The FSA has publicly censured The Garrison Finance Centre Limited for failing to communicate the risks of geared traded endowment policies to their customers, some of whom remortgaged their properties to buy policies.
The Yorkshire-based adviser firm is in liquidation so the FSA has instructed the liquidator to write to the firm’s GTEP customers informing them they may have received unsuitable advice and could be entitled to make a claim.
The FSA has waived the £35,000 fine it would have imposed so that the money can be used to meet customer claims.
The FSA’s investigation found a number of failings in relation to Garrison’s advice and sales to customers.
Garrison failed to communicate adequately why a GTEP was suitable for a customer and the risks associated with it, failed to demonstrate why its recommendations were suitable as it did not adequately document its recommendations and failed to show that customers’ attitude to risk was aligned with the GTEP’s risk profile.
The FSA sees the failings as particularly serious because a number of customers re-mortgaged their homes to purchase a GTEP following advice from Garrison.
Furthermore, of the files the FSA reviewed, only one customer was warned that further capital injections could be required to support the GTEP should it under-perform.
FSA director of enforcement and financial crime Margaret Cole says: “Geared traded endowment policies are complex investment products with significant risks attached to them. Garrison failed to make this clear to its customers so many of them may have received unsuitable advice. It’s for this reason that we’re censuring the firm. We would have also fined them but decided the money would be best served meeting any compensation claims.
“This is the second GTEP-related case we’ve published this year. Advisers currently offering or considering offering complex investment products should look at the details of these cases and act to ensure they’re treating their customers fairly. Anything less will result in strong action from the FSA.”
The investigation follows a thematic review of GTEPs conducted by the FSA’s Small Firms and Contact Division which began in 2007.
In 2008 the FSA fined Knowlden Titlow Financial Services and Derrick Hales Financial Planning for failures relating to the sale of geared traded endowment policies. In May this year the FSA also publicly censured Integrity Financial Solutions.