Pi Financial appeals Fos ruling and alleges AR duties breach
Firm recently fined by the regulator appeals decision, stating responsibility lies with individual adviser.
Pi Financial is appealing a Financial Ombudsman Scheme decision to pay redress to an elderly investor who was advised by the firm to invest £90,000 into an unregulated collective investment scheme, alleging that the adviser in question breached their authorised representative duties.
The Fos decision, seen by FTAdviser, details the submission from Pi Financial that the claim should be brought against the adviser directly and not against the firm. An appeal against the decision has been lodged by Pi and will be examined by an ombudsman.
An adviser from Ravencourt Financial Services, an appointed representative of Pi Financial at the time of the advice in 2007, advised an 88-year old man to invest £90,000 into the Stirling Mortimer No 4 Cape Verde fund. The fund is an unregulated collective investment scheme.
The Fos decision states the focus of the complaint is whether the Stirling Mortimer fund investment was a suitable recommendation that was compatible with the risk that he was prepared to take.
The Fos adjudicator highlights that there was a “lack of fact finding documentation” and due to this he has had to refer to a Ravencourt-headed letter dated October 2007 in which the adviser recommended investing the money into a “guaranteed investment producing a minimum of 6 per cent per annum”.
The letter mentions the need to provide income for care home fees and the need to reduce risk, the adjudicator continues, before going on to say that it does not appear the client was issued with any letter of suitability.
The adjudicator described this letter as “not balanced”, as it seemed to “focus entirely” on the Stirling investment and the adviser did not detail the risks or potential downsides.
The Stirling Mortimer fund is a Ucis that invests in an overseas property development scheme in Cape Verde. Recently, FTAdviser revealed a trio of Fos decisions that found against the advice given to invest in Stirling Mortimer funds.
The Fos decision said: “These schemes are deemed to be high risk products and can only be offered to certain limited categories of investors. That risk was not made clear to [the consumer] or his family at the time.
“I do not believe [the consumer’s] circumstances were such that he should have been advised to take undue risks with his capital. I have not seen anything which would lead me to conclude that the investment was suitable for [the consumer’s] investment needs.”
Pi states in its submission that it only provided Ravencourt headed paper on the “express requirement” that it would only be used by its advisers for conducting regulated business that fell within the scope of the AR agreement.
It also claims the adviser was in breach of this agreement as it had prohibited him from transacting business under power of attorney.