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FSA suspended A2O for not acting on a range of failings

The FSA suspended Alpha 2 Omega from all regulated activities after the network repeatedly failed to correct a catalogue of compliance and training failings identified by the regulator.

The FSA recently published a second supervisory notice detailing why it suspended the network on January 21, 2010. The network went into administration on January 26 and was declared in default by the Financial Services Compensation Scheme in August. The FSCS has so far received 180 claims against the firm.

The FSA says it had concerns about the oversight of regulated product sales through A2O’s appointed representatives and on May 8, 2009 it told the network to commission a skilled person’s report.

The report was presented to A2O on October 15, 2009, and to the FSA on October 19. It highlighted 13 serious failings in A2O’s systems and controls.

Among them was a failure to carry out sufficient checks on new recruits, a failure to follow its own training and competence scheme, poor fund research and poor suitability reports.

It also found that not all high-risk business was being reviewed beyond a fact-find and suitability report. The supervisors at A2O passed 99 per cent of files reviewed but the skilled person failed 98 per cent.

On October 30, the FSA wrote to A2O asking it to describe any improvements, whether already made or planned.
A2O responded with a nine- point document highlighting the improvements it intended to make but the FSA says the response indicated a failure to appreciate the seriousness of the concerns raised.

Despite subsequent discussions, the FSA says the network failed to remedy the situation.

A2O had 50 ARs at the time it was placed into administration. Simon Underwood and Rupert Mullins of Benedict MacKenzie were appointed joint administrators.

Syndaxi Chartered Financial Planners managing director Rob Reid says: “I think the FSA should have accelerated the process as it had given A2O a number of warnings. It could potentially have placed more clients at risk.”

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Comments

There are 13 comments at the moment, we would love to hear your opinion too.

  1. All joking and facts of the case apart but what is a “skilled person”?

    The evidence I have seen in other cases cannot have been provided by anyone who is in the real world.

    Did you know that ‘high risk’ includes personal pension (and stakeholder) transfers, often from defunct providers or poorly performing funds and that the ‘skilled person’ often failed the file because the illustration on the replacement product showed a slightly lower fund at retirement, yes it is all based upon illustrations but I have seen the FOS say that an IFA cannot rely upon illustrations alone when defending advice.

    We are in dire need of regulatory balance but according to Lord Newby we won’t be seeing any.

    Where would you be without AIFA?

  2. Well Rob Reid, get your tongue right up there…

  3. All joking apart, given “The supervisors at A2O passed 99 per cent of files reviewed but the skilled person failed 98 per cent”, I’d venture that the definition of skilled person is “someone who didn’t work at A2O”…

  4. Guilty Until Proven Innocent.

    I accept companies need to be regulated, but there were probably a large proportion of the AR’s that were very compliant and good at their job.

    They have been tarnished with the FSA brush and many have struggled to survive, leaving clients unattended to while they struggle to get registered.

  5. What is a skilled person?

    Easy – he is a person whose appointment the FSA will agree to when they have issued a Past Business Review or S.166 Notice.

    The ancillary question is probably more important.

    What makes a “killed person” acceptable to the FSA?

    Again, that’s easy – he is acceptable if his previous reports in previous investigations support the FSA’s view of a breach.

    And the next ancillary question?

    What incentive is there to a “skilled person” always to find an IFAs files to be non-compliant?

    Again, that’s easy. If he always finds something wrong with IFAs’ files – and whose amongst us has perfect files? – he will always be acceptable to the IFA for appointment as a skilled person and to charge the target IFA for the privilege.

    I hope that’s cleared that up.

  6. What is a skilled person?

    Easy – he is a person whose appointment the FSA will agree to when they have issued a Past Business Review or S.166 Notice.

    The ancillary question is probably more important.

    What makes a “killed person” acceptable to the FSA?

    Again, that’s easy – he is acceptable if his previous reports in previous investigations support the FSA’s view of a breach.

    And the next ancillary question?

    What incentive is there to a “skilled person” always to find an IFAs files to be non-compliant?

    Again, that’s easy. If he always finds something wrong with IFAs’ files – and whose amongst us has perfect files? – he will always be acceptable to the IFA for appointment as a skilled person and to charge the target IFA for the privilege.

    I hope that’s cleared that up.

  7. Again the FSA put an IFA firm out of business, then the FSCS ask the few of us remaining to pick up the bill for their puported failings?

    It is time to get our common law and human rights back.

  8. Mr G: “There were probably a large proportion of the AR’s that were very compliant and good at their job.” The evidence very strongly suggests otherwise; a 98% failure rate is very poor by any standard, which brings me on to…

    Mr Sampson: As a lawyer, you will be well aware of the need to avoid defaming professionals. Skilled persons are appointed for, inter alia, their independence; I suspect most appointments are of qualified accountants and – *gasp* – lawyers, both of which groups are of course subject to their own code of professional ethics when undertaking an assignment. I’m sure you’re not suggesting there is any collusion or undue influence between them and the FSA and will be happy to confirm that for the benefit of this audience.

  9. Gosh, so much for being protected by being a member of a network. At least if you are directly authorised you can be responsible for your own actions and can directly react to comments or instructions from the FSA. These poor advisers have had their living stopped even though they followed the network’s rules, presumably. How tough.

  10. Or is that A2O attracted certain likeminded advisers following the preachings of Clive Holmes. The majoirty of advisers were ex Berkely Network were they not?

  11. Evan:

    skilled person

    a person appointed to make a report required by section 166 of the Act (Reports by skilled persons) for provision to the FSA and who must be a person:
    (a) nominated or approved by the FSA ; and
    (b) appearing to the FSA to have the skills necessary to make a report on the matter concerned.2

    Looks like there is no actual set level of qualifications, just the requirement to appear competent to the FSA!

  12. “Guilty Until Proven Innocent.

    I accept companies need to be regulated, but there were probably a large proportion of the AR’s that were very compliant and good at their job.” ….

    …. so good that 98% of their files failed a competency test! I do feel sorry though for the 2% who were possibly ‘very compliant and good’!

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