The Financial Services Authority (FSA) has banned and fined two directors of an IFA firm for giving unsuitable advice on unregualted collective investment schemes (UCIS).
Paul Banfield and Anthony Moss, former directors of Best Advice Financial Planning, a small IFA firm in Surrey, have been banned from holding any significant influence functions.
Banfield has also been banned from being an investment adviser and fined £15,000.
Moss would have been fined £20,000 but this was not enforced after he provided evidence of financial hardship.
The FSA found weaknesses in the firm's systems and controls had resulted in customers being exposed to the risk of receiving unsuitable advice.
At least 22 customers were advised to invest in UCIS. But the FSA found no evidence the firm understood the regulatory requirements relating to the promotion of these investments, or took reasonable care to ensure customers received suitable advice.
In all of the 22 cases reviewed, the investment recommended for the customer by Best Advice was an extremely expensive one, with no apparent added value, the FSA said.
Recommendations resulted in a double layer of commission being charged on a significant proportion of the investments made, the FSA found.
In one instance, Mrs A - who was 87 at the time - had more than 80% of her funds reinvested in UCIS.
She had been advised to cash in a number of existing investments and reinvest in several UCIS through an offshore bond.
Best Advice failed to consider whether Mrs A was eligible to invest in a UCIS or adequately assess her attitude to risk.
It also failed to assess her existing investments before making a recommendation, despite Mrs A specifically requesting such an assessment.
During its investigation both Moss and Banfield admitted to the FSA that they did not fully understand the regulatory restrictions on UCIS despite their firm recommending them to customers.
Although UCIS are not authorised schemes there are regulations surrounding their promotion. Therefore people carrying on regulated activities in relation to them, such as giving a personal recommendation, are subject to FSA regulation.
Best Advice was dissolved on 20 July 2011.
Alzheimer’s is the most common cause of dementia
Total of 72 accredited firms
23% fall since Q1
Achievements, charity work and other happy snippets
Including advice firm Chadkirk WM