The FCA has prohibited five directors of financial advice firms from working in financial services and fined them over £1 million, after they caused significant losses to pension customers.
The decisions follow an extensive 300-page judgement issued by the Upper Tribunal in which the five directors unsuccessfully challenged the FCA’s decisions.
The Tribunal found Andrew Page, Thomas Ward, Aiden Henderson, Robert Ward and Tristan Freer had failed to act with integrity having either acted dishonestly or recklessly. Each had been directors at failed financial advice firms (Financial Page Ltd, Henderson Carter Associates Limited, and Bank House Investment Management Limited) who provided unsuitable advice to over 2,000 customers causing them to place their pensions in high-risk financial products in self-invested personal pensions in which Hennessy Jones, an unauthorised firm, had a significant financial interest. These customers had been referred to them by Hennessy Jones which was also involved in designing the pension advice process used by these firms.
This scheme caused significant losses of over £50 million to over 2,000 consumers who have been compensated now by the Financial Services Compensation Scheme. As well as the negative impact on consumers, this also affected other financial services firms which have to contribute to the costs of the FSCS.
The Tribunal found that all the five individuals allowed their 'instincts and values to be overridden' and their judgement to be compromised for personal financial gain. They failed to scrutinise where their customers’ pension funds were being invested. The scale of these shortcomings has led to very large penalties being imposed for directors of small IFA firms.
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA said: 'No reputable financial adviser should recommend that people put their entire pension savings in high-risk investments. Customers were misled into believing that they would get independent and impartial advice, but their interests were reprehensively betrayed in this case. This case also places firms’ relationships with unauthorised introducers in the spotlight. All firms should pay heed and scrutinise these relationships to ensure standards of integrity, due diligence and fair treatment of customers are uppermost.'
Notes to editors
1. Read the Upper Tribunal’s judgement.
2. As well as upholding the FCA’s decision to ban them from carrying out regulated functions, the Tribunal imposed the following financial penalties:
- Mr Page - £321,033 plus interest
- Mr T Ward - £416,558 plus interest
- Mr Henderson - £179,179 plus interest
- Mr R Ward - £88,100 (no interest applicable)
- Mr Freer - £ 40,736 plus interest
3. More information about what the FCA does and doesn’t regulate is contained in the annual Perimeter Report
4. Liabilities generated by advice to invest in high-risk non-standard assets in a SIPP have been the single biggest driver of the FSCS levy since 2015, with over £100m worth of claims each year. Because of the FSCS compensation cap, many consumers do not receive full compensation.
5. As outlined in our strategy, we are taking assertive action to address FSCS costs by improving the conduct of firms to prevent harm from happening in the first place. We hope that the work we are doing should first stabilise, then reduce the proportion of redress liabilities that failed firms leave in the system and stabilise the FSCS levy over a multi-year period.
6. In our Consumer Investments Strategy we have committed to reduce the levels of investment in higher risk investments and we have an extensive programme of work underway.
7. Following action by the FCA in 2015, requirements were imposed on the firms to prevent them providing advice to SIPP customers. The FCA issued Decision Notices against the firms and individuals in December 2018. The Tribunal hearing was initially scheduled for September 2020 but was delayed twice due to the pandemic. The Tribunal hearing lasted 5 weeks in November/December 2021.