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FSA suspends A2O from all regulated activities

The Financial Services Authority has suspended Alpha 2 Omega from all regulated activities over concerns around its compliance arrangements.

A20 has sent a letter to all its members/advisers informing them that the regulator has decided to change its permissions and ordered them it to cease all regulated activities for which it has permission from 5pm on January 21, 2010.

The decision does not apply to any regulated activities undertaken to complete existing transactions, which are proposals or applications which have been signed and dated by the client prior to the January 21 deadline.

A document sent to A20 advisers and seen by Money Marketing, says the FSA has informed A20 of the steps it must take before any applications to restore its Part IV permission are considered, this includes ensuring the competence of its advisers.

Money Marketing understands that A20 has been running a training scheme for its advisers to raise its competence levels this week.

The FSA recently ordered the IFA network to stop new business on certain funds, including Arch cru, as well as structured products, pension transfers and drawdown.

Regulatory Legal Partner Gareth Fatchett says: “We are advising 12 members of A2O concerned about the recent upheaval at the network. An enforced variation of permission by the FSA is never a good thing. Fundamentally, the network has been told to cease giving advice”

“My clients are concerned for their pipeline business and their clients.”

A spokesman for the FSA says the register is currently being updated to reflect the fact that A20’s permissions have changed and that it is currently unable to take on new business.

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Comments

There are 18 comments at the moment, we would love to hear your opinion too.

  1. And there’s more to come…

  2. Once again the appointed representatives (agents) pay for the inadequacies of their network (principal and authorised firm).

    Will we ever see similar action in the bank adviser arena?

    If not, why not? Any adviser worth his salt would not do the bidding of his/her line managers and flog the likes of the Aviva investment which hit the headlines with such a bang yet the banks do not have problems with their permissions, it simply doesn’t give me confidence in the system when there is a disproportionate effort applied to the independent sector alone.

    Society is in dire need of regulatory balance, I see none.

  3. Indeed there is…the FSA will ensure that standards are raised amongst IFAs, although many of them don’t seem to understand or accept the need

  4. Evan, you’re not wrong, but there is dire need for the IFA sector to get its own house in order – stones and glass houses and all that…

  5. Realist – you seem to have missed the point. Mr Owen was pointing out an obvious imbalance between the manner in which banks and product providers are penalised by the regulator when compared to IFAs. Banks and product providers almost always seem to have a fine of a few hundred thousand or a couple of million quid imposed when guilty of an offence (a tiny proportion of their overall turnover and profit), whereas IFAs tend to be suspended from taking new business (usually the kiss of death for them) or have tens or hundreds of thousands of pounds in fines, which are usually a very significant proportion of their turnover and profit.

    Therefore, there are no significant effects of the punishment imposed on banks / product providers whereas the repercussions for IFAs and their authorised individuals are huge.

    Mr Realist and those at the FSA should take note.

  6. What exactly were these compliance failings, when were they first identified and what opportunities were afforded by the FSA to A20 to rectify them? Was any remedial help and guidacne provided?

    From this report, one gains the impression that the FSA either

    1. waltzed in, didn’t like what it saw and just said Stop everything or that

    2. these compliance failings are of long standing and that, despite having been given every reasonable opportunity to get its house in order, A20 failed to do so.

    If nothing else, the FSA surely has an obligation to provide firms with every reasonable assistance to meet its requirements within a manageable time scale.

    But then, when we look back to the fiasco of TCF, all the FSA announced was that it had “decided to let firms work it out for themselves” which is hardly helpful, is it? Certain large investment houses were reported to be considering a legal challenge to the FSA’s behaviour in this regard, which is a crazy state of affairs ~ the regulated at war with the regulator. Aren’t we all ultimately supposed to be on the same side?

    The overriding impression one gains from this is that, with the exception of the banks, the FSA is not on the side of the industry, as it certainly should be given what it charges us just for the privilege of being allowed to trade, but rather is manifestly against it. The FSA seems to be the policeman (with a big spiked stick), judge, jury and executioner all rolled into one and quite unaccountable to anyone. The PIA was once described by a respected think tank as “a totally unaccountable monster riding roughshod over anyone or anything that dares to stand in its way” and the FSA seems to be the same only worse. Pretty soon, it will have become simply impossible, in practical terms, to meet all the FSA’s requirements. Is that not an exceedingly unhealthy and oppressive state of affairs?

