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FSA fines Ashcourt Rowan £412k over investment suitability flaws

by Daniel Grote on Nov 13, 2012 at 07:15

FSA fines Ashcourt Rowan £412k over investment suitability flaws

The Financial Services Authority (FSA) has fined Ashcourt Rowan £412,000 over legacy investment suitability issues in its Savoy Investment Management business.

National advice group Ashcourt Rowan has announced the fine in its interim results. Chief executive Jonathan Polin (pictured) said the Savoy business was served with a Section 166 order by the FSA following the regulator’s review of investment suitability across the wealth management sector. He added that the Savoy business was served with a similar order in 2009, but that the business ‘did not implement all the changes that it had committed to as a result.’

Polin said the fine was a ‘significant penalty’ but said it reflected Savoy’s breach of ‘a number of regulatory rules’.

‘We took the decision early on in this process to co-operate fully with the FSA, and resolve this issue at the earliest possible opportunity so that we could move on,’ he said. ‘At the same time we have been very proactive in our approach to rectifying our systems, controls, culture and methodology including voluntarily engaging in a past business review within Savoy which will determine whether any clients need to be compensated.’

Polin added the fine was likely to be the first of a number within the wealth management sector. ‘Savoy is the first firm to be penalised for this but it is in my view highly likely that others will follow,’ he said.

In its final notice the FSA said that the significant systems and compliance failings were identified through a review of 52 files, which 'revealed significant weaknesses across the firm's systems and controls.'

The regulator also found that the firm failed to take 'reasonable care' to ensure suitability of portfolios for discretionary clients and the suitability of its advice to managed clients.

The fine has pushed Ashcourt to a £1.2 million loss before tax for the six months to the end of September, compared to a £1.3 million loss over the same period last year.

A further contributor to that loss was £1.5 million spent on restructuring the company, as part of its change management programme. That has involved picking Cofunds to power its platform proposition and developing an investment model for use across its business, and the introduction of a retail distribution review (RDR)-compliant financial planning proposition. It is also preparing for all the group’s asset management activities to be brought under Ashcourt Rowan Asset Management, and has undertaken a review of governance, risk, compliance and controls arrangements.

The group said the restructuring had succeeded in delivering annualised cuts of £6 million to costs, ahead of its £5.2 million target.

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3 comments so far. Why not have your say?


Nov 13, 2012 at 13:20

'revealed significant weaknesses across the firm's systems and controls.'

The regulator also found that the firm failed to take 'reasonable care' to ensure suitability of portfolios for discretionary clients and the suitability of its advice to managed clients.

This is all well and good, but I would think that they thought they had done more than enough to cover these issues.

This is another reason why the regulator should give examples of what is and is not sufficient. The problem being the regulator can then introduce in retrospect whatever they wish, with the benefit of hind sight. This is not TAF.

It is also why you should be able to request an interim visit from the regulator, even if you have to pay for the staff’s time for a two day review, whenever you feel you need one. I requested a visit as we have been direct for two years and wish to make sure we are getting it right. I was told I could not request a visit.

The point being I would prefer to know now, not in ten years’ time when the corrective action (and fine) could put us out of business. We think we are doing all we can, but you can bet your bottom, they could find something if they wanted to, as there is no actual examples to use as any bench mark.

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John Frink

Nov 13, 2012 at 13:42

If you read the Final Notice it's very clear what they were doing wrong - examples are given.

They basically let a bunch of cowboys invest however they wanted without any sort of effective oversight and then chose not to action the reports from compliance. The notice even lists the 7 or 8 things the FSA expects firms managing money to do - which are all sensible.

The regulator is trying its best with an industry that just doesn't want to behave - how can a firm manage £4bn and not consider the need for oversight? How can it take two s.166 requests to get things in order?

If the FSA has failed it's that no one has been banned - what was the chief exec and head of risk doing if no monitoring was being done and file reviews revealing critical issues were being ignored by the board? Playing golf?

£400k + several hundred thousand more in past business reviews might teach them to behave. None of this is fair on the good advisers that get discredited daily by the bad ones.

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Nov 13, 2012 at 14:02

Thanks John I stand corrected, always admit when I am wrong, had not had time to read final notice. As the saying goes, look before you leap.

Sorry regulator.

Would still like more information and examples of good practice though, as I do feel they do have an oppertunity to look back in hindsight.

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