Pi Financial fined over Ucis and structured products
20 Sept 2012
The FSA has fined Pi Financial Limited £58,300 for advising its clients to invest in high risk products which the regulator deemed unsuitable.
According to the City watchdog, during 1 January 2009 and 3 February 2012, Shrewsbury-based Pi advised 168 clients to invest £6m in unregulated collective investment schemes and 362 clients to invest £20m in structured products.
Of the sample of files that the FSA reviewed, 50 per cent were found to be unsuitable.
The regulator said across the unsuitable files there was a clear disparity between the clients’ moderate attitude to risk and the high risk nature of the products that were recommended. In several cases, clients who appeared to have low incomes, limited assets and limited capacity for loss were advised to invest in high risk products, which were clearly not right for them.
The FSA said examples of unsuitable advice included:
* Client A was advised to place £51,000 in a UCIS and £34,000 in a structured product, which constituted all of his pension funds other than those held in a final salary scheme
* Client B was advised to invest 93% of his SIPP funds in structured products, with the effect that 54 per cent of his total investment portfolio was invested in structured products
* Client C, with an annual income of £18,500 and two dependant children, was advised to transfer his entire pension fund of £78,000 to one UCIS
The FSA said supervision of the two advisers who accounted for the highest sales of Ucis and structured products was poor, while the file checking process was unclear and the checks themselves incomplete.
Pi employed a maximum of only four file checkers during the relevant period, serving a total of 72 financial advisers. The compliance manual provided to advisers made no mention of UCIS at all, the FSA said.
Georgina Philippou, head of retail enforcement at the FSA, said: “Pi’s failings were serious. The firm sold unregulated collective investment schemes and structured products to ordinary retail investors, when these products were clearly unsuitable for their needs.
“We have made our views on Ucis very clear in a series of communications, most recently in our consultation paper and supervisory letters to firms active in this market. Ucis are very often high risk, complex products, which should not be promoted to the vast majority of retail investors in the UK. Where we see evidence of mis-selling, we will take action.
“For years we have emphasised the need for suitable advice. Pi made personal recommendations that clearly did not fit its clients’ individual needs and circumstances.”
Pi would have been fined £83,363 but agreed to settle at any early stage and thus qualified for a 30 per cent discount, the FSA said.
This is the 18th enforcement case brought against an advisory firm for UCIS failings since 2011
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