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FSA fines Ashcourt Rowan £412k over suitability failings

Jonathan Polin 480 profile closer

Wealth management firm Ashcourt Rowan has been hit with a £412,000 fine by the FSA over investment suitability failures relating to its Savoy Investment Management business.

In its interim results, published today, Ashcourt Rowan group chief executive Jonathan Polin (pictured) said the penalty followed a section 166, or skilled persons report, ordered by the FSA into Savoy as part the regulator’s thematic review into investment suitability.

Ashcourt Rowan was previously asked to carry out a s166 report in 2009, but failed to implement all the changes required.

Polin says: “This is clearly a significant penalty but we cannot dispute Savoy historically breached a number of regulatory rules. We took the decision early on in this process to co-operate fully with the FSA and resolve this issue at the earliest possible opportunity so that we could move on.”

He says Ashcourt Rowan has been proactive in addressing failures in its systems, controls, culture and methodology.

Polin adds: “Savoy is the first firm to be penalised for this but it is in my view highly likely that others will follow.”

The FSA says Savoy allowed its investment managers a high degree of discretion to advise clients, had limited front office controls and its other processes failed to ensure the suitability of its advice and portfolio management.

The regulator found that 23 per cent of files reviewed showed a high risk of unsuitability. Files often lacked information on clients’ personal and financial circumstances and contained out of date and inadequate client information.

Ashcourt Rowan has announced that following the fine asset management chief executive Christopher Jeffreys and group head of compliance Mark Smith have decided to resign.

Jeffreys will leave the Ashcourt Rowan asset management board but will stay with the company and go back to managing his clients. Polin is assuming the asset management chief executive role on an interim basis.

Smith is leaving Ashcourt Rowan after 15 years with the company, but will stay on for another six months to help with the transition of his responsibilities.

Chairman Kenneth “Buzz” West is also retiring from the board, and will be replaced by former Invesco UK and overseas chief executive Hugh Ward. Ward will take up the chairman role from 1 January.

Ashcourt Rowan has posted a pre-tax loss of £1.2m for the six months to the end of September, compared with a £1.3m pre-tax loss for the same period last year.

Revenues have fallen 12.5 per cent from £18.4m to £16.1m over the period, driven by lower dealing commissions in asset management and weaker new business from Ashcourt Rowan’s financial planning arm, which the company attributes to weaker market conditions and the RDR.

Revenues have also been pushed down by the transfer of six investment managers from Savoy to Walker Crips stockbrokers in June.

Funds under management fell to £3.8bn from £3.9bn last September and £4.1bn in March.

The proportion of discretionary and managed funds, which Ashcourt Rowan says is a key focus, has grown from 39 per cent in March to 41 per cent at the end of September. Management fees and recurring revenues rose to £11.3m from £11.1m over the same period last year.

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Gotta build up those FSA pension funds, go for it boys, fine us all for being incompetent, I am sure that with some draconian nit picking through every firms laundry, you will be able to clear the deficit in 12 months, just prior to the collapse of the IFA market.

  2. So the FSA “found that 23 per cent of files reviewed showed a high risk of unsuitability.”
    Does this mean that did not even bother to find out if the advice was unsuitable?
    Is merely the suspicion of unsuitabilty sufficient now for the unaccountable, unregulated, unqualified (in the main) bean counters at the FSA to levey a fine?
    God save us for the FCA won’t.

  3. @ Ned Naylor | 13 Nov 2012 8:55 am

    It’s an interesting view that refusing to make changes deemed necessary in a skilled persons report is draonian nit picking – worth exploring.

    @ Anonymous | 14 Nov 2012 12:24 pm
    Appropriate systems and controls would lead to a firms files demonstrating suitability… therefore the high risk of unsuitability is sufficient for enforcement and remediation.
    I’m sure the industry has different views on whether the file checking for actual loss should be undertaken by the firm at fault or the FSA. Personally, I would prefer the firm at fault to undertake this action (under approprate supervision), rather than have the industry pay via the FSA levy.

  4. Barbara Steward 17th March 2013 at 2:13 pm

    It would have been difficult to find a firm whose shares performed more badly. After reading a glowing newspaper report some years we put money with this firm, they made sure they drew their management fee out of our investment although we only saw shrinkage of our hard earned money.

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