The chief executive of one of the biggest sellers of troubled Harlequin Property investments faces a ban and a £233,600 fine for failing to ensure his firm provided suitable advice to pension clients
Alistair Burns, chief executive of advice firm Tailormade Independent, is fighting the regulatory action by taking his case to the Upper Tribunal in the hope of having the Financial Conduct Authority ruling overturned.
In the FCA’s view, Mr Burns failed to ensure Tailormade provided suitable advice to its clients and failed to ensure the firm managed fairly and clearly disclosed his own personal conflicts of interest and that of other individuals at Tailormade.
Tailormade was the biggest single seller of investments in Harlequin Property, ploughing tens of millions of pounds of mainly UK pension savers money into the unregulated overseas property company on the promise of high returns from the development of villas in the Caribbean.
As of September 2016 the Financial Services Compensation Scheme (Fscs) has upheld 919 claims of unsuitable advice against Tailormade, with compensation of over £40m paid to date.
More than half of the affected customers invested in Harlequin, whose sales arm has entered liquidation and the rest of the company teeters on the brink, with the result that Harlequin investments have been valued at nil by the FSCS.
Between January 2010 and January 2013, Tailormade provided advice to customers who were considering transferring or switching their existing pension funds via self-invested personal pensions (Sipps) into unregulated investments like green oil, biofuels, farmland and overseas property such as Harlequin.
During this period, 1,661 customers invested £112.5m in alternative investments, many of which were not typically permitted by their existing pension schemes.
In the FCA’s view, the personal recommendations process used to advise customers, for which Mr Burns was jointly responsible, was inadequate.
The process failed to take into account a customer’s individual circumstances, demands and needs, and instead resulted in personal recommendations being made predominantly on the basis of the customer’s objective of using their existing pension funds to purchase alternative investments.
Further, the FCA’s decision notice sets out the regulator’s view that Mr Burns received significant financial benefit from his positions as a director and shareholder of an unregulated introducer also operating under the ‘TailorMade’ name, which referred clients to TMI.
According to the FCA, the financial benefit he and other individuals at the firm received from both the fees paid by customers for TMI’s advice, and the commission paid to the unregulated introducer for its introduction, created a conflict between the interests of Mr Burns (and the other individuals) in the outcome of TMI’s advice and the customer’s interest in that outcome.
This, the FCA stated, should have been disclosed to customers and managed using a suitable process.
As a director Mr Burns was required to take reasonable steps to ensure TMI complied with regulatory standards. In the FCA’s view he did not do so.