Two directors at financial advice firm TailorMade, which was the main distributor of unregulated property scheme Harlequin, have been ordered to pay a fraction of the fines initially handed to them by the regulator.
The Financial Conduct Authority (FCA) this week published two decision notices against TailorMade directors Robert Shaw and Lloyd Pope, who have been ordered to pay £41,400 and £23,400 respectively.
However, the money both directors have ultimately been asked to pay in fines was significantly lower than what the pair were originally asked to fork out by the FCA. Both men qualified for 30% discounts of their original fines due to agreeing to settle during 'stage 1' negotiations - a common practice used by the FCA - but then also received further 75% discounts on those already-reduced figures.
Shaw was originally fined £237,040 and Burns £134,073, but since receiving the 30% discount, plus the "approximate" reduction of 75%, Shaw has ultimately been ordered to pay £41,400 and Burns £23,400.
Shaw's settlement was originally reached in July 2015, which resulted in the FCA imposing a reduced financial penalty of £165,900 on the director. As Shaw agreed to settle at an early stage of the regulator's investigation into him and the firm, Shaw qualified for a 30% discount under the FCA's executive settlement procedures. Were it not for the stage 1 discount, Shaw's fine would have totalled £237,040.
Pope also agreed to settle at an early stage of the FCA's investigation, qualifying for a 30% discount. His initial settlement was reached in March 2015, resulting in a financial penalty of £93,800. Without the discount this would have been £134,073.
A total of 1,661 TailorMade customers invested £112,420,985, from mostly their pension funds, into self-invested personal pensions (SIPPS), many of which contained high-risk investments.
In October 2015 the FCA suspended the enforcement of both of the men's penalties because of issues surrounding its investigation into Alistair Burns, another director and former CEO at TailorMade.
The issues concerned the FCA's jurisdiction to impose Burn's penalty as evidence had emerged that the limitation period for doing so may have expired before the issue of warning notices against Burns and the other TailorMade directors. Given the factual similarities between the cases, the FCA wanted the question of limitation in the Burns case to be resolved before Shaw and Pope paid their penalties.
The Burns case was referred to the Upper Tribunal, and ultimately the FCA decided not to pursue a penalty against him in respect of a misconduct case because it was "strongly arguable" that its jurisdiction had expired, and therefore the FCA was time-barred from issuing warning notices in respect of some misconduct. In light of that, Burn's fine was reduced to £60,000 from his original penalty of £233,600.
Accordingly, the FCA decided to withdraw Shaw's and Pope's fine and issue a revised penalty proportionate to the amount imposed on Burns. For both men, the penalty was 25% of the original, discounted fine imposed by the FCA. This means they paid around 18% of their original fines.
'Conflict of interest'
For three years between January 2010 and January 2013, TailorMade provided advice to 1,661 customers who were considering transferring or switching their pension funds via self-invested personal pensions (SIPPs).
Tailormade Independent was the main distributor of unregulated property scheme Harlequin and the advice firm entered liquidation because it could not afford to finance redress payments to clients.
According to the Tribunal's findings, customers were given "wholly unsuitable advice" to transfer pension benefits into a SIPP, which was to be invested in either a single, or a very small number of, risky overseas properties.
The FCA said the "vast majority" of TailorMade's clients were referred to it by an unregulated introducer that a number of individuals at TailoreMade - including Burns and Shaw - were also owners of, or acting as agents of, therefore creating a conflict of interest at TailorMade.
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