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FSA censures Park Row – Peter Sprung fined

The FSA has publicly censured Park Row and fined former chief executive Peter Sprung £49,000 for failing to ensure sales were suitable.

The FSA says the firm failed to ensure its sales were suitable and has ordered Park Row’s parent company Royal Liver to pay customer redress estimated at between £5m and £7.8m.

It has also fined Peter Sprung (pictured), the firm’s former chief executive, £49,000 and has withdrawn his approval to perform a controlled function at Park Row.  He has also undertaken not to perform a significant function at any firm for five years.

Money Marketing first revealed news of the FSA investigation in March 2009. Between January 2007 and January 2009, the FSA says a number of serious failings by Park Row were identified in relation to the suitability of its customer advice. It says it failed to ensure that advisers properly evidenced the suitability of sales, failed to ensure advisers offered suitable advice to customers and did not ensure that its systems and controls were adequate.

The FSA says the firm “consistently” failed to take action to rectify the problems despite the fact that concerns were highlighted to the firm on a number of occasions.

Sprung, who was chief executive of Park Row between January 2007 and January 2009, has been fined for “falling short of what was expected of a senior manager of an authorised firm”.  The FSA says he failed to take steps to ensure that the firm and its advisers properly evidenced suitable sales, in particular in relation to pension advice.

The regulator says Park Row advisers sometimes provided advice in relation to certain products on which they were not authorised to advise and it was identified that there was a danger that some of them may have selected products based on the fact that they would receive higher commission.

FSA director of enforcement Margaret Cole says the FSA has secured funding estimated at between £5m and £7.8m to ensure that where customers were not given suitable advice, or where Park Row can not demonstrate suitable advice, they will receive redress with support of the firm’s parent company, Royal Liver Assurance Limited.

She says: “As chief executive, Sprung was responsible for ensuring that there were appropriate systems and controls at the firm and that it treated its customers fairly. He failed to do this despite being given the opportunity to do so on a number of occasions.  As a result, he has been fined and can no longer work in a significant influence function for five years.”

The FSA says the firm’s breaches were severe enough to impose a financial penalty of £2.4m, were it not for the fact that the firm can not pay such a fine and is currently undertaking an orderly wind-down of its business.

Sprung also co-operated fully with the FSA and settled at an early stage of the FSA’s investigation and therefore qualified for a 30 per cent discount. Without the discount, the fine would have been £70,000.

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Comments

There are 40 comments at the moment, we would love to hear your opinion too.

  1. Christian Patricot 24th February 2010 at 11:31 am

    You don’t say: some advisers may have selected products that paid the highest commission. Surely not!
    I am a “one man band” IFA. I have never truly understood how if you run a bank, a life assurance company or a firm of employed IFAs, your advice might not run the risk of being compromised when your first priority is to generate sufficient income to pay for overheads: salaries, PAYE, NIC, rent, utilities, regulatory fees. The larger the firm, the greater the absolute need to generate income day in, day out. That means chasing volume in terms of sales generated per customer and number of customers. In my opinion, those objectives are mutually incompatible with the provision of independent advice.

  2. Plenty more firms like that out there. I doubt £49k will do the great man too much harm.

  3. Maybe the FSA will stop punishing the majority of decent advisers suffering vast financial hardship. Did Park Row give all the information relevant to the solveny wind down or did they know advisers would be treated shamefully.

    It’s time to act FSA let ex Park Row advisers work you have authorised most of the bad ones elsewhere allready

  4. Didn’t I read recently that Park Row has nearly the highest number of certified financial planners in any firm. I think that they were third in the list.

    It is incredible that such a ‘well respected’ firm should be found to be giving advice when not authorised in certain areas regardless of the high commission selling.

    No wonder our industry has such a bad name!

  5. Standby FSCS! Here comes another one!

  6. Point, fine, ban.. That’s regulation for you, isn’t hindsight a wonderful thing?

    Get a grip FSA, want a list of people and things who could do with some ‘supervision’??

