The FSA has handed out three fines to advisers for failings related to Lehman-backed structured product sales.
Dundee based law firm Thorntons Law, which provides investment advice to customers under the brand Thorntons Investment Services, has been fined £35,000, with a separate fine of £10,500 for one of its partners, Michael Royden.
A third fine of £28,000 has been given to Robert Peter Yarr, at McClelland Yarr Financial Services, an IFA firm based in Belfast.
This enforcement action comes following an FSA review of the marketing and distribution of structured products, particularly those backed by Lehman Brothers, concluded in October 2009.
The regulator found that the firms improperly advised clients to invest in structured products backed by Lehman Brothers between November 2007 and August 2008. In particular, it says Thorntons made recommendations to customers to invest in structured products when those customers could not afford to lose money and it also recommended that a high concentration of customers’ savings and investment portfolios be placed in structured products.
The FSA says that in one case, Thorntons advised a customer to place 45 per cent of his wealth in a single structured product.
The advisers also used misleading phrases to describe structured products in letters to customers such as “absolutely no risk to capital”. It found that Royden, the partner at Thorntons responsible for compliance oversight, had no financial services experience prior to taking responsibility for Thorntons Investment Services.
The FSA has also find Yarr, who was found that have not fully understood and warn customers of the counterparty risk associated with structured products, as well as failing to keep adequate records, conduct product research and ensure sufficient compliance oversight.
FSA managing director of enforcement and financial crime Margaret Cole says: “Firms and individuals giving investment advice must properly assess their clients’ needs and make suitable recommendations. Where we find evidence that firms are giving unsuitable advice to investors relating to complicated investments such as structured products we will not hesitate to take action.”