The Financial Services Authority (FSA) has fined Maidstone-based independent financial adviser firm, Kings, £60,000 for approving misleading financial promotions and for related systems and controls breaches.
The promotions were issued by an unregulated firm, Regal Partners Ltd, which acted as an introducer for Kings, and concerned pension unlocking, a process by which a consumer can release their pension assets before retirement. They took the form of TV advertisements, direct mailings and brochures.
The FSA says the promotions failed to fairly and adequately describe the risks associated with pension unlocking and included misleading claims that pension unlocking amounted to making the most of a customer’s pension assets. Further, the brochures failed to include an adequate description of the nature of the service and the commitment required, and lacked balance by unduly focusing on the benefits of pension unlocking.
The FSA considers the firm’s breaches were particularly serious because the promotions potentially affected the pension assets of customers who were approaching retirement and had the potential to be viewed by a large number of consumers. The failings also persisted over two years and arose from systemic weaknesses in the firm’s procedures for approving financial promotions. Kings failed to ensure that past mistakes were not repeated in subsequent financial promotions.
Vernon Everitt, the FSA’s director of retail themes, says: “Firms must have adequate systems and controls to ensure financial promotions are clear, fair and not misleading, whether they issue them themselves or through another firm.”
Everitt says that potential customers must be able to discern the key risks of an investment as well as its benefits.
“The FSA considers the risks and downsides of pension unlocking mean that it is likely to be suitable in only a very limited number of circumstances, and usually as a last resort. We have issued alerts to raise consumer awareness of the nature of these products, and made the industry aware of our concerns, including reminding firms of their regulatory responsibilities,” he adds.
Kings has agreed to appoint an independent third party to review its procedures for approving and monitoring financial promotions and to carry out any remedial action arising out of the review. It has also appointed a full-time compliance officer. The FSA says were it not for these actions the penalty would have been higher.
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