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FSA clamps down on IFA over Keydata promotions

by Michelle Abrego on Jan 11, 2013 at 10:48

FSA clamps down on IFA over Keydata promotions

The Financial Services Authority (FSA) has taken action against Essex-based IFA Baronworth Investment Services and its chief executive Colin Jackson over failures relating to the promotion of Keydata and other structured products.

The regulator said that the firm offered a variety of high income products to its customers on a direct offer and non-advised basis, including structured products and Keydata.

When promoting Keydata Protected Portfolio Plan in 2006 it heavily promoted the potential benefit of ‘100% capital protection at maturity’, the FSA said.

Baronworth issued financial  promotions  for a number of  complex structured products  which failed to include  an adequate explanation of the nature of those products, the FSA said this was significant because the firm’s mailing distribution list mainly consisted of retail clients.

Baronworth also failed to handle its complaints appropriately, which arose from its promotions of the Eurolife Secured Bond ISA, the regulator said.

When consumers did complain, Jackson would respond stating that the firm was not responsible for the advice behind the product because they had been purchased on an execution-only basis.

The FSA said that a number of the financial promotions did not contain accurate or sufficient information on the availably of compensation under the Financial Services Compensation Authority.

Jackson has received a partial prohibition from performing any significant influence function, which included being chief executive, principal shareholder, compliance oversight and director.

The FSA also sought to impose a financial penalty of £50,000 on the firm, but because Baronworth entered into liquidation on 17 July 2012 it was reduced to nil so that any funds could be returned to creditors.

Bill Sillett, FSA head of retail enforcement, said: ‘This particular case emphasises the need for authorised firms and approved persons to ensure that their financial promotions are clear, fair and not misleading, especially when they are carried out on a direct offer or non-advised basis.’

19 comments so far. Why not have your say?

P L H

Jan 11, 2013 at 11:09

And queue here for comments regarding MAS advertising... GO!

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Chris F

Jan 11, 2013 at 11:14

Baronworth (Investment Services) Ltd no. 115284 are still on the FSA register so not sure where they are at with the whole liquidation thing. There is a note about the prohibition on there for Mr Jackson.But nothing on the company's disciplinary history.

If a consumer were to check the register, everything would look fine. What, precisely, is the point of the register then?

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Julian Stevens

Jan 11, 2013 at 11:39

So, even if you offer products on an Execution Only/Non-Advised basis, if they go wrong for some reason, the FSA will still declare you to be liable on the grounds of some fault identified in the way you promoted said product/s ~ probably, amongst other sins, because you didn't conduct sufficient due diligence. Heads you're screwed and tails you're shafted.

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Bob Donaldson

Jan 11, 2013 at 11:42

Oh how the mighty have fallen!

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David Craik

Jan 11, 2013 at 11:42

Chris F - What, precisely, is the point of the FSA?

An IFA promoting a fund wrongly is a crime. Capita and the fund manager misrepresenting a fund is OK? The FSA needs to address its standards!

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Telford MS

Jan 11, 2013 at 11:44

Now that closes that gate.............anyone seen my horse?

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David Cathcart

Jan 11, 2013 at 12:09

So the banks selling market linked structured products as alternative to deposit accounts is acceptable then

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Mike Morley

Jan 11, 2013 at 12:20

Wouldn't the folk at the FSA make great racing tipsters. The only problem would be that their tip for the Grand National would not be published until June and their Derby tip until September. They are totally unable to come to any judgement without the benefit of considerable hindsight which is an indictment of their lack of expertise in regulating any products that are not pure vanilla.

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Julian Stevens

Jan 11, 2013 at 13:06

If the FSA regulated the bookies, they'd probably insist on placing their bets after the race had been run.

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PHicks

Jan 11, 2013 at 13:27

Julian, more likely they'd insist on a full refund of all losing bets.

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Julian Stevens

Jan 11, 2013 at 13:38

On the basis that the bookie had failed to quantify adequately their CFL.

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Umkomaas

Jan 11, 2013 at 14:33

They'd probably insist that the horses had stabilisers, airbags & parachutes - remember the FSA hates the idea of risk. The jockeys would have to wear padded suits, moon boots and GP grade crash helmets, padded gloves and be wrapped up in a sleeping bag.

The race itself would have to be taken at walking pace, no jumps, an ABSOLUTELY level course - measured by a RICS qualified surveyor so that they someone to blame if there is a deviation of more than 1" per mile in the vertical....all horses would be tethered together so that they cross the line at the same time.

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Alan Lakey

Jan 11, 2013 at 15:27

And when you think about it, the FSA is a bit like the Jockey Club.

"Cabbage Patch Dolls", was John Francome's description

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MPT

Jan 11, 2013 at 18:25

The lesson to be had is that you want a restricted arm for Product Sales and only approve the promotion of a product with a full indemnity from the provider.

Clearly state on all promotions that you are only a reseller of the product.

Run your product sales business as a non regulated entity. All promotions thius signed off by the regulated provider.

ADVICE- do exactly that under your regulated business and only give generic advice ( What the MAS should understand means Impartial Information.)

Then offer your client the choices on how they may get to products, direct , your reseller company or advised at a FEE that is appropriate to the liabilities this may hold. I think the FEE should be binding with upward only lifetime insurance premium to cover you for FSA backward looking corrective actions.

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MJH

Jan 11, 2013 at 20:41

Having decided that most IFAs obviously misold clents the Arch Cru products, the FSA and FOS in their deliberation were without doubt not privy to seeing the presentations that were made in our offices or indeed at public venues.

The private Finance was without doubt as good as 100% guaranteed since any Loan was made after due diligence showed the capital backing and ability to repay the Loan -

The Private Equity of course a little more risky but with due diligence and expertise is was expected that experience would mean that there was more success than failure in the selection process and therefore confidence in long term results -

Very positive and convincing - indeed not unreasonable - but total crap really since apparently the vast bulk of funds were invested outside the investment managers remit -

The FSA will not confirm whether or not in fact the managers did act within or without their remit - I wonder why they will not tell us, what is there to hide.

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Bill Ward

Jan 12, 2013 at 13:04

to MJH The Truth is their to hide. Because it, the truth that is,points a big strong spotlight at the FSA's own considerable failures so instead they will linger in the shadows and wield their poisoned knife from a cute and non exposed difference. Hooray for knighthoods and final salry pension schemes and no accountability. No doubt Jimmy Saville could have hidden in this institution

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Bill Ward

Jan 12, 2013 at 13:05

For previous email difference should state distance.

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John Bees

Jan 14, 2013 at 10:33

Just more of the same retrospective rubbish, hopefully we will all register in Europe at some stage, where they realise that no-one has a crystal ball and that regulation in hindsight is no use to anyone least of all the client. the real problem is that the public will not receive advice. No one wants to give advice today, with the prospect that they could be hung for it in the future, and as for investor compensation, ask an Equitable policy holder if they are happy with investor compensation. Quite simply the FSA is frightend of getting it wrong again so its eayer to shoot the survivors, the wounded and the dead, just in case. I want to do my job without being hounded and being blamed for what others have done, and why are the banks sheilded for their dishonest endevours when the IFA is hunted.

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matt b

Jan 15, 2013 at 17:07

About time Baronworth Investments were caught out. They promised us a return of commission on numerous occasions - nothing was ever received! Would Colin Jackson know what a complaint is?

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