Sesame Limited has been fined £6m by the Financial Conduct Authority for failing to ensure the advice it gave was suitable on Keydata recommendations and over broader systems and controls weaknesses.
The £6m figure is £2m more than the £4.1m trading profit the network reported for 2012. Sesame Bankhall Group increased its year-on-year profit by nearly £2m from 2011 to 2012.
The regulator found that the “vast majority” of Keydata sales to 426 customers between July 2005 and June 2009 were flawed due to mismatches between customers’ investment objectives, attitudes to risk and the products sold.
Suitability letters provided to customers stated incorrectly that income or capital growth was guaranteed. Customers were also advised incorrectly that the Keydata life settlement products were low risk, the FCA said.
This was despite Sesame’s own view that the Keydata life settlement products presented investors with “a considerable amount of risk”. While it issued its ARs with this view, it failed to take any further steps to prevent and/or identify mis-selling.
The penalty is made up of a £245,000 fine for Sesame’s advice failings in relation to Keydata life settlement products, and a £5,786,200 fine for systems and controls weaknesses across its investment advice business.
Sesame agreed to settle the case at an early stage of the investigation and therefore qualified for a 30% discount. Without the discount the fine would have been £8,616,000.
Specifically, the regulator said the company failed to identify and monitor sales of those products and funds which were not suitable for most customers; did not conduct consistently robust desk-based file reviews and visits by Sesame’s internal compliance team; and failed to improve record-keeping for ARs.
Tracey McDermott, director of enforcement and financial crime at the FCA, said: “Sesame is one of the largest and most well-known financial services networks in the UK responsible for the oversight of some 1,220 ARs.
“The weaknesses in Sesame’s systems and controls show that there was an ongoing risk that unsuitable advice could be given by Sesame’s ARs.”
The fine comes after the FCA announced earlier this year that Sesame received almost double the number of customer complaints in the second half of last year than it did in the same period the year before.
In its complaints data for the second half of 2012, the financial services regulator revealed 1,978 complaints were opened against Sesame in the final six months of 2012, up from 1,060 in the latter half of 2011.
George Higginson, chief executive officer of Sesame Bankhall Group, said: “We regret these past issues and, in co-operation with the FCA, we have undertaken an immediate past business review to ensure that any customers who received unsuitable advice on Keydata products have been compensated.
“Through our multi-million pound investment in technology and improved systems and control framework, which includes the move to full file checking, we are working hard to ensure lessons are learnt and corrective actions implemented.”
