Sesame deserves its fine, now what about the providers?

And according to the details contained in the published final notice, which was tacitly agreed by Sesame when it settled at an “early stage” for a £1.6m penalty, the action was thoroughly deserved.

Its fourth fine in a decade - it was as high as a pre-discount £2.3m precisely because of this persistency - the network was pulled up for so-called ‘pay-for-play’ deals demanded in order for providers to feature on its restricted product panels, launched in 2012.

Typically the Financial Conduct Authority stopped short of stating any inappropriate products were sold to clients as a result of these practices. It didn’t need to: the deals flagrantly ignored any consideration of suitability; potential for detriment was a clear and present danger.

Sesame was said to have demanded a minimum of £250,000 be spent on services to help “promote” its restricted offering, such as training, technology upgrades and the like, which would be “over and above” any existing arrangements.

Questions asked of providers in an ‘invitation for tender’ included: “What sales and marketing support (over and above normal activity) would you offer to ensure the benefits of [sic] this proposition can bring are maximised?”; and “What ability do you have within the value chain to make payments to [the Sesame group] for the provision of certain services traditionally supplied by the Provider [sic]?”

In one particularly egregious case, Sesame asked a provider to commit to an extra £750,000 over the two final years of its prospective deal. All commitments were to be secured over a minimum five-year period.

The firm writing the figurative cheque as part of a prohibited pecuniary arrangement is as in the wrong as the one banking it

There’s no hiding place here; the firm is bang to rights. My question is, where is the action on providers?

When the FCA published the findings of its inducements rules review in September 2013, it confirmed two firms had been referred to enforcement, one provider and one adviser.

It was later confirmed that the provider was annuity specialist Partnership, which was one of a number of the firms on Sesame’s panel. The probe into the company was, perhaps coincidentally, dropped earlier this week.

We spoke to the FCA yesterday in the wake of the Sesame announcements, but it was unable to confirm if any further enforcement investigations were ongoing, or if any providers were likely to be formally censured.

We can only hope this changes.

The FCA Conduct of Business Sourcebook rules on inducements, section 2.3.1 for your reference, states a “firm must not pay or accept any fee or commission, or provide or receive any non-monetary benefit” except fees which are being paid to or on behalf of clients and are “clearly disclosed... in a manner that is comprehensive, accurate and understandable”.

I’ve been deliberately selective with the direct quotes there because it’s a particularly arcane passage containing a number of sub-clauses, and because for my purposes the first and last bits I’ve referenced are the most pertinent.

Firstly, the firm writing the figurative cheque as part of a prohibited pecuniary arrangement is as in the wrong as the one banking it; second, it is everyone’s duty to make sure the process is transparent.

Sesame may have been the most grievous transgressor - it was after all the authorised principal for the advisers which made direct recommendations to clients - but clearly any firm flouting their responsibility to put the customers needs before their own deserves punishment.

In short: it takes two to tango, and while Sesame may have led the dance, it required willing partners.

As Sesame Bankhall Group executive chairman John Cowan, who was admirably contrite over his network’s past behaviour, said yesterday: “I’d like to know if Sesame is the only business that’s been singled out for this activity, it will be interesting to see if that’s the case.”

Me too, John.

ashley.wassall@ft.com