Lighthouse Adviser Services is contesting dozens of claims brought through the Financial Ombudsman Service relating to more than £5m worth of unregulated investment schemes sold by a single adviser, who has alleged the fault lies with network compliance.
Complaints relate to one former adviser, Nick Barnett, who became part of Lighthouse following its merger with the parent of his previous authorised principal firm Falcon Group, in 2008.
The cases came to light following Mr Barnett’s deauthorisation in 2012, when another adviser firm took over his client book. FTAdviser understands that concerns over sales between 2005 and 2008, focusing on network compliance approval, were submitted to the regulator in 2013.
In February 2013 it was determined by a consultant, who asked not to be named, that around £5.5m of Ucis had been transacted by Mr Barnett. He added that “practically all [sales] are with or are heading to the Fos”.
In a letter sent in December 2013, seen by FTAdviser, Lighthouse Group chief executive Malcolm Streatfield wrote to him that Mr Barnett was “unwilling” to acknowledge the scale of the problem he “created” and the “costs that may be involved both for Falcon’s insurers and yourself”.
In the letter Mr Streatfield acknowledged that at that time around 60 complaints had been made over sales between 2005 and 2009. He also intimated a full review would be carried out by the company.
“The number and content of such complaints has now reached the point at which Falcon believes that is obliged to initiate a full review and to take steps towards compensating losses as a consequence of mis-selling by you,” it read.
There is no evidence of a past business review being carried out by the firm. In 2012 it was confirmed in Lighthouse interim results that £2.5m had been set aside to cover claims relating to Falcon.
In a letter sent to Mr Streatfield in February 2014, also seen by FTAdviser, Mr Barnett stated that “few [clients] if any were high risk”. He also specifically blamed the network’s compliance department for signing off all files.
“It now seems quite clear that Falcon should have monitored and controlled the selling of these plans, have undertaken due diligence before compliance sign off and made sure we understood the whole series of rules that I didn’t know existed.
“As advisers we paid Falcon for those services. Each case was signed off by compliance, at no time questioning the advice.”
FTAdviser spoke to three separate investors who have complained to the Fos, all of whom were all advised by Mr Barnett to transfer their pensions into self-invested wrappers in order to invest in the unregulated schemes, including a number marketed by a firm called Merchant Place.
Among concerns listed in at least one Fos claim and in the submission to the regulator, in documents seen by FTAdviser a number of clients were marked up from a previous designation as a ‘cautious’ investor to a risk rating of ‘speculative’ over a period of time.