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.”