FSA fines firm GBP14,000 for financial advice failings
9th September 2009The Financial Services Authority (FSA) has today fined a Kent financial advice firm GBP14,000 for failing to demonstrate that its advice on investment products was suitable. The most serious failings related to Henry Neil Ltd's (HNL) advice that customers give up segments of existing offshore investment bonds and reinvest the proceeds in new bonds, putting 13 customers at risk of buying unsuitable investment bonds. The problems at HNL were identified following visits by the FSA.
Margaret Cole, FSA director of enforcement, said:
"This fine puts investment advisory firms on clear notice that they must have the right arrangements in place to ensure that suitable advice is given and recorded. When making an investment recommendation, firms must ensure that customers have all the necessary information to decide whether the recommendation is right for them. This includes information about relevant costs and charges. Where firms cannot demonstrate this, we will take action which will include imposing disciplinary sanctions where appropriate."
The FSA found that HNL had breached Principle 9 of the FSA's Principles for businesses, which included failing to:
- adequately determine its customers' attitude to risk and ensure that customers' attitude to risk was consistent with the risk rating of the underlying funds held in the bond;
- undertake adequate or independent product research to support its recommendations;
- adequately explain to its customers the reason for, or suitability of, its recommendations, particularly for investment bonds; and
- explicitly link each recommendation to surrender segments of an existing bond with its advice to reinvest the proceeds in a new bond and adequately explain the consequences, costs and charges of the transaction as a whole.
HNL must also appoint an external compliance consultant to conduct a review of investment products sold between 10 June 2005 and 31 December 2007 and compensate any customers who may have suffered loss.
HNL agreed to settle at an early stage of the FSA's investigation and therefore qualified for a 30 per cent discount under the FSA's executive settlement procedures. Had HNL not settled at this stage the FSA would have imposed a financial penalty of GBP20,000.
