IFA network PI Financial is in the spotlight again over the mis-selling of unregulated collective investment schemes (UCIS), two months after being hit with a £58,000 fine by the regulator for giving unsuitable UCIS advice.
In a Financial Ombudsman Service (FOS) final ruling seen by IFAonline the IFA network is found to have given unsuitable advice in 2007 to a woman to invest £20,000 in the Stirling Mortimer No 4 fund Cape Verde.
The ombudsman ruled the Stirling Mortimer fund carried risks "in excess of what [the investor's] circumstances and requirements suggest would have been acceptable".
The No 4 Cape Verde fund has been beset with problems, including heavy falls in the value of the fund after Stirling Mortimer struggled to find buyers for the luxury properties it invested in following the global financial crisis.
At the time the investor was retired and had an income of approximately £15,800 and expenses of about £6,000. In addition to the £20,000 in the Stirling Mortimer fund, the investor held an investment bond valued at £216,000 and an ISA at £9,600.
To invest in the Stirling Mortimer fund, the investor cashed in one existing sterling investment bond and partially cashed in another, funds which had offered some capital protection and which the ombudsman stated "therefore appears to have been in a relatively secure environment".
"I have seen insufficient evidence to persuade me [the investor] was made aware that by replacing this with the Sterling Mortimer plan she would be taking a greater risk with her money," the ombudsman continued.
The FOS has ruled PI Financial must give redress to the client equal to what would be the value of the investments surrendered, approximately £20,000.
A spokesperson for Regulatory Legal, who helped bring the claim on behalf of the investor, said: "PI Financial should do the right thing and stop trying to argue the sale of Stirling Mortimer products to these elderly people were suitable. The FSA fined them and FOS has rejected their defences. They should now move quickly to remedy the situation."
In September the Financial Services Authority (FSA) fined the IFA network for advising its clients to invest in high risk products which were "clearly" unsuitable.
Between 1 January 2009 to 3 February 2012, PI failed to take reasonable care to ensure the suitability of its advice, the regulator said.
During this period, it advised 168 clients to invest £6m in UCIS and 362 clients to invest £20m in structured products.
Of the files the FSA reviewed, 50% were found to be unsuitable, with a disparity between the clients' moderate attitude to risk and the high risk nature of the products that were recommended.
Tim Sutcliffe, chief executive officer at PI Financial, said: "We are reviewing our files. There are about 60 files linked to one former adviser and about 32 clients have complained.
"Solicitors for our professional indemnity cover have agreed terms which is good as it means financially this is not an issue for us."
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