The Financial Conduct Authority (FCA) has banned a husband and wife IFA duo who lived a lavish lifestyle depsite being liable for claims connected to the sale of geared traded endowment products (Gteps).
The regulator banned both Colette Chiesa and husband John Chiesa, founding partners of Westwood Independent Financial Planners for a 'a lack of integrity'. It also fined Colette Chiesa £50,000 for attempting to mislead the FCA during an interview.
The regulator took action against the firm in May 2011 over the mis-selling of Gteps. Westwood subsequently became insolvent and went into 'sequestration', the Scottish term for bankruptcy.
Westwood had liabilities worth more than £5 million resulting from multiple FOS claims relating to Gtep advice,according to the regulator's final notice. By late 2016, the FSCS had paid out over £3.8 million in claims.
The pair had significant liabilities arising from these claims, but when a trustee was appointed to assess their assets they 'made inadequate, incomplete and misleading disclosures' according to the FCA.
According to the FCA, the couple failed to disclose they had a beneficial interest in an unregulated company that paid £1 million a year into an off-shore remuneration trust they benefitted from.
Between April 2012 and December 2014 the couple was paid £2.6 million from this trust.
This same unregulated company also paid the adviser couple personal and living expenses. For example, John Chiesa spent £12,000 a month on football tickets, tennis tickets and flying lessons. Colette Chiesa spent an average of £6,000 a month on jewellery, clothing and her Porsche.
In 2011 the Financial Services Authority (FSA) published a decision notice announcing its intention to fine Westwood £100,000 over its sale of geared traded endowment policies.
The Scottish firm failed COB rules in relation to its communication with clients about geared traded endowment policies and did not take ‘reasonable care to ensure the suitability of its advice’, the FSA said in 2011.
In its original decision notice the FSA said Westwood had invested 10 clients, including a retired 73-year-old widow in financial difficulties, to re-mortgage their homes in order to invest in Gteps which promised returns of 10% per annum.
The Gteps were marketed by Integrity Financial Solutions. The Integrity Maximiser plan used loans, on top of the investor’s own money, to invest in second-hand endowment policies. The aim was for these traded endowment policies to cover the cost of the loan when they matured, with spare income on top. However the investments unravelled and investors ended up losing money.
In 2010 the Financial Services Authority (FSA) publicly censured Integrity Financial Solutions, but waived a £350,000 fine because the firm was in liquidation. The FSA said it wanted any remaining money to be used to meet customer claims.
This 2011 fine was upheld by the Upper Tribunal in 2013 after the firm appealed the decision.
The Tribunal highlighted that Westwood made £509,123 in commission from the sale of Gteps between September 2005 and October 2007.