  7. Simon Whitney-Montpellier Asset Mgt....AR of A2O 22nd January 2010 at 11:04 am

    Great and I’m off skiing to Verbier today as well,can’t say I will be leaving with a stress free mind but thats life I suppose.Just rang the FSA and they won’t even talk to me,the qualification for dialogue is payment of their fees for 25 years and I’ve only been paying them for the last 20 years…thats fine because their attitude is always a timely reminder of how not to be.

  8. Sorry to say I told you so in my comments to the first story the other week about A20.

    Mr ‘Anonymous | 22 Jan 2010 10:40 am’, you do raise valid points, and I’m sorry for the IFAs concerned, but if the advice given is poor (we don’t know, but as A20 don’t know either as their compliance and monitoring procedures are crap), then clients are probably being disadvantaged….. mis sold, poorly advised.

    The stats show that the IFA model is not broken. Well, it might not be broken but it does have crumbling edges sometimes….. these type of companies reflect badly on all of us, and always have the potential to drag our good name through the mud, thus throwing clients into the arms of the retail and private banks. And we all know what happens then 🙁

  9. I agree with the comment about how IFAs are treated compared to banks. One example of this is the Barclays/Aviva matter another example I can give is that, while standing in the queue at Nat West to pay a cheque in I heard the sales girl telling an elderly customer their financial investment product was the best in the country and would give the highest return. There is definitely a different standard applied to IFAs than to banks.
    However, it’s worth pointing out that Kilminster were fined for regulatory failings and when they closed most of the advisers went to A2O. I’ve picked up some work from a former Kilminster/current A2O adviser and can give some very choice examples of his work:
    one case was a client who had been advised to surrender his Canada Life bond with significant penalties and was being advised to reinvest back into Canada Life. The client how no idea what he was doing or how much he was losing as he was blind – that’s pretty much the lowest of the low as far as I’m concerned.
    Another client I’d picked up had been advised to transfer out of her final salary pension on the advice that the performance of the fund (!!!!????) would be better by transferring. At no point was the client told that she was giving up a guaranteed benefit. Kilminster are liquidated and the FSCS is capped so this client is massively now out of pocket.
    I therefore think it’s correct that the FSA works to raise the standard of advice however this should apply to the whole industry, not just IFAs.

  10. Julian,

    IFA Networks are ‘relationship managed’ which means that unlike you and me who have to deal with the call centre in Dehli/Docklands, there is a reasonable dialogue going on.

    I have worked in Network Compliance over the years and can assure you that there is often a good degree of prior warning…Many of these firms have a number of “private warnings” over some of the most basic issues.

    Following Evan’s comments, if anything can be said of mis-selling in the industry, its IFAs being mis-sold the network concept. The “we take care of compliance for you” mantra really means consistently cut corners on obvious issues whilst tying up more diligent ARs in all manner of red-tape.

  11. Alpha to Omega UK Ltd. Suspended For All Part IV Permissions.

    This is now another Park Row, with 100’s of good, honest hard working Advisers now suspended completely from all activities as of Jan 21.

    This is a dark time for Network Members, I suspect personal bankruptcies and family breakups could affect the stressed Advisers at all Firms being taken down by the FSA with no right to stand up for the compliant advisers, if a network fails to be compliant, it does not follow it’s Advisers are all non-compliant. Why not let Advisers prove their competence by being immediately re-authorised at other firms that the FSA must deem to be competent?

    To withhold re-authorisation is against the human rights of honest and compliant Advisers who are punished due to the failing of their networks. A person has the right to work and should have the right to prove there competence immediately at alternate firms. To do otherwise would indicate that the system to authorise advisers at all firms is deemed inadequate by the FSA – so surely ALL Advisers may be suspended at multiple firms if the FSA seemingly has such a lack of confidence in the new entrant programs at many Firms.

    After all it was the FSA who fined a firm 250k and then appointed one of that firms Directors to run Northern Rock – it seems it is one rule for the Sand Man and the old boy network at the FSA and another for good Advisers with unblemished backgrounds.

    Posted anonymously due to FSA’s revenge program on our honest and fair industry.

    Best Wishes to all the Advisers at Alpha to Omega, Park Row and other firms and networks.

    I sincerely hope you regain the ability to earn your living soon and service your Clients in the ethical and professional manner your Clients are accustomed to.

