The FCA has fined Sesame £1.6m for setting up “pay to play” distribution deals.
The regulator has found that between 1 January 2012 to 31 January 2014, Sesame told certain providers that it expected them to purchase additional services in order to secure distribution through its new restricted advice proposition.
The FCA says Sesame effectively set up a “pay to play” arrangement which undermined the ban on commission under the RDR.
During the selection process, Sesame told a number of providers that it expected them to spend an extra £250,000 a year on services to be placed on one of Sesame’s restricted advice panels.
In one case, a provider included its budget for services from Sesame, for the years 2012 to 2016, in its initial response to the tender.
Sesame reviewed the response and the firm requested that the provider increase its budget for services by £750,000 per annum for the years 2014 to 2016.
The FCA says Sesame acted in pursuit of its own commercial interests by selecting providers on the sums the Sesame group would receive for additional services. This was not in its clients’ best interests and had the potential to distort the advice Sesame’s customers received.
FCA director of enforcement and financial crime Tracey McDermott says: “Firms must place customers at the heart of their business. Our reforms were designed to ensure advice is based on what is best for the client not the adviser.
“Firms can have had no doubt about the outcomes we were looking for here. Sesame’s approach to inducements, in the face of a clear position from the regulator, undermined the rules in order to look after its own interests.
“If we are to move on in financial services we must see firms focusing on how they achieve the best outcomes for their customers – not adopting practices that avoid our rules.”
SBG executive chairman John Cowan says: “We recognise that the arrival of the RDR introduced a step change in regulation and heralded a new relationship between product providers and distributors. As the market leader, we should have been more responsive to the wind of change blowing through our industry.
“In January 2014 the leadership was changed and the new executive team has been implementing a new and more transparent policy, as well as building a robust operation that will serve customers better in the future. This has led to significant improvements in our processes and controls, with customers’ best interests and quality outcomes placed firmly at the centre of all business decisions.”
This is the fourth time Sesame has been fined by the regulator. In June 2013, it was fined £6m by the FCA for failings relating to the suitability of investment advice.
In April 2007, the network was fined £330,000 for failures in relation to its complaints handling of Scarps, and in October 2004 it was fined £290,000 for failing to monitor an appointed representative engaged in pension unlocking.
Earlier this week, the regulator dropped its investigation into whether Partnership struck a distribution deal with an advice firm which undermined the RDR.