The Financial Services Authority (FSA) has fined an independent financial adviser £60,000 for the unsuitable sales of Unregulated Collective Investment Schemes (UCIS) and other non-mainstream investments.
Patrick Francis O'Donnell, of P3 Wealth Management Limited, has also been banned from performing any function in relation to any regulated activity in the financial services industry.
Meanwhile his West Lothian-based firm, where he was sole director and the only approved person, has also had its permission to carry on regulated activities cancelled.
The FSA said O'Donnell had failed to adequately assess whether non-mainstream investments were suitable for his clients and whether his clients were eligible to receive promotions for UCIS under the FSA's restrictions.
It added that, although he may have honestly and sincerely believed he was doing his best for his customers, he advised many of them to invest almost all of their wealth in one or more illiquid, complex and higher risk investments.
Following a TCF visit in October 2009, in which the FSA found around two thirds of O'Donnell's customers had invested over 75% of their known available funds into UCIS and other non-mainstream investments, the FSA asked P3 to vary its permission to cease conducting UCIS business.
Despite this, he permitted £185,306 of UCIS business to be completed just four days before he confirmed to the FSA that he would stop selling these products, while he also completed UCIS investment applications on behalf of two of his customers after the confirmation.
Tom Spender, head of retail enforcement at the FSA, said: "O'Donnell had absolutely no understanding of the regulatory restrictions in place which prohibit advisers from selling UCIS to the vast majority of UK retail investors.
"He also completely failed to make recommendations that were suitable for his clients' individual needs and circumstances.
"Such mis-advice cannot continue. UCIS and other non-mainstream investments are very often high risk, complex products, which are not appropriate for most retail investors."
In total, O'Donnell advised 57 of his customers to invest in UCIS, 14 of whom also invested in other non-mainstream investments.
From a sample of nine files, covering 15 customers, the FSA found that there were discrepancies in the descriptions of the customers' attitude to risk (ATR) in seven cases, with the recorded ATR frequently varying across different documents.
Among the clients affected were a fork-lift driver and his wife, who invested the entirety of their known pension funds into UCIS.
Meanwhile, a cautious investor put 94% of her known assets into non-mainstream investments in attempt to provide her husband with benefits in the event of her death.
O'Donnell also advised a mother earning a small salary and supporting a dependant son to invest 93% of her known pension in UCIS.
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