    Despite the fact that the FSA thinks it is my ‘duty’ I won’t be doing it for free Lesley….

  7. Having worked within the compliance department for a period of 3 years I am pleased with the above news.
    Though the problems were repeatedly escalated to higher mangement nothing was actioned. Advisors ran the roost and felt they were above the law. Dodgy pension transfers for higher commission was rife. The systems and controls were terrible with greed priority.

    I bet Peter Sprung regrets the day he took over as CEO. It was obvious when the previous owner and directors abandoned ship – shame they have gone on to setup another venture….no names mentioned.

    Peter Sprung should be ashamed, what with all them qualifications under his belt he should have acted sooner. No one is above the FSA!!

  8. The FSA make me smile, imagine getting arrested for Drink Drive, and

    Blowing down the tube as requested, and

    behaving at the Police Station and

    turning up at Court on time only to find that local Magistrate lets you off with a £50 fine and a 6th month Driving Ban for co-operating. The Newspapers would outraged and so they should.

    So the man was clearly not doing his job and acting wrongly and had several warnings it seems. Clients would have been disadvantaged etc etc and the FSA has seen fit to reduce the fine.

    No wonder there is no faith in any of these organisations.

    Richard Smith IFA and Tech Consultant.
    http://www.theinternetconsultancy.com

  9. It is a shame that a company which undoubtedly has some strong, well qualified advisers ends in a manner such as this.

    The signs had been there for a number of years, indeed Peter Sprung inherited the problems – consistent losses, large fixed costs and overheads, lack of strong direction, advisers allowed to do whatever they want – the story writes itself.

    GJ

  10. As an ex-employee of Park Row I can say that Peter Sprung is actually a sweet and lovely individual. Its just unfortunate that he wasnt strong enough to stand up to other people and make the harsh desicions that should have been made to get Park Row on track.

  11. It seems strange to me that comments call for Park Row advisors to be authorised, on the day the enforcement action says Park Row advisors gave customers unsuitable advice.

    An investigation into the firm and into advisors where customers have been financially disadvantaged or cases were so poor it wasn’t possible to tell whether customers were disadvantaged does not seem so unreasonable. That some of these files could relate to occupational transfers seems utterly ludicrous and it does not appear to be sufficient to blame the overall failing of the company. Any ‘qualified’ advisor daring to provide deficient advice or incapable of completing the paperwork should down grade their career to a maximum level of flipping burgers. Would you really want one of these advisors working for your firm?

    The industry has proven itself incapable of self regulation, and the regulator has been caught short. Change is required. However, solutions for a fit for purpose regulatory system will never be found while practitioners in the industry can only react negatively to any piece of news. As a positive, this investigation may mean that that these advisors may not be let loose near a customer again.

    Maybe instead of knee jerk comments, the quality advisors amongst you could think about how, as an industry, you can help prevent the rubbish advisors giving all IFAs an undeserved bad name.

    At this point in time it could be suggested that some of the individuals in this forum have the regulator they deserve.

  12. What about IFA’s like me I changed networks in september 2009 but haven’t been able to get registered because i “worked” for park row for 3 months when we were transferred from Royal Liver in 2006, I never sold a thing because there was no process in place for us Multi-Tied agents so I left, I have been an IFA ever since with no issues, but because of this I haven’t been able to work for the last 5 months, its about time the FSA got off their high horses and sorted this mess out. If they know advisers have been misselling target them (their names are on the paperwork) and let us hardworking genuine advisers get back to giving correct advice

  13. According to the FSA notice, “Mr Sprung … became [a director] of Park Row on 1 February 2005 and [CEO] on 2 February 2006” – so how did he inherit the problem of a “lack of strong direction” between January 2007 and January 2009? This happened on his watch, fair & square.

