Sesame is still using providers which were selected as part of “pay to play” distribution deals on its panel, executive chairman John Cowan has admitted.
Earlier today, Sesame was fined £1.6m by the FCA for setting up distribution deals which required providers to purchase additional services to secure a place on its restricted panel.
It signed long-term deals of five years or more and told providers it expected them to spend an extra £250,000 a year on services to be placed on its panel.
Speaking to Money Marketing, Cowan says: “Providers involved in the deals are still on our ‘restricted focus’ panel. That is currently being reviewed.
“There are commercial sensitivities around that and there are legal contracts involved, but nevertheless we are going to get to a different place to where we are today.
“[Whether or not to break the contracts] is a commercial decision we would have to make and perhaps suffer penalties for it. We are looking to do the right thing and suffer the pain for it.”
Cowan declined to say how many of the providers are still on the panel.
When asked to defend the network’s regulatory breaches, Cowan suggested there was a general lack of understanding in the market around the RDR rules.
He says: “There was some confusion in the market about what activities could and could not be done. The rules only firmed up in September 2013 when guidance on inducements was published.
“I am not in the business of defending issues of the past because I was brought in in January to run the business on a different model.
“I have been in financial services all my career, and to varying degrees business practices went on, whether it was sponsoring sport or inviting people to events. Everybody in the industry was aware of the business relationships between providers and distributors. I would ask, ’is Sesame the only company that has operated in some sort of different way to the rest of the marketplace?’”
However, the FCA says in its final notice that it made it clear to firms that upfront payments as a pre-condition for appointment to a panel was inconsistent with its standards of conduct, from June 2004 onwards.
Cowan denied that members may have been misled into giving advice that was not in the best interests of clients.
He says: “The selection of providers on the panel allows advisers to do a good job. If you reassembled the panel [stripping out the deals], I would suggest it would look very similar.”
Cowan says Sesame no longer offers any services to providers which generate a profit for the network.
He says: “The RDR has driven the industry to a better place, and maybe some firms have been slow and some have been quicker, and my great regret is we didn’t get there quicker. If we are guilty we are guilty of not reading the signs.
“I certainly believe the business has learned from its mistakes – this regulatory action relates to the past and the current management team is completely different to what it was at the time.”