The Financial Conduct Authority has been forced to apologise to a financial advisory firm and make a goodwill payment of £1,000 by the Complaints Commissioner, following “serious failings” in an enforcement investigation.
In a report, published yesterday (17 December), Antony Townsend stated that there were deficiencies in the manner the regulator communicated with the firm before its enforcement action and that it is likely that conduct fell below the standard expected.
While chastening for the regulator, the commissioner concluded the actions were in accordance with its mission to ensure industry representatives are ‘fit and proper’ and that it had not acted “inappropriately”.
The adviser suggested that a financial award should be made to reflect the losses incurred - claimed to be in the region of £1.2m - as a result of the regulator’s actions.
The complaint was made by the unnamed firm on 10 March, following an unannounced enforcement visit to its offices on 29 April 2009 where the regulator discussed the possibility of a ‘voluntary variation of permissions’.
He took issue with the conduct and comments made by one of the investigators during the visit and during a subsequent interview, while also claiming that the regulator made “deliberate attempts” to prevent him from gaining further employment.
Following a visit from the Financial Service Authority’s supervision division in March 2007, concerns were raised over a number of the firm’s procedures, with a further visits conducted in March and November 2008, which highlighted further deficiencies.
The regulator wanted the firm to arrange for a ‘skilled person’ to undertake a review of four areas of the business - including a past business review - as “failures were serious given the significant concerns the regulator appeared to have had over the risks posed to consumers by your business”.
In the complainant’s letter, he stated: “At the first meeting with enforcement (25 April 2009) and at the end, Investigator W suggested there was always Tescos to work for and that indeed bad advisers always come back under another guise out of the woodwork!
“This was intimidation, he also at this stage mentioning prison if criminal activity was proven, unwarranted and distressing comments and indeed misleading [sic].”
The adviser felt misled over the implications of signing the permission variation at the end of the meeting and, as a result, lost a significant amount of business and the ability to obtain legal representation under a professional indemnity insurance policy.
However, the complaints commissioner responded that “being the subject of an enforcement investigation is, by its nature, unlikely to be a pleasant experience however carefully it is conducted”.
The adviser in question made applications to networks to become re-authorised as an adviser, but felt that the regulator made it difficult to be reapproved on three occasions. Of these, two applications were received before the conclusion of its enforcement action.
“Although I can appreciate why you were disappointed that the regulator would not approve your applications, it must be remembered that the aim of the approval process is to ensure that an individual is fit and proper to work in the industry,” wrote Mr Townsend.
The complaints commissioner concluded that while there were deficiencies in the manner the regulator communicated and standards fell below what was expected of its staff, there was nothing to indicate that the FSA acted inappropriately.
“I am unable to make a recommendation that the regulator should offer you any financial redress for the losses you say that you have incurred as a result of its actions, although I have recommended an ex-gratia payment in recognition of the matters which I have criticised,” he added.
The regulator responded to the case by stating that is accepts the recommendations.
“The FCA will accordingly apologise to the complainant and make an ex gratia payment of £1,000.”
peter.walker@ft.com
