RegulationSep 21 2018

FCA bans advice firm chief executive

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FCA bans advice firm chief executive

The Financial Conduct Authority (FCA) has banned the chief executive of an advice firm which distributed Harlequin products.

The ban on Alistair Burns from performing any significant-influence or senior management function has been reinstated after a judge upheld the regulator’s original decision to take this action.

Mr Burns, the chief executive and director of TailorMade Independent (TMI), was also fined £60,000 on the basis he had failed to take reasonable steps to make sure his firm complied with the FCA’s rules.

While the court upheld the ban and fine on Mr Burns, it told the FCA to impose a reduced fine of £60,000, compared to the £233,600 which the regulator had originally levied.

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

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

Mr Burns had argued the investments were not high-risk because they offered "guaranteed returns", but the judge 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 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.

The FCA found Mr Burns had not identified, and TMI had failed to manage, this conflict of interest.

The Tribunal found that in these circumstances a financial adviser cannot give suitable advice if they advise on the Sipp alone because the Sipp and its underlying investments are part of an "indivisible package of rights" which form a customer’s overall pension arrangements.

To date, compensation totalling more than £55.6m has been paid by the Financial Services Compensation Scheme in relation to claims upheld against TMI. This does not cover all the losses suffered by investors, which the FSCS assesses at more than £106.5m.

damian.fantato@ft.com