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How Sesame structured its £16m ‘pay to play’ deals

Sesame expected providers on its restricted panel to pay for the training of advisers and development of a new IT system under long-term “pay to play” deals which undermined the RDR.

Earlier today, the FCA fined the network £1.6m for setting up distribution deals which required providers to purchase additional services to secure a place on its restricted panel.

The final notice published by the FCA shows Sesame began the selection process for its restricted advice panels by sending a ‘request for information’ to providers.

This was only sent to providers which had already purchased services from the Sesame group.

The request contained a section entitled ‘sales and marketing support’. It included the question: “What sales and marketing support (over and above normal activity) would you offer to ensure the benefits this proposition can bring are maximised?”

This section invited responses from providers to include information about what additional services they were prepared to purchase from the Sesame group.

Sesame then sent an invitation to tender for the restricted proposition to providers.

This similarly contained questions that invited providers to include information about the additional services they would purchase to support the proposition, including:

  • “What ability do you have within the value chain to make payments to [the Sesame group] for the provision of certain services traditionally supplied by the provider?”
  • “We anticipate entering into long-term agreements with selected partners (at least five years). Please indicate the key contractual obligations and benefits envisaged.”

The FCA says the long-term nature of the agreements extended the effect of the conflict of interest. There was a risk that Sesame would be less likely to re-evaluate whether the providers and products selected for the panel continued to be in customers’ best interests.

The FCA says Sesame generated £16.3m in revenue through its restricted advice proposition and the service agreements, between January 2012 and January 2014.

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