RegulationJan 31 2023

FCA places restrictions on IFA firm over unauthorised client fee withdrawals

Search sponsored by
FCA places restrictions on IFA firm over unauthorised client fee withdrawals

The Financial Conduct Authority has imposed a number of restrictions on Nexus Independent Financial Advisers and Nexus Investment Managers, preventing them from carrying out any regulated activities.

In a first supervisory notice published today (January 31), the FCA said it has very serious concerns about the conduct of the firms and is concerned that the firms’ sole director may have deducted sums from clients without authorisation or without their knowledge.

It said the firms’ director may have taken a total of £2.07mn in unauthorised and/or inappropriate withdrawals from clients of the firms. 

The FCA said the conduct appears to relate to multiple clients, and to have spanned at least the period from September 2021 to December 2022. 

“There is evidence to suggest that on or around January 14, 2023, the firms’ director was able to access bank accounts held by the firms and withdraw a further £50,000 which was transferred to their personal bank account,” the FCA wrote.

“Consequently, the authority considers it necessary and proportionate to impose the requirements to address the ongoing risk of further dissipation and to preserve the firms’ assets and provide an appropriate degree of protection for the firms’ customers.”

As of January 25, the regulator restricted access to the firms’ assets and said each firm must immediately cease carrying on all regulated activities for which each has a Part 4A permission, other than where it has the express written consent of the regulator.

The firms must, within 72 hours of the receipt of the notice, write to all clients and all platforms upon which its clients have funds placed, informing each of them of the imposition of the requirements and their effects.

Once this has been done, within 24 hours, the firms must provide the regulator with a list of all parties to whom notifications have been sent and confirmation that, to the best of their knowledge, the firms have sent the specified notifications to all relevant parties.

The FCA said the imposition of the requirements should take immediate effect because the matters set out demonstrate that the firm is “unable to manage its affairs in a sound and prudent manner, and is putting consumers at risk”.

The investigation

Nexus IFA utilises the services of Platform N and each of Nexus IFA and Nexus IM use the services of Platform S. 

Under the arrangements between the firms and the platforms, where the firms provide advice to a client, they can deduct fees from the client’s funds held on the relevant platform. 

The firms can instruct ‘ad hoc payments’ of fees to be deducted (as compared to more regular fee payments) from each of Platform S and Platform N.