Censured IFA Park Row reduced the number of cases it checked for compliance in 2008, despite multiple warnings from the FSA.
The former Royal Liver-owned distribution business was today censured by the FSA and forced to redress up to £7.8m to customers. Its former CEO Peter Sprung was also fined £49,000.
The FSA's final notice on Park Row's former CEO, Peter Sprung, reveals the network scaled back its desk based monitoring (DBM) compliance checks despite serious concerns over the suitability of advice.
In July 2008, despite numerous letters of concern from the FSA, dating as far back as 2006, Park Row reduced the level of DBM case checks from 35% of cases submitted to just 25%.
The DBM function at Park Row performs post-sale compliance checks to review and assess the suitability of advice given to customers. It bases its checks on the risk-rating of the product and the adviser.
The FSA says in the 24 months from January 2007, it sent several reports highlighting concerns about the quality of the DBM compliance checks.
According to the regulator, the reduction in checks was partially related to resource constraints in the DBM team, including a significant backlog of cases, but Sprung later denied this.
According to the final notice, Sprung stated the proportion of DBM checks was reduced due to a reassessment of the risk selection of cases.
However, Sprung contradicted himself on 15 September 2008, when board meeting minutes revealed the level of checks had been reduced to 25% of cases, as the 35% level was difficult to achieve given resource levels in the DBM.
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