  12. Don’t shout too loud – There is a moderate avalanche hazard in Verbier at the moment!

  13. Malcolm Kilminster really does seem to be awfully unlucky. Two large IFAs in 3 years going Pete Tong is surely a coincidence.

  14. Dear Realist, I am probably the first one to point at bad advice whether it is the ‘old’ or the ‘new’ model, always have been, since before regulation in fact and I welcomed ‘A Day’ because I thought we could get rid of the crooks. Unfortunately I haven’t seen any benefit from increasingly intrusive regulation and after more than two decades I have decided to do something about it by engaging with the people who dream up all these solutions to bad things which have already happened instead of looking at the reasons why the problem arose in the first place, most of the problems were fundamental defects in design.

    Reactive regulation is a waste of time, money and effort and when every new government reinvents the wheel all I see is recycled regulators following the same dusty road as before. We may hear reassuring whimpers of ‘lessons have been learned’ but there is no evidence to support this assertion.

    Regulation should be built from the ground up.

  15. Alasdair Sampson, FinServ Regulatory Lawyer 22nd January 2010 at 3:07 pm

    The surreal world of financial services must be the only area of professional life where the sentence is executed before the evidence is heard let alone tested.

    No-one would accept that in the context of alleged criminal activity yet, for some obscure reason, the system allows civil servants with little or no investigative/forensic training to have the power to terminate a business with immediate effect on their own “evidence”. The FSA is policeman, judge and executioner.

    It may well be that there had been a series of visits and private warnings from the FSA before the authorisation was varied to nil but, from my experience of dealing with them for IFA clients, the FSA’s standard of investigation and the standard of what passes for proof are simply not acceptable.

    An investigator should follow the evidence to a conclusion but, in the investigations I have been representing clients, the FSA do not enter an investigation with an open mind.

    They may well chant the mantra that it is for the protection of the public, but even IFAs have human rights which seem simply to be trampled on.

    One of your other contributors makes the point that the effect of the sanctions imposed on small firms is disproportionately heavy compared to the effect of sanctions on big firm like banks – always assuming they are disciplined at all.

    It is at times difficult to escape the conclusion that the FSA is more likely to target those firms which it judges are easier targets to hit by reason of being small, with little resource available to mount an aggressive defence and the lack of will to do so.

    It is no surprise to me that so many of your contributors make their contributions anonymously.

  16. Realist – you seem to have missed the point. Mr Owen was pointing out an obvious imbalance between the manner in which banks and product providers are penalised by the regulator when compared to IFAs. Banks and product providers almost always seem to have a fine of a few hundred thousand or a couple of million quid imposed when guilty of an offence (a tiny proportion of their overall turnover and profit), whereas IFAs tend to be suspended from taking new business (usually the kiss of death for them) or have tens or hundreds of thousands of pounds in fines, which are usually a very significant proportion of their turnover and profit.

    Therefore, there are no significant effects of the punishment imposed on banks / product providers whereas the repercussions for IFAs and their authorised individuals are huge.

    Mr Realist and those at the FSA should take note.

  17. Thanks for those comments, as an Ex Park Row adviser still trying to join Personal Touch, it is good to know there are people who have sympathy with our plight.

    Strangely the Park Row story seems to be moving down the news agenda week by week.

    I would have thought it would be the opposite, because every week that goes by, the situation gets more and more dire, for ourselves and our clients.

    There but the grace of God applies to many advisers who read Money Marketing, and, it could be any one of you at a big network, next week, month or year.

    It makes me keener to be directly authorised at some stage in the future.

    If this applies to a lot of consultants who have been treated so badly by the FSA, and they vote with their feet. We really will have problems.

    If the FSA cannot police the networks, how would they copy with thousands more directly authorised advisers?

  18. A2O are now going into Administration I am informed (by a sound source I like to think)……which of course is not only leaving advisers with no network through which to trade but a period of time possibly with no income either, as we all know what happens when the Administrators come in.

    So many advisers will this morning be looking for alternative networks or thinking about direct authorisation with the FSA.

    Last week A2O put advisers through exams, which in the light of the latest news, was a waste of time, but going forward may sort the wheat from the chaff in relation to competent and non competent advisers.

    My heart goes out to all advisers who are tangled up in this mess. Day to day with the FSA can be stressful enough without the added stress of having to find a new network in a time of personal financial strain and being able to think clearly and make decisions that are not based on panic. Trying to channel the anger that comes with having upheaval thrust upon you and your clients due to Network incompetence……remember something positive will come of all this..

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