The City watchdog has banned two advisers who lied about the high net worth status of numerous clients to Sipp provider James Hay.
The Financial Conduct Authority today (October 12) confirmed it had banned former IFA directors Peter Howson and John Butterfield and warned the pair had "no place in the financial services industry".
The regulator said between 2013 and 2014 the former advisers, who were both directors of the now-liquidated Vanguard Wealth Management Limited, submitted false and misleading information about the high net worth status of clients to self-invested personal pension provider James Hay.
The false declarations meant more Vanguard customers were able to purchase shares in Elysian Fuels PLC, which were considered to be high risk and non-standard investments, through their James Hay Sipps.
For customers to purchase these unlisted shares James Hay required the completion of high net worth declarations.
By fabricating this information the FCA said Mr Howson and Mr Butterfield generated "substantial" fees and commission from which they both benefitted, while some customers lost money.
The FCA said James Hay had no knowledge of the duo's actions.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: "Both advisers knew, or should have known, that what they were doing lacked integrity and betrayed the high standards expected by the FCA. They have no place in the financial services industry."
According to the City watchdog Mr Howson dishonestly deceived James Hay about the high net worth status of six customers by submitting fabricated information, including fabricating figures for fictitious properties.
Between February 2014 and November 2014 he also dishonestly submitted 27 high net worth declarations in which he falsely claimed to have seen evidence of the customers’ net worth.
Mr Howson also submitted false information relating to his own financial circumstances to the Sipp provider when submitting his own applications.
Between March 2013 and September 2014 the FCA said Mr Butterfield submitted 48 high net worth declarations in which he falsely claimed he had seen evidence of the net worth of his clients.
Alex Kovach, chief commercial officer at James Hay, said: "We are strong supporters of financial advisers, and therefore pleased that the FCA is taking steps to eradicate those ‘bad apples’ that undermine investor confidence and leave the majority of upstanding advisers facing increased FSCS and professional indemnity levies."
The exemptions provided to sophisticated and high net worth investors are certainly under the FCA’s microscope, with the regulator last month revealing evidence of firms "coaching" people through the self-certifying process in order to sell their products.
This "unscrupulous" behaviour is coupled with the fact the criteria to be one of these investors was now easier to tick off with the growth of crowdfunding and peer-to-peer platforms, it said.
The definition of HNW is having an annual income of £100,000 or more, or more than £250,000 of net assets — levels unchanged for the past two decades despite the value of money declining significantly.
Vanguard Wealth Management Limited has no connection to the Vanguard Group.
rachel.mortimer@ft.com
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