Regulation  

Tribunal upholds FCA ban on Harlequin adviser

Tribunal upholds FCA ban on Harlequin adviser

A judge has upheld the Financial Conduct Authority's (FCA) decision to ban the chief executive of an advice firm which distributed Harlequin products.

Alistair Burns, the chief executive and director of TailorMade Independent (TMI), has been banned from performing any significant-influence or senior management function, on the basis of a "fundamental lack of competence and capability".

But the Upper Tribunal also told the FCA to impose a reduced fine on Mr Burns of £60,000, compared with the £233,600 which the regulator had originally levied.

Between January 2010 and January 2013, TailorMade provided advice to 1,661 customers who were considering transferring or switching their pension funds into self-invested personal pensions (Sipp).

The Tribunal found TailorMade's customers were given bad advice to transfer into a Sipp which was to be invested in either a single, or a very small number of, inherently risky overseas property investments - notably Harlequin.

Judge Timothy Herrington said: "It would be readily apparent to any competent financial adviser that for an unsophisticated retail investor with a relatively small pension pot represented either by interests in a defined benefit scheme or in a personal pension invested in a spread of traditional investments, to switch his benefits into a Sipp which was to be wholly invested in either a single or very small number of inherently risky overseas property investments was a wholly unsuitable course of action for that investor to take."

He added: "We are seriously concerned that Mr Burns shows limited insight into the duties of a director and the board of a regulated firm and has given no serious thought to what he would need to do to address his failings.

"We therefore have no confidence that he would not make similar mistakes again were he able to exercise senior management functions in a regulated firm in the foreseeable future."

Mr Burns had argued the investments were not high-risk because they offered "guaranteed returns", but Mr Herrington said these were "no more than a promise" by the product providers themselves rather than a concrete guarantee.

The Tribunal also found Mr Burns had a significant financial interest in the outcome of the unsuitable advice his firm was giving because he co-owned and co-directed an unregulated introducer called TailorMade Alternative Investments (TMAI), which referred clients to his advice business.

Mr Herrington said: "[The investors], not unreasonably, made no distinction between TMAI’s activities and those of TMI, particularly as it was often the case that the same introducer was involved in the introduction to the product provider of the alternative investment and the subsequent introduction to TMI for the purpose of obtaining advice on the establishment of a Sipp.

"As far as the consumers were concerned, the process was a seamless one through which they were advised by 'TailorMade'.

"The idea that these investors would obtain independent advice on the underlying investments promoted by TMAI was totally unrealistic, and it is clear to us that such advice would not have been readily available in any event."