course that is different to suitable.

  6. The FOS have no mechanism for actually checking awards are paid. Its as simple as that.

    2 ways to deal with FOS – never do client suitability’ and shred all files , they then have no way of dealing with the case, and if you do get an award against you don’t pay it they never follow up or have no power to force payment.

    • Assume that’s an ironic comment – if not it’s moronic. Don’t do suitability and shred files – then they will just find against you as you can’t prove the advice is suitable. Don’t pay – keep doing that and the Regulator will catch up with you and savvy clients will just take you to court to get you to pay

  7. Financials Ltd let the advisers cover their own compliance!
    That’s how this guy got away with it.

  8. Victim of dodgy claims 26th September 2016 at 1:04 pm

    Where’s the client’s responsibility in all this. Why would you want to invest in this type of investment. You don’t need to be an adviser to think why is this suitable?

  9. Do CII/PFS have a compliance dept ?. If its the same adviser as this one he is Chartered – # ethics?

    http://www.phifa.co.uk/aboutus.html

  10. Living the Dream Dream ..... 26th September 2016 at 8:16 pm

    All these years of regulation, exam after exam and countless truck loads of cash this industry’s regulation is worse than before it started by a country mile!
    Quite frankly I have given up hope

  11. What I don’t quite understand is the link to the Times article states “MFS Partnership admits it owes the Solomons about £500,000, based on a calculation stipulated…” If that is the case, if the firm (it’s an LLP) does not carry capital adequacy in excess of £150k (imposed by FOS) or perhaps even the £500k they are said to have admitted in the article OR it’s insurers have agreed to pay the full £500k, then the firm is in breach of it’s threshold capital adequacy requirements and the FCA should be immediately suspending it’s authorization. Perhaps MM should phone and ask the FCA to clairfy these and to check the Gabriel report of the firm to ensure it is correct.
    Or is the liability with a previous firm at which Mr Herd worked, in which case, why is his SPS not being questioned by his regulatory body )which must be the CISI as he is a Certified Financial Planner).
    This article raises more questions than it answers.

    • The article states that Lawyers for the IFA have offered £30K payable in instalments, & if they try to enforce the decision (£500K) they will get pence in the pound back. Apparently PI does not cover unregulated funds, & the LLP has cash in its last accounts of some £19K. Can’t see these clients getting anything. Also according to the article, another 82 year old client was advised to put £99K of her £125K into this fund, and she lost it all. Luckily for Herd she has since died. It will be interesting to see what, if anything the FCA does, but PFS should be looking at this guy as well.

      • The decision is not worth £500k – it is capped at £150k.

      • PJF – You assume the PFS issued his SPS and not the CISI/IFP and as a certified financial planner it is more likely to be CISI than PFS. The FCA will probably need to wait to see what his SPS issuer says first and only then, if every professional body were to decline to issue an SPS do the FCA HAVE to make a decision as membership of a professional body wasn’t made mandatory, just obtaining an SPS annually.

  12. and MFS Partnership have now bitten the dust…

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