The Financial Conduct Authority has banned Paul Steel of Estate Matters Financial Ltd from working in financial services after he gave unsuitable defined benefit transfer advice.
The regulator said Steel provided unsuitable advice to customers to transfer out of defined benefit pension schemes, including the British Steel Pension Scheme.
The regulator also said he showed a lack of honesty and integrity in selling his client book for less than its value to himself. This meant customers who had lost out from the poor advice could not pursue EMF for redress.
The FCA imposed a fine of £3,694,400 but it agreed not to enforce this if Steel paid £850,000 to the Financial Services Compensation Scheme.
It said this represented substantially all of Steel’s remaining assets and ensured he would contribute to the cost of compensating customers who received his poor advice.
Without this settlement, most or all of Steel’s assets would have been spent on the High Court proceedings rather than compensating consumers, the FCA explained.
The details
Between 2015 and 2018, 484 clients were given DB transfer advice by EMF.
Of these, 483 clients followed the advice provided and transferred out of their DB pension schemes into a defined contribution scheme. The remaining client transferred despite being advised not to.
More than £140mn in pension assets were transferred as a result but 86 per cent of this advice failed to meet the required standards.
In providing the advice, Steel failed to collect the right information and/or disclose the risks of transferring.
Between March and May 2018, EMF transferred its client base to Pension Matters (North East) Ltd, which was also owned and run Steel and Jacqueline Foster. An asset purchase agreement signed in June 2018 valued the assets at £80,000 but the FCA said this was based on "unreal assumptions" and did not reflect the real value of EMF.
In February 2020, Steel procured a valuation of the goodwill and assets of Pension Matters which gave a valuation of £20,000. This was despite the fact an unconnected firm had already offered to pay more than £3mn for the business.
That month Pension Matters was sold to Steel for £20,000. The FCA was not informed of the transaction by Steel. Then in July 2020 Steel sold the goodwill and assets to the unconnected firm for more than £3mn and Pension Matters was placed in liquidation.
As a result of his conduct in selling his client book, the FCA sought and obtained a freezing injunction and brought proceedings in the High Court seeking redress for customer losses.
It agreed to settle those proceedings on the basis of Steel’s agreement not to contest the FCA’s penalties.
Therese Chambers, joint executive director of enforcement and market oversight, said: “Steel failed to provide suitable pension transfer advice. But he also failed to act with honesty and integrity when he improperly sold the firm’s assets for less than their value - to himself - so that he could enjoy the profits of the business without the burden of the risks that he had created.
“We are determined that those who fail in their duties to their customers take responsibility for paying towards redress and do not expect the FSCS, and the vast majority of firms who do the right thing, to pick up the tab for their failings.”
The FCA launched High Court action against Steel in February 2021. Those proceedings have now been settled.
As at June 27, 2023, the FSCS has paid out £1,752,125 in relation to claims valued at £4,539,474 to clients to whom EMF has provided unsuitable pension transfer advice.
Last week, the FCA banned Mark Abley of County Capital Wealth Management Ltd from providing any advice on pension transfers.
The regulator also told Abley to pay £106,100 to the Financial Services Compensation Scheme rather than the FCA, to contribute towards the redress owed to CCWM’s customers.
Around the same time, the FCA published an update on its work with the BSPS and the outcomes so far.
The regulator said it has carried out around 30 investigations into firms and individuals regarding defined benefit transfer advice related to BSPS.
sonia.rach@ft.com
