The Manchester-based financial adviser gave the products a lower than appropriate risk profile after failing to assess them properly, and the Keydata products shared a number of common features with other products which the firm had graded as higher risk.
Care Asset Management was also found to have inadequate systems in place to ensure that it understood the risks its customers were willing to take, that it provided written documentation to customers which described adequately the nature and wide-ranging risks inherent in Keydata products in a clear and balanced way, and that it monitored adequately the sale of Keydata products.
Many of the customers who had purchased the products were particularly vulnerable in the event of loss of capital or income as they were in or near retirement age.
The Financial Services Compensation Scheme (FSCS) has awarded £1.96m in compensation to Care customers, and the FSCS is seeking to repayment of this sum, along with additional sums to cover the losses suffered by customers.
Care has since taken steps to improve its sales processes, and has appointed an external compliance consultant to review and update its compliance arrangements and review its sales.
It qualified for a 30% discount on the fine after it co-operated with the FSA in its investigation. Without the discount the fine would have been £80,000.
Bill Sillett, FSA head of retail enforcement said: “This case highlights once again that advisers cannot rely simply on the opinions of a provider when giving advice about their products. They must form their own views as to the riskiness of the product and do their own due diligence before recommending the product to their customers.”
