The Financial Conduct Authority (FCA) has fined a compliance officer for putting customers at risk of losses in relation to defined benefit pension transfers.
David Watters was fined £75,000 for failing to exercise due skill, care and diligence in his role as compliance oversight officer, firstly at FGS McClure Watters and then Lanyon Astor Buller.
Following an investigation, the FCA found Mr Watters failed to take reasonable steps to ensure that the process in place at both firms for giving advice on enhanced transfer value (ETV) pension transfer exercises, met regulatory standards.
The FCA said this “led to a serious risk of unsuitable advice being given to customers about the merits of transferring their pension, from a defined benefit to a defined contribution scheme, as part of an ETV pension transfer exercise”.
About 500 customers who received advice from either of the two companies transferred their pensions from a defined benefit transfers to a defined contribution scheme.
The total value of these pensions was around £12.7m. The regulator said it was in many cases unnecessary for customers to leave their DB schemes and lose their guaranteed benefits.
It asserted that Mr Watters failed to:
· give sufficient consideration to whether the advice process was compliant;
· take reasonable steps to gain a sufficient understanding of the relevant regulatory requirements;
· obtain an appropriate third party review of the processes to ensure compliance; and
· take reasonable steps to ensure advisers were properly monitored to reduce the risk of unsuitable pension transfer advice being given to customers.
The regulator said ETV exercises incentivise customers to transfer their pensions, and they must receive suitable advice on the real benefits and consequences of giving up guaranteed benefits.
Mark Steward, the FCA’s executive director of enforcement and market oversight, said: “It was Mr Watters’ responsibility to take reasonable steps to put in place a compliant advice process. His failure to do this placed customers at risk of needlessly losing valuable benefits for their retirement.”
Lanyon Astor Buller has agreed to contact affected customers and pay appropriate redress where they have suffered losses. FGS transferred its business to Lanyon Astor Buller in 2008, and is no longer an authorised firm.