The FSA has banned and fined P3 Wealth Management director Patrick O’Donnell £60,000 for advising clients to invest in unregulated collective investment schemes and other non-mainstream investments when they were not suitable.
The FSA says O’Donnell did not understand the regulatory restrictions on the promotion of Ucis and failed to promote these schemes compliantly.
O’Donnell has been banned from performing any function in relation to any regulated activity in the financial services industry.
The regulator found that O’Donnell failed to adequately assess whether non-mainstream investments were suitable for his clients and whether his clients were eligible to receive promotions for Ucis under the FSA’s restrictions.
O’Donnell advised many of his customers to invest almost all of their wealth in one or more illiquid, complex and higher risk investments.
As a result of his advice, a fork-lift driver and his wife invested the entirety of their known pension funds into Ucis. He also advised a mother earning a small salary and supporting a dependent son to invest 93 per cent of her known pension into Ucis.
In total, O’Donnell advised 57 of his clients to invest, 14 of whom also invested in other non-mainstream investments. From a sample of 15 clients, the FSA found that around two thirds of O’ Donnell’s customers invested over 75 per cent of their known pension funds into Ucis and other non-mainstream investments.
Following a visit, the FSA asked O’Donnell to stop selling Ucis. Despite being fully aware of the FSA’s concerns, O’Donnell permitted £185,306 of Ucis business to be completed just four days before he confirmed to the FSA that he would stop selling these products.
Even after he had confirmed this, O’Donnell nonetheless completed Ucis investment applications on behalf of two of his customers.
Although Ucis are not regulated schemes, their promotion and sale is subject to FSA rules. Authorised firms carrying on regulated activities in relation to Ucis, such as giving a personal recommendation to invest in them, are subject to FSA regulation.
FSA head of retail enforcement Tom Spender says: “O’Donnell had absolutely no understanding of the regulatory restrictions in place which prohibit advisers from selling Ucis to the vast majority of UK retail investors. He also completely failed to make recommendations that were suitable for his clients’ individual needs and circumstances.
“Such mis-advice cannot continue. Ucis and other non-mainstream investments are very often high risk, complex products, which are not appropriate for most retail investors. We will continue to intervene where we find misselling.”