In the firm’s interim management statement, for the six months to 30 September, Ashcourt Rowan said it was served with a Section 166 order by the City watchdog following its thematic review of investment suitability.
CEO of the wealth manager, Jonathan Polin, was at pains to state that the regulatory issues predated the arrival of the current management team (including himself).
In a separate statement the FSA said Savoy Investment Management had been fined for failing to take reasonable care to ensure the suitability of portfolios for its wealth management clients.
The FSA added: “Savoy allowed its investment managers a high degree of discretion to advise its wealth management clients on their investment portfolios. It had limited front office controls and its other processes failed to ensure the suitability of its advice and portfolio management. This included failures to collect and record ‘know your client’ information and failures in its compliance monitoring processes.”
A review of sample files found that 23% showed a high risk of unsuitability and files often lacked information on clients’ personal and financial circumstances and contained out of date and inadequate client information.
On the size of the fine, Polin admitted it was a significant penalty, but added that the firm could not dispute Savoy had historically breached a number of regulatory rules. For this reason the decision was made early on to co-operate fully with the FSA and resolve the issue at the earliest possible opportunity.
Polin said the Change Management Programme initiated when he joined was responsible for a great deal of change in the company and it is now RDR compliant, with a fee driven model in operation since September.
The financial performance of the group in the half under review showed earnings before interest, taxes, depreciation and amortisation (EBITDA) of £508,000, which was more than the whole of the last financial year.
EBITDA after exceptional items would have shown a marginal profit had it not been for the FSA fine, Ashcourt Rowan added.
However, revenues for the period fell 12.5% to £16.1m compared to a year earlier. Ashcourt Rowan said the reduction was a result of the reduced income it knew would occur as people were exited from the business which were unable to meet “the high bar of ethos, culture and accountability” it required.
Difficult trading conditions over the June to August period and the amount of re-training and RDR readiness work undertaken also impacted this position, the group added.
Meanwhile, chairman of the Ashcourt Rowan board, Kenneth West, announced his retirement after taking the group through a tough transitional period.
West stepped in last year, initially on an interim basis and will now be succeeded by Hugh Ward former CEO of Invesco’s UK and overseas business on 1 January 2013.