  14. I have come across a situation like this in other industries/professions. You come across people who would have done a certain activity in a certain way for several years. A college grad comes along to inspect their work and tells them to change. They dwell so much on their experience that they fail to see the bigger picture and before you know it, they are overtaken by time and go out of business. I’m afraid to say but we will see more of this in the not too distant future. Only those that are keen to embrace change will be around for a while.

  15. Actually GJ most of the advisers actually did a good honest job, and as noted above, those who did do as they pleased left a while before all this came out AND they have been reauthorised elsewhere! They havent had the hardship of nearly four months without being able to trade, with no end in sight as yet.

    So please dont tar us all with the same brush!

    Most of us do (and would like to continue to do) a good honest job – I have spent the last 3.5 months explaining the situation to my clients, and even offered for them to consult someone else, and you know, for all this not one of my clients wants to go anywhere else.

    I do think that says something (and dont bother with smart comments, my clients are mainly corporate, intelligent and sadly only too familiar with what goes on in some areas of Financial Services)

    As as for the comment about being well qualified….I am sure some of the biggest fraudsters in corporate history had degrees, not really sure what point was being made.

  16. Echoing GJ – was this all down to Peter Sprung? What did he inherit and what about the rest of the board ? Where are they now ?

  17. Having worked in the past at Park Row and managed a particularly tight operation it comes as no surprise that this happened.

    As for Peter Sprung… can’t say I’m surprised. The only shame is that he got off as lightly as he did.

  18. For every story like this, the case for the RDR strengthens. And qualification clearly is not the only factor – it is possible to have every qualification and still chase commission and give inappropriate advice, where that is the culture. (I’m not suggesting it was the qualified advisers who gave the inappropriate advice, by the way, just that having the qualification per se doesn’t stop the possibility).

    As long as the environment exists for this to happen (as long as commission exists) the problem will remain and the regulator will find them.

  19. The comments from the FSA are making out that all park row advisers were giving bad advice, many advisers myself included were only there for a short period of time the rogue advisers to which the FSA refer too were sent packing long ago and i may add authorised by the FSA somewhere else. I however and many other unfortunate advisers are still waiting to be authorised and have been since mid october. My main concern is my family, house and home, if there are failings within park row then deal with park row, and let us advisers do our job thats if we have any clients left after this witch hunt.

  20. ExParkRowWealthManagementConsultant 24th February 2010 at 3:31 pm

    I’ve a lot of time for Peter Sprung as a person. Other posters are right – the problems were there long before he took over and he was, in my opinion, never suited to being in control of the whole business.

    Part of the problem was down to the forced integration of Royal Liver’s salesforce into Park Row. Hard for anyone used to selling a couple of products to suddenly be expected to offer whole of market, holistic advice. Always a recipe for disaster imho.

  21. Peter Sprung was former LIA (Now PFS) President!

    Maybe one day we will see Fay Goddard on the FSA hit list?

  22. What I find ironic is that the new Chairman and CEO of Park Row were on the Board at the time all this was going on. How does this deal with the problem? It can’t all be Peter Sprung’s fault when there were other Directors whose job is to oversee the work of the CEO. Mr Sprung is guilty but how can others be totally innocent? I’m bemused too!

  23. rachael and penny 24th February 2010 at 4:59 pm

    As Ex Park Row Advisers we are horrified of the events of the last few months. Neither of us were involved with Park Row at the time of the pension investigation, which was roughly 3-4 yrs ago.

    We both feel victimised. Neither of us have had any complaints, here or with with previous employers. Our clients are more than happy with our services and are willing and wanting for us to be re-registered.

    All we are here to do is to provide customer service and act in the clients best interest; making a living for ourselves at the same time.

    Having contacted Mr Sprung in October 2009 regarding his knowledge of these events, which had begun before we joined the company between March 2008 and July 2008, he expressed no knowledge of anything. The first that any advisers knew about these issues was in a meeting in October 2009.

