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FSA bans two IFAs over advice failings

The FSA has publicly censured an IFA firm and banned two advisers after they failed to demonstrate the suitability of their advice.

Birmingham-based IFA firm Wheatcroft Fox & Company has been censured for systems and controls failings, an inability to demonstrate the suitability of advice and for failing to co-operate with the FSA.

Partner at the firm Peter Fox has also been banned from carrying out any significant influence functions.

The failings at Wheatcroft Fox emerged during an FSA visit in November 2008 as part of the regulator’s Treating Customers Fairly programme.

Following the visit Wheatcroft Fox was referred to enforcement, after the FSA identified problems with the firm’s sales and advice processes.

The FSA also found a failure to record sufficient information about customers’ personal and financial circumstances, and a failure to ensure that its systems and controls were adequate to monitor the suitability of its advice.

The FSA says although customers’ circumstances were not evidenced on the customer files, Wheatcroft Fox was able to demonstrate knowledge of its customers’ personal and financial situation.

But the regulator says the failings are serious as a number of them relate to pension products, which the FSA has previously highlighted as being high risk.

Wheatcroft Fox also failed to make substantial changes after the firm’s external compliance consultant first identified failings in 2006.

In a separate case, the FSA has also publicly censured and banned West Midlands-based IFA Gary Hexley for giving customers unsuitable investment advice.

Hexley’s ban related to investments set up through his own property development company, Greenfield International in 2003, and investment advice he gave at Exclusive Asset Management between January 2009 and May 2010.

Both companies are now in liquidation.

Hexley’s misconduct came to light in April 2010 during an FSA visit to Exclusive, prompted by complaints from clients and other IFAs.

The FSA found that Hexley had told investors they would be shareholders in Greenfield in return for their investments, which was not the case.

Hexley failed to disclose accurately to investors when they would receive repayment of their investments. He also failed to demonstrate the suitability of advice he gave at Exclusive, to explain the reasons for his recommendations, and relied on a small range of investments which paid higher commission.

He also advised one of Exclusive’s clients to transfer their pension without the appropriate qualifications to do so.

FSA head of retail enforcement Tom Spender said: “It is unacceptable for a firm operating in this industry not to comply with the FSA’s principles and rules and to refuse to comply with a requirement notice imposed upon it. Peter Fox failed to control his business effectively and exposed the firm’s customers to the risk of receiving unsuitable advice.

“Hexley’s conduct fell well below the standard expected by the FSA. The FSA will take robust action against individuals who fail to demonstrate competence and capability.”

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Comments

There are 10 comments at the moment, we would love to hear your opinion too.

  1. Where are the comments from the ‘All IFA’s are perfect, it’s all the banks and the FSA…’ brigade on this one?
    Oh yes, they’re all making comments on today’s stories from the banks and the FSA…

  2. there are always going to be rotten apples, why did it take so long to ban them! If it’s clear there are consistent breaches then remove authorisation immediately.

  3. To WTF. Smell the coffee, this action is commendable nobody would dissagree with fair actions from the FSA.

  4. Willing to bet that no clients were disadvantaged and no complaints were made and that this was just someone who knew his clients intimately but failed to document and then got beligerent with the FSA over unqualified idiots telling him what to do even though he had been in the business for over 30 years. Ring any bells?

  5. To WTF

    I think anybody whether independent all working in the banking community that acts in a irresponsible way should be banned from the industry. I wonder why it took the FSA so long to ban these two individuals.

    We IFA’s are not perfect and when one of us acts in a irresponsible manner, then that person deserves to lose their authorisation and indeed in some cases should be prosecuted.

    What we are asking for is for the same thing to happen to large organisations as we have all pointed out today, no senior director of any large organisation has ever been prosecuted for wholesale mis-selling of products or lack of control systems. WHY IS THIS?

    The only token directors to be disqualified was from Northern Rock for false reporting of their mortgage book and that only resulted in a relatively small fine compared to the individual’s earnings and banned from being in a control function in the future. A slap on the wrist for somebody who has earned multi-million pound remuneration. That’s not fair or indeed justice to the general public who are now suffering from the multibillion pound bailouts or indeed from the chronically bad advice.

  6. TO WTF

    You do need to see the grey inbetween not just the black and white !!!

    Agree with Hugo on this one and adding they may not have in a position to buy their innocence or pay for a 166 and forced into bankrupcy

    And repeating other comments, if that was not the case what took the FSA so long to de-authorise them ?

    Enjoying tea and cakes with their thumbs up arse’s making ill judged rules.

  7. hugh – i think that you might find that for one of the chaps in question, the advice was in fact to sell all of your perfectly good investments and then re-invest in one of three bonds paying 7% commission. as has been said, bad apples and for once the fsa doing its job

  8. Exasperated me 30th June 2011 at 6:41 pm

    Was a BIG bank fined recently or was it allowed the ‘withdraw’ from the market?

    Bent advisers are bent advisers whether they are WOM or ‘multi tied’, if they are found to be worthy of a ban then they should be BANNED, but this doesn’t apply to banks does it?

  9. Do and I say not as I do! 30th June 2011 at 6:48 pm

    How many regulators have been banned for failure to regulate the banks?

    PS name changes don’t count!

  10. hugh jeego | 29 Jun 2011 7:16 pm

    Willing to bet that no clients were disadvantaged and no complaints were made and that this was just someone who knew his clients intimately but failed to document and then got beligerent with the FSA over unqualified idiots telling him what to do even though he had been in the business for over 30 years. Ring any bells?

    ————————————————————————-
    Are you seriously defending these charlatans? If someone has been in business for 30 years, he (or she) should know the importance of making sure their recommendations are properly documented. Roll on RDR is all I can say – this whole industry stinks to high heaven and is badly in need of a clean-up.

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