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FSA fines Pi Financial £58k

FSA Front 480

The FSA has fined network Pi Financial £58,300 for unsuitable sales after it advised clients to invest £6m in unregulated collective investment schemes and £20m in structured products.

Between 1 January 2009 and 3 February 2012, Pi failed to take reasonable care to ensure the suitability of its advice. The firm advised 168 clients to invest £6m in Ucis and 362 clients to invest £20m in structured products.

Of the sample of files the FSA reviewed, 50 per cent were found to be unsuitable. The FSA says across the unsuitable files there was a clear disparity between the clients’ moderate attitude to risk and the high risk nature of the products that were recommended. In several cases, clients who appeared to have low incomes, limited assets and limited capacity for loss were advised to invest in high risk products.

One client was advised to invest £51,000 of his pension pot into a Ucis and the remaining £34,000 into a structured product.

Another client was advised to invest 93 per cent of his Sipp into structured products, so that over half of his total portfolio was invested in structured products.

A third client, with an annual income of £18,500 and two children, was advised to transfer his entire pension fund of £78,000 to one Ucis.

The FSA says Pi’s supervision of the two advisers who accounted for the highest number of Ucis and structured product sales was poor. Pi employed four file checkers between January 2009 and February 2012 overseeing 72 advisers. The compliance manual provided to advisers made no mention of Ucis at all.

FSA head of retail enforcement Georgina Philippou says: “Pi’s failings were serious. The firm sold Ucis and structured products to ordinary retail investors, when these products were clearly unsuitable for their needs. 

“We have made our views on Ucis very clear in a series of communications, most recently in our consultation paper and supervisory letters to firms active in this market. Ucis are very often high risk, complex products, which should not be promoted to the vast majority of retail investors in the UK. Where we see evidence of misselling, we will take action.”

Speaking to Money Marketing, Pi Financial chief executive Tim Sutcliffe says: “We have reviewed a number of files and are in the process of reviewing files. Redress will be offered to any client where the advice is viewed to be inappropriate and where the client has suffered financial detriment. To date, no client has suffered financial detriment.”

Sutcliffe says around 88 per cent of Ucis and structured products business written by Pi Financial related to two advisers. He says overall Ucis sales represent 1.15 per cent of total business and structured products represent 5.85 per cent of total business.

He adds: “There are some cases where I agree wholly with the FSA that advice was unsuitable. These are complicated products and their distribution needs considerable understanding from the adviser and they must only be distributed to appropriate clients. The FSA has made that clear and I support 100 per cent the FSA’s view on Ucis and structured products.”


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

  1. I wonder what would have driven the advice process on these recommendations……qualifications? Fees? or could it have been commission?
    How about another debate on RDR!

  2. ANOTHER debate on RDR!!

    There was never a first debate on it and its implications for the now fully realised and understood consumer detriment.

    The sale of UCIS to ordinary investors clearly was awry, but the firms compliance department should have picked that up.

    The issue of commission or fees has now been resolved, but what about the less well off end of the market, those whose funds are limited and who would rather pay for advice via that route.?

    Tough luck Mr Consumer, you either pay fees or don’t get the service.

    When commission disclosure came in in the early 90’s everyone said it would be good for consumers as full disclosure of costs and adviser payments empowered consumers as to whether the iFA offered value for money.

    Now of course no such option will exist post 2012.

    The system was not broken, it just needed tweaking. It’s has never been sensible to scrap a car if just one part of it fails, just repair it.

    Financial Services practice with regard to adviser payments was not broken, so why did the FSA scrap it?

    TO GET RID OF THOSE PESKY IFA’s and place the major distribution channel for financial products in the hands of the direct and banking providers.

    If anyone is still under the illusion this is good for the mass market, just look at how Independent Insurance and Mortgage advice services have declined, with providers offering better deals if consumers come to them direct but without an Independent appraisal of the relevant market.

    Sometimes I think the colleagues in our industry who support RDR are living in a dream world, it will harm our economy, reduce the availability of money invested into the capital markets and has cost a lot of people their jobs.

    How is that good for consumers and the country?

  3. Nice response Ned, cannot agree more and in 5 years time when evetyone is saying “where have all the small financial advisors gone?” blame will not be admitted by any of the idiots who have overseen proceedings.

  4. Where did this phrase (suggested as a quote) of ‘pesky IFAs’ come from? I see it written all the time by IFAs on these boards, who said IFAs are ‘pesky’

  5. Matty….

    Have you never watched Scooby Do?

  6. i thought they would have fined them £3.14…K they missed a trick there

  7. Pi received credit for voluntarily changing their Part IV permissions for promoting and arranging UCIS. Presumably this will mean that they are restricted post 31st December.

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