    We are still awaiting our registration, through events which were no fault of our own.

    The advisers whose cases have been and are currenlty under scruitiny with the FSA left many years ago. We have inherited this and were encouarged to leave good positions elsewhere.

    Park Row would not have found itself in the apparent position that it did, if it had complied with the FSA – instead of fighting them at every turn and just accepting that their old ways needed changing and take the fine on the chin.

    We are left in limbo, just like many of the customers who have been affected.

    By the look of it Peter Sprung can still act as a IFA which is the most ludicrous part – if we have had our livelihoods taken away from us through his actions, then at least he should suffer the same.

  24. In full agreement with the sentiments expressed at 4.59pm.

    The individuals who were working at Park Row at its closure from 13th November 2009, have suffered extraordinary hardship themselves with loss of income since then and no clear picture of when the FSA will allow re registration. All that aside, the greater majority of Park Row IFA’s, have only ever done is provide sound financial advice to their clients and only wish to continue doing so. Those working with Park Row both past and present, who have contributed to the problems, they know who they are, and for the hardship and stress they have left behind I have no sympathy for what might befall them next.

    The regulator has a huge part to play in keeping the bad eggs out of our industry, and they cannot regulate our business, only offer retribution once it is discovered and massive fines, where the innocent are left to take the wrap, in true FSA style.

    For those whose contribution today have been less than helpful, yes ‘the I told you so’s’ where you are happy to mock, without any thought, tarring all with the same brush. You are missing a point, where and when or should it happen to you that you are unable to work for three to four months courtesy of the regulator. Lose business and clients who cannot afford to wait, and would you be able to take it on the chin as we are having to at the moment. At some stage the regulator could decide it is your turn.

    I look forward to continuing to provide sound independent advice, once the FSA gets its act together.

  25. This was an accident waiting to happen. Park Row as a whole should take the blame for not heeding previous FSA visits and warnings. It’s time to ban ALL commission to truly be called a Profession. Feel a little sorry for Mr Sprung as the FSA should not have published his remuneration in the Report (even though in the public domain).

  26. Richard Costain CFP 24th February 2010 at 8:01 pm

    Some of the people above should have the b***s not to post comments anonymously. As CEO, Peter Sprung has been made the scapegoat for this – perhaps the advisers (long gone now & re-authorised) that were churning should take a long hard look at themselves.
    Peter in his role as President of the LIA introuduced the Pinnacle Programme and certainly encouraged my to educate myself to CFP standard.

  27. Let’s face it, Park Row has been a car crash waiting to happen for years…. when they left Sesame the flags were put out. Now we have people who set the thing up driving around in fancy sportscars scot free and the parent co carries the can!

    Flog some bonds, churn some pensions…. money for old rope!

  28. So when are Barclays going to be fined?

  29. response to last poster 25th February 2010 at 8:25 am

    Think that happy clients and customers are not the FSA’s concern.

    they are interested in processes and occasionally catch the bad guys and gals out.

    when we consider TCF what about the Banks who we mainly own being subject to this? Libor plus 5% overdrafts, stockmarket bonds sold over the counter etc. are the FSA asking about their processes?

    I can only imagine in fairness to the FSA that there were poor practices and behaviours at Park Row. It does none of us any good that bad practices and misrepesentation operates to give us all a bad name.

