The Upper Tribunal has upheld a decision by the Financial Conduct Authority (FCA) to fine investment adviser Westwood Independent Financial Planners £100,000 for mis-selling geared traded endowment policies (GTEPs).
The Tribunal agreed with the FCA that Westwood breached two of its Principles for Businesses and a range of FCA rules in relation to its sale of GTEPs between September 2005 and October 2007.
It noted Scottish firm Westwood had made £509,123 commission from the sale of 50 GTEPs - and was scheduled to receive £700,000 commission on those sales - and that a fine of £100,000 was both adequate punishment and an appropriate amount to serve as a deterrent.
The FCA had noted in its original decision notice against Westwood in 2011 that, often, it advised investors to remortgage their home to invest in GTEPs.
Westwood had appealed that decision and maintained throughout its defence that it believed GTEPs were medium risk products.
The Tribunal found that, in relation to all customers who gave evidence at the hearing, Westwood had not taken reasonable care to ensure its recommendations to invest in a GTEP plan were suitable, having regard to what it knew about those customers.
It found that, for all but one of the customer witnesses, Westwood had not provided information in a clear and fair way.
These customers included a teacher, married to a self-employed writer, who took out a larger mortgage than they needed for their new home, in order to buy GTEPs on Westwood's recommendation.
Many of the GTEP plans sold by Westwood to customers have fallen significantly in value, although in most cases the underlying endowment policies still have a number of years left to maturity. All of the customers who gave evidence at the hearing have been forced to assign other investments to their GTEP plans, or inject cash into them. The evidence at the Tribunal also showed that some Westwood GTEP customers have already received compensation from Westwood's PI insurers and the Financial Services Compensation Scheme.
Westwood no longer carries on any regulated activities, having been placed into sequestration (a Scottish term for bankruptcy) on 18 October 2011. It remains open to Westwood to appeal the judgment.
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