Charterhouse Consulting Wealth Management has been fined £122,500 by the Financial Services Authority for carrying out discretionary portfolio management without permission and for various conduct of business failings.
The FSA says its investigation revealed the IFA firm regularly switched a number of clients between funds despite not having permission to operate in this way, in particular it says Charterhouse would often send clients an email before 6.30am in the morning proposing the switching of funds and requiring a response by 8.00 am.
Switches would then take place without any further instruction from the client.
In addition, the FSA says Charterhouse failed to record sufficient client information to demonstrate the suitability of its advice; the firm did not ensure transactions were appropriate for its customers' attitude to risk; and it also failed to communicate with its clients in a clear, fair and not misleading manner.
However, the FSA confirms the penalty has taken into account the mitigating steps taken by Charterhouse to regularise its business activities, which included the cessation of business activities falling outside its permitted activities.
And as a result of agreeing to settle at the earliest opportunity it says Charterhouse has received the maximum 30% discount afforded under the FSA's Discount Scheme, otherwise the fine would have been £175,000.
Jonathan Phelan, head of retail enforcement at the FSA, says it is unacceptable for a firm to operate in effect as a Discretionary Portfolio Manager without appropriate FSA authorisation.
He says: “The switching of clients between funds in a way that was outside of their declared attitude to risk could have resulted in them suffering large and unexpected financial losses.”
“The disciplinary action we have taken sends out the clear message that firms wishing to offer wealth management services must ensure they operate in a compliant way, which includes ensuring they have the appropriate regulatory permissions for their business activities.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7034 2681 or email [email protected]IFAonline
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