  30. As someone who works on the periphery of the financial services both with Banks and the smaller broker firms, including Park Row, I have seen the pressure placed on staff within the banking industry to sell products to anyone they can persuade to buy them, whether they need or want them.
    The big players such as the high street banks bully staff into sales at any cost whereas the smaller firms are far more in tune with the customer’s needs.
    In large institutions they want a sale today; they are less concerned about tomorrow. On the other hand the smaller firm or individual relies on building up a good client base of satisfied customers.
    Not only that but the smaller firms, including Park Row, made their staff jump through hoops regarding sales and compliance. Vast quantities of information was gathered, recorded, checked for compliance and stored for future reference all to ensure the customer received the correct product. However, in many cases the correct product is subjective. What may be right today may not be so good tomorrow i.e. a 5 year fixed term mortgage two years ago might have appeared the way forward but a disaster if you are still paying that rate today.
    Where it all goes wrong is the FSA, funded by the banks, leaves the big players alone, unless there is a glaring failure and pursues the smaller firms and individuals who are the easy target.
    Big business and high fliers can move money around the world with little regard for regulation but if I go into a bank branch to transfer cash from my own account to the joint one to pay the mortgage, I have to answer a ridiculous list of security questions because of money laundering. Similarly, I can no longer make a cheque out to “Self” and pay it into my account, it must have my name on it although it is printed on the bottom.
    It is just a symptom of this crazy country.

  31. I met this sprung guy a couple of times. Words arrogant, conceited, big head and up himself come to mind.

  32. “As CEO he’s been made a scapegoat” – what else is a CEO for other than to exercise control and take responsibility??
    “He’s sweet and lovely” – but read the report – he “mis-reported” action taken to the FSA and “mis-reported” FSA reports to the Board. Based on one of the posts above he also “mis-reported” the situation to his own trusting and faithful advisers.
    “What matters is happy customers” – not to those of us who take time and money to comply with rules about authorisation and giving advice whilst other firms seem to think that being authorised / competent / trained / qualified to advise (and the associated expense) is utterly irrelevant.
    What does interest me is working out the average transaction value (£277 per sale / £438 per customer) and average income per adviser over the two year period in question (£19,411 i.e. £9,700 per annum).
    This, associated with Peter’s “interesting” salary, may provide a better explanation for why the firm ran out of money and couldn’t afford an effective compliance department.

  33. I posted this on a different website blog BEFORE Park Rows fine, but my comments if anything are even mor epertinant. What about the innocent clients and advisers of Prk Row?

    There is a probelm with the F-packs attitude of Guilty until proven innocent. What after all is the FSA register for? Should it not be to maintain a list of advisers and firms the FSA deem fit and proper to trade and hence, even if a firm goes out of business (for whatever reason), then the formerly fit and proper should be roled over on to a new firm automatically (staying with THEIR clients) until the FSA have EVIDENCE the individual is NOT fit and proper. At the moment, could the FSA be held liable for losses a client incures whilst they have no adviser? If they have reasonable doubt as to whether these individuals are fit and proper, then interim advice needs to be made available to clients, without impacting the advisers credability. If the FSA have NO reasonable doubt of individual competance, then they should be reinstated NOW. No more delay, this is unacceptable for the clients and advisers alike and one could aregue is actually a failure of a statutory duty of the FSA as it is more likely to cause detriment to the clients if they have to seek advice from a new adviser. Shame on the FSA, they knew this was coming with Park Row so why have the FSA still NOT put clear procedures in place for reauthorisation of individuals when a firm ceases to trade. Come on Hector, get your house in order before you get your removal men in….

  34. If Peter Sprung is guilty of something its mostly hoping that some advisers would meet the standards he aspired to as an individual.

    Its common knowledge that he got rid of some advisers he thought were a risk to the business and that from external work he understood the sloppy files did not mean product miss-selling was taking place. In fact I understand only a small % were proven to be so.

    Im sure he now realises you can lead a horse to water but you cant make it drink but thats not the same as presiding over something as dishonest as some press releases might suggest

  35. I worked as a self employed financial adviser under contract to Park Row for approximately 10 years and have worked within financial services for a considerable time previously.

    I have read the press reports and FSA Final Notices with concerned disbelief.

    OK, so Peter Sprung as CEO bears responsibility for the abysmal failings within Park Row’s administration, compliance etc and he has been penalised financially ( he can afford it!). However, I feel that the FSA must bear some responsibility because it failed to ensure that its requirements as detailed to Peter Sprung were complied with in a reasonable timescale.

