Fos asks RSM Tenon to buy back Ucis schemes from client
Financial Ombudsman preliminary ruling places asset recovery burden back with adviser.
The Financial Ombudsman Service (Fos) has said that an adviser that recommended two unregulated investment schemes to a client, who was then unable to get her money back quickly, should buy the investments from the client and take on the burden of recovering the money.
The preliminary ruling, against adviser firm RSM Tenon Financial Management, comes as unregulated collective investment schemes (Ucis) have been in the spotlight in recent weeks, as the FSA in April said it was set to publish proposals to prevent them from being promoted to the general public.
According to the client’s current adviser, the 41-year old woman filed a Fos claim after her adviser recommended she make pension investments in two Ucis - including a foreign property product. When the client then decided to pull out, to invest in another asset, one of the Ucis providers told her she faced a wait of up to three years to get her money back, the adviser said.
He said that the Fos had issued a preliminary ruling ordering RSM Tenon to pay the client £41,000 - the initial investments plus interest - in cash and take over the Ucis funds itself. The client has accepted the ruling.
RSM Tenon Financial Management confirmed to Investment Adviser that the FOS had “suggested we buy back the funds”, but the company has “rejected this and is waiting for a final, binding decision”.
A spokesperson said: “At no time has the FSA expressed any concern about our complaints handling process.
“We always comply with regulations. No regulatory body has suggested at any point that we have done anything wrong. We can’t talk about individual clients but we stand by the advice and are waiting for a final hearing from the ombudsman.”
The Fos said it was unable to discuss specific cases. It added that a ruling that an adviser should buy back Ucis investments from a client did not set a precedent for the organisation’s approach to claims related to the schemes, as each claim is judged on a case-by-case basis.
In its annual review of complaints received, published in May, the Fos said it had noted an increase in complaints involving Ucis. The ombudsman made a general observation that cases in this area had often involved “unsatisfactory record keeping” and “little understanding” of who such products were suitable for.
A separate RSM Tenon subsidiary, RSM Tenon Financial Services, now known as Lemontree Wealth, was fined £700,000 by the FSA in February 2010 for failures in assessing suitability when it invested clients in Lehman Brothers-backed structured products.