The headline, FSCS confirms new interim levy for investment advisers as claims soar, got me thinking about three instances of regulatory action and inaction that I have experienced first hand during the 33 years I have worked in this profession.
The first concerns the old Personal Investment Authority and its chief executive Collette Bowe. I met her in the mid-1990s when I worked in DBS’s research & technical support department. DBS at the time had 2,000 member firms and 4,000 RIs give or take. With such a large footprint, DBS members inevitably came across questionable activities from time to time and as I was DBS’s investment bod, most of them wound up on my desk.
More often than not, they turned out to be a scam. One concerned a “bond” sold to a certain Newcastle United player for £150,000 promising a guaranteed 30 per cent return after 12 months, underwritten by a major US investment bank, provided the buyer did not disclose its existence to anyone. Said player got a bit nervous a few months on when a teammate to whom he showed it pointed out that a reputable issuer would probably not have spelled “return” as “retern” and “guaranteed” as “garanteed”. The unfortunate magpie had just bought the world’s most expensive sheet of A4 paper.
Most of the scams we came across were more sophisticated and whenever one appeared, we tried to do the right thing by letting the regulator know. Unfortunately this involved the usual run-around from one person to another. All this changed one day when Bowe visited DBS’s head office in Huddersfield. On her guided tour of the building, she stopped at my desk for a chat and I took the opportunity to raise the problem with her. She reeled off the name and direct line of the person in charge of their early warning unit. It was not long before we could put it to the test. A churchgoing client of a DBS member in the North-west was befriended by a new attendee of his church who tried selling her a scheme that promised attractive returns and spin-off benefits for the church and Africa’s poor.
She wisely got a second opinion. The DBS member concerned did not like the smell of it and it ended up as a fax on my desk. I definitely did not like the smell of it. Testing the early warning unit contact, I sent it down. The response was immediate. It finished with the police involved and jail sentences.
Fast forward to a few years back when I was at a Simply-Biz meeting in Huddersfield. I came across an “adviser” I had known since 1980 who tried suborning me to be part of his own mini-Madoff scam. I reported this immediately to the FSA but a year later he was still running it despite him having regulatory ‘previous’. Eventually they got on top of it but why the delay?
Then about three years ago I interviewed an individual who admitted resigning “under investigation” from a major bank. He had even brought his disciplinary papers with him, supposedly to demonstrate his “openness”. He had impersonated one client and deliberately missold two more. The pièce de résistance, however, was his own USP – he proudly announced he had downloaded and stolen information on all the bank’s clients.
We reported him immediately. A few days later the FSA called saying yes, we were right to report it and would we mind calling the bank concerned so they could deal with it? Checking the register recently I see this individual is still practising. Maybe our friend Martin Wheatley should give Bowe a call?
Neil Liversidge is managing director at West Riding Personal Financial Solutions