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FSA fines IFA over platform advice

The FSA has fined Moneywise IFA £19,600 over compliance failings relating to the investment advice it gave to clients using platforms and discretionary portfolios.

Moneywise IFA was referred to the FSA’s enforcement and financial crime division as a result of the regulator’s earlier thematic review on platforms in March.

One of the director’s of Moneywise IFA, Malcolm Coury, was a co-founder of Ascentric. Without naming any individuals, the FSA says in its notice on the firm that it did not manage conflicts of interest appropriately.

An investigation by the FSA found that Moneywise IFA did not have robust arrangements for training advisers and ensuring suitability reports were clear, fair and not misleading.

Moneywise IFA also recommended platform-based investment to 519 customers but failed to ensure its advisers explained their rationale clearly to investors. The firm also failed to ensure its advisers understood the reasons behind these recommendations.

The regulator also found that Moneywise IFA had not made it clear to customers that some of the underlying investments contained unregulated collective investment schemes and the associated risks that needed to be understood before investing.

Despite these failings, the FSA did not find any evidence that customers had suffered any financial detriment. Moneywise IFA also appointed an external compliance consultant, made changes recommended by the consultant, and appointed a new compliance officer at board level.

Moneywise IFA qualified for a 30 per cent discount on its fine because of the improvements the company had made and Moneywise IFA’s agreement to settle at an early stage of the investigation. Had this not been the case Moneywise IFA would have been subject to a £28,000 fine.

FSA director of enforcement and financial crime Margaret Cole says: “As Moneywise’s business model evolved to include wrap platforms, sadly its compliance function and elements of its staff training did not keep pace.

“Firms that move to platform-based investment models need to ensure their advisers are properly trained and understand the nature of all of the underlying investments. They must also make sure they are properly supported by adequate compliance arrangements.

“It’s imperative that customers have a full understanding of where and how their money is being invested. Following the thematic review we’re seeing some good progress being made but it is vital that this continues to ensure investors are treated fairly.”

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Comments

There are 15 comments at the moment, we would love to hear your opinion too.

  1. I give up, did any of the investors complain?
    I am sure that Moneywise did their best but the FSA have given no help to them whatsoever.

  2. As for the p****d of IFA I think he should take his own suggestion seriously and GIVE UP. Yet another dinosaur that needs a career change.

  3. FSA reeping in the money before they go!

  4. Obviously, I do not know the details of this case and what unregulated investments were sold.

    But it seems to me that there is nothing that an IFA recommends or any level of competence that will satisfy a regulator that is out to justify its own sorry existence. If no client has complained and there has been no client detriment, how can the FSA justify fining the adviser ?

  5. I’m not sure whether this is imprecise reporting or whether the FSA have finally ‘lost it’.

    A platform is a utility – it isn’t an investment. The reporting switches terms from Platform to Wrap – they are not the same – which is it? My guess is that it is a Wrap as I know of no Platforms having unregulated collectives.

    The investments would have been equally inappropriate whether in a wrap or platform or purchased directly. The issue is not the utility but whether the investments themselves were suitable – surely?

  6. Well said Harry, I thought the same.

    The current burst of issues over Unregulated Collectives is worrying, there are apparently lots of people getting involved with investments they don’t understand without checking their Regulatory position.

    Is anyone out there happy to still advise on UCIS to anyone but clearly sophisticated Investors?

  7. I think it’s pretty fair to be honest. Investing clients monies in an unregulated collective scheme, which means the client does not have FSCS protection is pretty maverick – esp. if client unaware. I believe the FSA is cracking down on this – wraps are not to be used as whole business solutions, but as a means to managed mostly high net worth clients..when appropriate. In addition, had the investors lost 90% of their investments, and no FSCS in place, they might just have made their voices heard!

  8. Quite obviously Derek works for the FSA or some other qango. I think needs to get out a bit more and find out what is like to work in IFA office.

    I would love career change but like most IFAs I have people depending on me.

  9. Well some of us are quick at labelling people ‘dinosaurs’.
    I’m sure that if the FSA visited most firms they would be able to find something (a box not ticked,the toilet roll hanging the wrong way) if they looked hard enough.
    As there was evidently areas for improvement and the firm appeared to have taken this on board surely a common sense approach would have been sufficient.
    Lets hit the IFA again they are the easy target and let the Banks continue with the quality advice they give their customers, they never get complaints do they?.

  10. I have to agree with Derek Stewart.

    Its good to see the FSA being pro-active rather than reactive.

    Isnt it their job after all to ensure all regulated firms provide proper advice and therefore avoid complaints?

  11. If you look at any single case for long enough you can always think of an addittional question or “theme” on which to base another view to deem in “Potentially” unsuitable.

    This is what the regulator does. If everthing is pretty much OK or needs a few points to set a case straight then the regulator be downsized (saving us all a shit load of Civil servants incomes).

    Anyone would think they are desperate to run down what isnt actually broken to keep those inflated salaries and pensions in check.

  12. The second report make more sense as to why they were fined. The fuller picture smacks of vested interests rather than truely Independent sales. Non-exec directors in the company involved in the platform used and not fully disclosed to investors. There may not have been malice intended in this but its quite clear that you need to disclose this sort of thing in the rules. Seems like a fair cop to me (and I’m an IFA!)

  13. Just a thought but perhaps commentators might read the FSA Final Notice on this case before they “go off on one”

    Oh I know far too busy looking after clients to let the facts get in the way of a good rant

  14. I can safely say I have read the ‘Final Notice’ Nick refers to. I have also had a previous sniff around within the compliance community…
    you are not promoting UCIS if you buy them as a discretionary manager. There is a grey area if an adviser is signing clients up for the portfolios and discusses the content. Moreover, if you take reasonable steps to ensure that the investment is suitable for the client, then there is no ‘statutory prohibition’ on their promotion [s.238(6); COBS 4.12 R].

    FSA’s ‘trick’ in this exercise is two-fold: –

    – to introduce a specific record keeping requirement as to why you considered the s.238(1) restriction did not apply. (There is no such requirement in COBS).

    – to argue that the requirement suitability requirement in COBS 9.2.3 R can be construed as effectively meaning that somebody must have prior experience of an unregulated scheme in order for an unregulated scheme to be suitable. (The plain meaning of the words does not say this and FSA is in truth barred by Article 4 of the MiFID Implementing Directive from introducing an explicit one)

    Moneywise will be constrained under the Settlement Agreement from saying anything that contradicts what FSA is saying in its Press Release. I do not actually know these guys…but…I should point out that: –

    – FSA went into these guys with intent and were originally trying to claim a lot lot more. Word in the Compliance Community is that they had to fall back on the major part of their case.

    – Moneywise has around £200m under management. This is nothing more than a token fine.

    – The Final Notice is clear that clients did not suffer detriment; I believe if you do the calculations, you will find that the clients probably did not see their portfolios go through the floor when the markets crashed i.e. positively gained.

    – The Final Notice is light on specific rule breaches. It refers in fact only to breaches of Principle (and also passing references to s.238). This is because any alleged rule breaches would certainly be arguable!!

    Personally, had it been my path they crossed, I would not have Settled. These issues need to be tested thoroughly in the Tribunal – I would be pretty confident that much of what FSA’s junior officials claim when they turn up with their checklists and sets of crayons would be shredded pretty quickly.

  15. Thanks to the ‘man in black’ for his reasoned commentary on the salient points of the case.

    Personally I think as a profession we need more ‘men in black’ and less ‘I’ve been doing this 30 years blah blah blah’ merchants!

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