The Financial Conduct Authority is investigating two IFAs over their role in a pension scam that generated £5.9m in payments for the scammers.
In a warning notice, received by the advisers on August 10 and published by the FCA today (September 30), the regulator told the pair they faced regulatory action, including a fine, if their role in the pension scam is not successfully challenged.
The FCA believes the pair colluded with a stockbroker in making sure that customers switched or transferred their existing pension funds into a self-invested personal pension (Sipp) which would then be invested in high-risk and mainly illiquid investments in investment companies seeking to raise funds.
In return, these investment firms were requested to make “substantial marketing and other payments” to the advisers and the stockbroker. These payments totalled to £5.9m.
The regulator accused the individuals of being “driven by profit”, having exposed all their customers to “a very significant risk of detriment” and, in many cases, “actual loss”.
“The individuals each played an integral role in a pension scam and colluded together,” the FCA said in its warning notice.
“The individuals were motivated by financial benefit. In particular, the FCA considers the decisions made by the individual working at the retail advisory stockbroker and the advice provided by the independent financial advisers were driven by profit, were inevitably unsuitable and exposed all customers to a very significant risk of detriment and, in many cases, actual loss.”
It added: “The individuals deliberately concealed their receipt of marketing commissions and other payments from customers.”
The financial watchdog concluded the individuals' conduct “amounts to a lack of integrity”.
As this formed the first stage of the FCA's enforcement proceedings it did not name any of the people involved.
The advisers and stockbroker can now make representations to the FCA’s Regulatory Decisions Committee, before it decides on appropriate further action and whether it will issue a decision notice.
If a decision notice is issued, the individuals will be named and can then take the case to the Upper Tribunal which would reach an independent decision on the appropriate action for the FCA to take, if any.