An adviser recommended unsophisticated clients with income of as little as £3,000 remortgage their homes to invest in Ucis and geared traded endowment policies.
The FCA is seeking to ban and fine Paul Reynolds £290,344 for recklessly recommending high risk investments to eight retail clients.
Reynolds was an approved person at Aspire Personal Finance Limited, previously known as Positive Financial Strategies Limited, between 2005 and 2010.
A decision notice published by the FCA today reveals six of the clients had low incomes and/or little or no investment experience.
Of the seven clients who invested in Ucis, three were within 10 years of retirement age and were encouraged to invest more than 80 per cent of their pension funds in the products, with little or no means to make up a shortfall in the event of a loss.
Reynolds also forged client signatures, created retrospective suitability documents, produced inflated valuations of clients’ investments and submitted applications to providers which contained inflated incomes.
In one case, Reynolds advised a hairdresser earning £3,000 a year to remortgage her home on an interest-only basis for £130,000 and invest the proceeds in Forex and TEPs, as well as invest £20,000 in Ucis. He was knowingly involved in the forgery of her signature on a sophisticated investor certificate.
In another case, he recommended a client remortgage his house and invest £150,000 in Forex and TEPs, take out a gearing loan, and transfer his £57,000 pension into a Ucis.
The client says Reynolds did not assess his attitude to risk or explain the Ucis was unregulated. Reynolds asked the client to sign a sophisticated investor certificate despite him not meeting the criteria and when the client enquired why, told him “not to worry about it”.
Reynolds was knowingly involved in submitting false and misleading income and asset information to the providers of the GTEPs product.
In one case, he declared a client’s income as £85,000 when in fact it was only £3,000. In another case, he declared a client held £276,000 in cash deposits when they had only £5,000 in savings.
He also attempted to mislead the FCA by altering client files to produce fact finds and suitability letters retrospectively, following notice of a supervisory visit by the regulator.
When he was unable to create the documents in time for the visit, he asked a member of staff to phone the FCA and say the visit would have to be rearranged because he was ill.
Between January 2006 and October 2008, Reynolds advised at least 41 clients to invest a total of £8.3m in GTEPs. The total commission paid to Aspire by the GTEPs provider was £606,824.