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Ignored risk assessments and DB transfers: Why FCA banned Sipp advice directors

Two former directors of advice firm TailorMade Independent advised ‘cautious’ customers to invest in high risk investments, and said they “did not have time” to deal with compliance issues.

Earlier today, the FCA fined Lloyd Pope £93,800 for failings relating to advice to invest in unregulated investments via Sipps. Peter Legerton would also have been fined £84,000 had he not been in financial difficulty,

Between 2010 and 2013, TailorMade advised 1,661 customers to invest £112.4m in green oil, biofuels, farmland and overseas property operated by Harlequin.

The final notices for the pair reveal TailorMade’s business model focused solely on providing the most suitable Sipp wrapper for the underlying product.

The firm did not carry out risk assessments of the underlying products, and in 40 per cent of cases customers did not know what they planned to invest in at the point the advice was given.

Pope told the FCA he did not fully understand the underlying products customers were investing in.

The firm assessed customers’ attitude to risk, and found some customers had a “cautious” attitude. However, the firm still advised them to invest in high risk, esoteric investments.

Pope told the FCA that while they might have been assessed as “cautious”, they preferred to take a self-select approach to investment.

A number of those who transferred into Sipps did so from final salary pension schemes.

Over 95 per cent of TailorMade’s customers were referred from an unregulated introducer, which also used the TailorMade brand and which earned commission from the underlying product providers.

A number of individuals at TailorMade were also owners of, or acted as agents of, the introducer firm.

Legerton acted as an agent for the introducer and earned commission for referrals.

The firm failed to adequately disclose or manage this conflict of interest, despite it being raised as a risk by compliance consultants.

Pope delegated his responsibilities as compliance officer to external compliance consultants without providing sufficient oversight of their activities.

He told the regulator that as the only CF30 holder at the firm for the majority of the relevant period, he was focused on providing advice and did not have much time for compliance issues.

For the majority of the relevant period, TailorMade did not have a formal conflicts of interest register.

The FCA says Pope and Legerton ignored clear warnings from the firm’s compliance consultants, including a “red flag” warning about the risk of unregulated introducers giving advice in April 2012.

Legerton also told the FCA that he recognised in hindsight the potential for confusion among consumers as a result of his numerous roles within various TailorMade entities.

He said customers viewed him as “Pete from TailorMade” and might not therefore have appreciated what role he was acting in or what financial benefit he was receiving as a result.

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Why were these people not jailed?

  2. I guess its because people haven’t committed any crimes.

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