    For myself, I have conducted business honestly, with integrity and always with my clients best interests at heart as I believe is the case with the majority of my colleagues.

    I have been unable to work since November 2009 and therefore cannot provide my clients with professional advice and service as they have every reasonable right to expect under Treat the Customer Fairly rules.

    As usual, the advisers are seen to be the baddies of this debacle, always the easy targets for both the regulator and the press.

    Many of my colleagues have expressed their concerns about their futures without income to sustain their families and to meet their commitments and are consdiering leaving the profession or facing bankrupty – this cannot be fair or just.

    After many years of honest, loyal service I feel very badly let down both by Park Row and the regulator

  36. i was with PArk Row for a number of years until 2004. There was a good number of IFA’s who were doing a good job. I left becuase I felt that the complaince, T&C were getting worse; and like everything else when you are a RI, you were self employed when it suits Park Row and ‘ employed ‘ when it suits them. When I requested compliance files to add stuff, contents were missing. Thankd god, I’ve got my own copies. When I left, Park Row got a load of Royal Liver advsers to train up and sell. i know a number of Park row advisers who are still not athorised at the moment, and they are very unhappy with the whole thing, FSA and PArk Row. I do know one adviser ( at Park Row ) who did a lot of pension transfers that had guanrantted annuity rates, how the hell, he got them through compliance I never know. Its a shame that its come to an end, I had some good times there.

  37. sone of the boo hoo – poor me ex park row advisers on here who distance themselves from the situation have not read the FSA report

    this report highlights that a lot (not all) advisers failed to document their files properly despite controls in place – that is why some of their sales need reviewing and i understand why Park Row consistently spent more than half its compliance time chasing advisers for information to close files

    im sure Peter Sprung wishes he had been tougher on these advisers and hope the good avisers get authorised soon but some of the others need to face up to their own failings before they start over

  38. themanwhowasthere 1st March 2010 at 1:49 pm

    Peter Sprung was a Royal Liver appointee who carefully steered the Park Row ship on to the rocks, he constantly blamed previous staff and management and ignored his significant shortcomings- pity the policyholders at Royal Liver who spent nearly £20 million on Park Row and who are still bailing it out

  39. Entre nous I can confirm that the review of Park Row’s past sales is deep and wide, covering most product lines (inc. mortgages, bonds, pension switches etc) and many many advisers. Advisers are being denied re-authorisation by the FSA until the FSA receive sufficient MI from PR to prove that advisers haven’t been involved in non-compliant sales. As the PR clean up project could take up to another 6 months or longer to complete then it’s your guess when these guys will be re-authorised. So who’s fault is it? Everyones including you advisers! When your sample cases were selected for review by PR compliance you complained vociferously if they weren’t passed. PR is at fault for passing cases that were subsequently found non-compliant by the professional person(s). And FSA for presiding over a regulatory system that is rotten to the core. Just to put the PR DBM failings into perspective, one of the s.166 reports found that circa 0ne third of pensions switches completed after A Day were unsuitable, a third did not have sufficient evidence to support them and a third may have been suitable but with a further communication to the client. IFAs bleat on about serving the customer but god knows, you’ve had enough wake up calls to at least start trying to work with compliance functions to get things right. But you never do and the reason for this is you are constantly chasing the commission cheque and anything or anyone who gets in the way is swept aside. So, my advice is stop whingeing and take it like men!

  40. Peter Sprung was made a scapegoat for this whole sordid business. Yes he made mistakes but he was let down and hung out to dry by a company he was once proud to work for. Peter was an excellent employer of the highest integrity his honesty and hard work was evident in all he achieved throughout his career. His reputation maybe in tatters now but not to all thoes who know the real truth and know Peter Sprung the person. It makes me wonder how Peter’s superiors can sleep at night but then thats what they get paid their enormous salaries for.

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