Financial Conduct Authority  

FCA denies adviser authorisation over compliance concerns

FCA denies adviser authorisation over compliance concerns

An adviser who was in the past banned from functions of influence by the regulator has had his application to set up a new advice firm denied by Financial Conduct Authority. 

A final notice published on the watchdog's website last week (March 27) shows it refused an application for authorisation submitted by NestHaven Limited, which intended to advise on investments and pension transfers and opt outs as well as mortgages, peer-to-peer agreements and debt counselling. 

The FCA flagged a number of issues with NestHaven's application, including its proposals to rely on external compliance consultants but failing to demonstrate a "long-term, stable or adequate commitment" to ensuring compliance with regulatory requirements.

The FCA said: "The business plan submitted by NHL as part of the application did not provide the substantive detail that would reasonably be expected in respect of how it would operate a regulated business.

"In particular, there were no policies for dealing with vulnerable customers or anti-money laundering, and the compliance monitoring document was insufficiently tailored to the business.

"These inadequacies have not been rectified by NHL. They are of particular concern to the authority because of the risks posed by the pension transfer market, including the vulnerability of customers approaching retirement who may be at risk of not having appropriate provisions in place."

The regulator said NestHaven had provided screenshots of a CRM system when asked for further information on its business plan, but this "fell short of evidence that such a system was in place and ready to operate". 

The watchdog said: "Mr Hunt stated that he would set up all NHL’s systems and controls after authorisation.

"In the authority’s view, this demonstrates that NHL is not ready, willing and organised to comply with regulatory requirements, as the appropriate systems and controls, policies and procedures should be in place prior to authorisation."

Mr Hunt told the regulator his firm only planned to advise on multi-asset funds and said it would retain its independent status by advising on other investments "as and when necessary".

The FCA flagged concerns with inconsistencies in Mr Hunt's business plan, which became apparent during interviews and subsequent emails with the regulator. 

The watchdog said: "Mr Hunt has not demonstrated that he fully understands what will be needed to run a regulated firm of this sort, as he appeared unaware of the necessity for NHL to be ready to trade, when authorised, and his understanding of conduct risk appears to be limited."

NestHaven withdrew its application to become a Self-invested personal pension operator early on in the process and also offered to withdraw its application to advise on defined benefit pension transfers.

But the FCA ultimately decided NestHaven did not have adequate policies and procedures in place to ensure customers did not receive unsuitable advice.

It added: "In particular, it has not demonstrated commitment to long-term and stable compliance support and the authority is not satisfied that it is ready, willing and organised to comply with regulatory requirements from the time of authorisation."