Back in August the FSA issued a consultation paper on the distribution of Ucis and proposed a ban on their sale to the majority of retail investors.
In this case the regulator said that from 1 January 2009 to 3 February 2012, 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 the FSA reviewed, 50% were found to be unsuitable and it said 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.
Poor due diligence
The FSA said that product sales were not effectively monitored and systems and controls at the firm were inadequate. 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.
It also said that Pi employed a maximum of only four file checkers during the relevant period, serving a total of 72 financial advisers and the compliance manual provided to advisers made no mention of Ucis at all.
“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. Pi made personal recommendations that clearly did not fit its clients’ individual needs and circumstances,” said Georgina Philippou, head of retail enforcement at the FSA.
“Ucis are very often high risk, complex products, which should not be promoted to the vast majority of retail investors in the UK. 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,” she added.
Pi would have been fined £83,363 but agreed to settle at an early stage and thus qualified for a 30% discount.
