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FSA fines IFA firm £56,000 over Keydata

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The FSA has fined IFA firm Care Asset Management £56,000 for giving unsuitable advice on Keydata products.

The Manchester-based firm advised 98 clients to invest a total of £3.1m in Keydata’s life settlement products between September 2005 and April 2009.

Care’s clients have so far received a total of £1.96m in compensation from the Financial Services Compensation Scheme in relation to Keydata.

The FSCS continues to seek additional repayment from Care to cover losses suffered by its customers, most of whom were in or near retirement.

The firm failed to assess the products and judged them to have a lower risk profile than was appropriate leading to unsuitable sales.

Care failed to ensure it understood the risks customers were willing to take, failed to provide written documentation to customers describing Keydata products’ risk adequately and failed to monitor the sale of the products.

Care was granted a 30 per cent reduction in its fine as co-operated fully with the regulator on the issues. Without the discount the fine would have been £80,000.

FSA head of retail enforcement Bill Sillett says: “This case highlights once again that advisers cannot rely simply on the opinions of a provider when giving advice about their products. They must form their own views as to the riskiness of the product and do their own due diligence before recommending the product to their customers.”

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. For all you self righteous bigots who castigate anybody from a tied background-let this be a salutatory lesson.
    Being and IFA is not the ultimate accolade!

  2. So when the regulator approved this providers products as low risk and did not inform the advising community of a change in its perceptions in 2007, it’s all the fault of the adviser is it.

    Now we know that any financial product other than a cash ISA or deposit based savings plan are the only products clients should invest in.

    The regulator hasn’t even concluded its own investigation as to the the circumstances surrounding the loss of £100million by SLS which KIS place in to this rogue firms hands who is alleged to have died with no trace of the money being able to be found

    How do they get away with such summary justice ?

  3. I would like to ask the regulator to give specifics of what any adviser could do for due dilligence on providers funds that would enable them to make an informed decision as to the risks. If providers who have huge resources to do this type of thing cant get it right, then what specifically can an adviser do? They obviuously have some kind of thoughts on this if (with the benefit of hindsight) they can make a judgement that someone has not done due dilligence properly, they must base that against a “benchmark” to be able to say “you didnt do your job properly. So what exactly is this benchmark that they have? They wont say

  4. Where will the £56k fine go?

    So the FSA head of retail enforcement Bill Sillett says: “This case highlights once again that advisers cannot rely simply on the opinions of a provider when giving advice about their products. They must form their own views as to the riskiness of the product and do their own due diligence before recommending the product to their customers.”

    Yet – Rory Percival of the FSA stated “Advisers can take factual information on a product from a third party at face value and need not undertake further due diligence” (NMA 06/07/2012)

    The product and provider were regulated and authorised by the FSA so they should be suitable for release to the general public.

    I now know where all the clowns went when Billy Smart’s Circus closed down!

    What a shambles.

  5. Well said Ned.

    Are we being told that the regulator has no responsibility, legal or functional, for the risk assessment given to any new product? If, as the article suggests, that is the position one might ask why go through the charade of risk assessment in the first instance. What purpose if any is served?

  6. Have Bill Sillet and Rory Percival ever met each other?
    We need answers from the FSA/FCA as to the accuracy of each of these statements.
    No one can be expected to second guess the regulator.

  7. What’s the point in having the FSA they don’t look at common sense, they can’t even do there own job correctly (They knew of the risks with keydata but choose to keep that to themselves) so why fine an IFA because they didn’t have Keydata as lower risk where all the information obtained about keydata before the disaster indicated the product to be lower risk, it was a fraud/scam I wonder what the FSA would have made of the advisors in Cyprus recommending emergency funds or no risks funds to be placed in a bank deposit, Glad I left the industry why did I leave ? because we are in a claim culture now and the advisor will always lose, Keydata proves that.

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