The FCA has ordered an advice firm to stop conducting regulated activities after it became concerned over its pension transfer business.
The firm also breached the terms of a voluntary agreement with the regulator that was imposed on its Sipp activities.
A supervisory notice released by the FCA late yesterday says Bank House Investment Management can not not dispose of, deal with, or diminish the value of any of its assets without the FCA’s consent and that it must “secure all books and records” relating to its regulatory activities.
The FCA first became concerned about the suitability of Bank House Investment Management’s advice around pension switching after it visited the firm in July 2015.
As a result, the FCA asked Bank House to apply for a requirement that would mean it would not undertake any activities in relation to pension switches or pension transfers in to Sipps until independent verification was given to the FCA relating to compliance around the advice.
The “voluntary requirement” took effect in September 2015 and also stipulated that all new pension Sipp switching advice would be subject to independent checks until the FCA was satisfied such a process was “embedded” in the firm. It also said Bank House should not “dispose of, deal with, or diminish” the value of any of its assets without the FCA’s consent.
The supervisory notice explains that, around August 2016, the FCA became aware that Bank House might have been conducting pension switches to a Sipp account that were not in keeping to the terms of the voluntary agreement.
The new business register Bank House gave to the FCA showed 30 transactions involving pensions after the voluntary requirement, however it did not show that any of these involved customers switching to a Sipp account.
The FCA also received information from the Sipp provider that showed Bank House had advised 72 customers on 78 transactions involving pension switches to a Sipp account totalling £2.65m between from 5 October 2015 to 13 October 2016.
According to the supervisory notice, Bank House’s business register only recorded 29 per cent of the 78 transactions reported by the Sipp provider up to 21 September 2016.
Bank House had also advised five customers to switch pensions to a Sipp account offered by two other providers between October 2015 and November 2016.
The supervisory notice says: “When questioned by the [FCA] about the pension switches done to the account offered by the Sipp provider, the firm said it understood that the account ‘was not a Sipp, it was personal pension with a deferred Sipp option’. The authority has confirmed with the Sipp provider that it does not offer the option of a deferred Sipp in any of its accounts and that all 78 switches on which the firm advised were to a Sipp account.”
It adds: “The firm also said that it understood that the authority had agreed it could conduct pension switches where customers would be investing in a ‘platform’. This does not reflect the wording of the voluntary requirement and is not consistent with the authority’s correspondence with the firm about the voluntary requirement in which the authority repeatedly stated that the firm was not permitted to do any pension switches involving Sipps.”
Bank House sourced its pension switching customers through a third party firm and the supervisory notice says “misleading” information was given to the FCA about its relationship with that company.
It also sold customer data to the third party and did not tell the FCA about this arrangement when it was asked about the relationship.
The supervisory notice says: “When questioned in October 2016, the firm said that the third party firm paid the firm between £50,000 and £70,000 in September 2015. The authority subsequently required the firm to provide details of the payments. These showed that the third party firm had in fact paid the firm’s holding company approximately £163,000 between 3 August 2015 and 24 November 2015.
“The firm told the authority that these monies all relate to the sale of the customer data referred to above. Some of the monies were used to pay for the salary costs of staff employed by the firm, who were previously employed by another unauthorised firm which was also involved in the pension switching business that gave rise to the authority’s initial concerns about the firm. It is unclear if there was in fact an arrangement for the third party firm to cover the costs of those staff.”
Bank House had not paid regulatory fees worth £22,859.29 that were due to the FCA in August 2016 due to its financial circumstances. Its draft management accounts show it made a loss of £137,087.39 in the year ending 31 May 2016.