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Sesame adviser faces £600,000 claims over Ucis

by Michelle Abrego on Feb 22, 2013 at 07:28

Sesame adviser faces £600,000 claims over Ucis

A Sesame adviser is facing £600,000 of claims as 19 clients pursue him over alleged mis-selling of failed property investment Arck.

Law firm Regulatory Legal is representing clients of Alan Mason, director of Financial Distinction and a Sesame appointed representative, claiming he gave ‘negligent’ advice on the Arck funds.

The firm alleged clients were advised that Arck, an unregulated collective investment scheme (Ucis), was ‘low risk and a sound investment’, and a good alternative to property.

It also claimed Mason did not adequately ascertain’ clients’ attitude to risk and that there was no evidence in client documents whether the degree of risk associated with the investment was discussed with clients.

All 19 clients have either been referred or will be referred to Sesame, which has an internal complaints handling process.

A Sesame spokesman said: ‘We take our regulatory responsibilities very seriously and all customer complaints are fully investigated. It would not be appropriate for us to comment on any individual cases.'

Michael Cotter who is handling the claims for Regulatory Legal said: ‘I imagine Sesame will uphold the complaints due to the mis-sale of Ucis and award the return of the capital sum and interest in accordance with the principles of the Financial Ombudsman Service (FOS).

‘In the event Sesame fail to act as such, we will refer all matters to FOS or issue proceedings in the High Court.’

Arck, which is currently in liquidation, has been embroiled in investigations and regulatory action over the past year.

In December last year, the Serious Fraud Office appealed to investors for information on the advisers who sold the investment.

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59 comments so far. Why not have your say?

Holden

Feb 22, 2013 at 08:03

I just wonder how many of these clients would have gone ahead with the investment in the first place if they had known how much commission was being paid out of their hard earned cash.

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Anitaki

Feb 22, 2013 at 08:16

If it seems too good to be true, then it probably isn't true.

No sympathy from me

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DS

Feb 22, 2013 at 08:25

@ Anitaki - I can't believe you have said that. Even if something sounds too good to be true, if information is coming from a seemingly professional, credible and trusted source, a lot of people would take it on faith.

You might has well have said it's their own fault for trusting their financial adviser!

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Roydo

Feb 22, 2013 at 08:36

Groundhog day,

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Badger

Feb 22, 2013 at 08:37

No sympathy from me either. There is on 1 reason that this non mainstream fund was SOLD commission. Nothing wrong in trying to earn a living from commission but you have to be dumb to risk recommending market stall funds. The adviser took the risk he should pay the cost. Oh, sorry let everyone else pay instead

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Adam Smith

Feb 22, 2013 at 08:39

DS' final comment nails it... Excatly why being the most trusted source of advice with the fewest complaints is not synonymous with being the best source of advice (with apologies for bursting Julian Stevens' bubble).

And if it had been anyone other than a big player like Sesame in the firing line, there'd be three times as many comments on here already, complaining about another FSCS levy...

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Adam Smith

Feb 22, 2013 at 08:40

With apologies for the typo in my above post - severe coffee deficit at this time in the morning, about to be rectified!

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Lemsip cold and flu via mobile

Feb 22, 2013 at 08:54

I feel sorry for the clients but How did all 19 cases get through compliance?

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Anitaki

Feb 22, 2013 at 08:57

............and l meant (also because of "early coffee deficit disorder")

No sympathy from me FOR THE SALESMAN, but every sympathy for the investors. . I cannot believe this was best advice for all 19 people. I can believe it was a hyped up easy sell for commission using "selective" sales information. That's why no sympathy for the Sesame salesman.

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Sascha K

Feb 22, 2013 at 08:59

@DS: Absolutely. If a respectable-looking man of business shakes you firmly by the hand, looks you in the eye, and says "I will pay you a massive wodge of commission for recommending this highly-geared, built-on-sand garbage", how can you be in a position to doubt his word?

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Greg M

Feb 22, 2013 at 09:00

What amuses me is that a law firm thinks it honest and decent to charge money to advise a client to follow a clearly defined complaints procedure backed by a regulatory ombudsman. Money for old rope - I wonder if they are on comission? Oh sorry, I mean a contingency fee basis based on a percent of settlement?

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Anitaki

Feb 22, 2013 at 09:01

@ Lemsip

How did all 19 cases get through compliance?

As this was a UCIS, l'm not convinced "Compliance" actually knew. These would not be the first ever UCIS cases submitted direct. We don't know, but never be surprised at anything where large commissions are involved.

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Confused.com

Feb 22, 2013 at 09:04

Sesame's compliance department should also be held to account over this - clearly not doing their job properly if they allowed these investments to go through unchallenged from one of their appointed rep's

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Ric Green

Feb 22, 2013 at 09:10

Regulatory Legal are a nice bunch of chaps. Absolutely no sympathy for adviser or Sesame on this, but there is something about Fatchett and his claims chasers at RL that turns the stomach.

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Bob Donaldson

Feb 22, 2013 at 09:19

Regulatory Legal like to bat from both ends. Act on behalf of advisors but then sue them when appropriate on behalf of clients.

They therefore gain massive experience from the IFA community and then are in a position to use it against them when necessary.

Whilst it is there prerogative to do so, I think I would prefer to deal with a solicitor who acts on behalf of advisor only.

Bit like the estate agent who acts on behalf of the vendor but also has to appease the buyer.

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Kevin Smith via mobile

Feb 22, 2013 at 09:30

A pitty that regulatory legal don't apply there so called stance in these matters consistently !! Batting from both sides !?? Depending on who's paying the fee !! .. Also we all know the solution here in most cases is FOS or FCSC, the other courses of action being proposed by this firm are simply a fee earning excercise. There,s no point in leading people down what may seem legally entitled routes if there,s no pot of gold at the end of the rainbow !! Does the SRA have a view on TCF !

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Shaun F

Feb 22, 2013 at 09:30

I too share concerns over the compliance carried out (if indeed it was) as if so surely they would also have benefited financially (network) and as such should not be able to have their cake and eat it. If it went through compliance the ifa paid for a service etc?

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Dandy lion

Feb 22, 2013 at 09:31

Isnt it wrong of regulatory legal not to tell their clients that they could achieve the same result without paying Gareth's fees ie complaint, followed by ombudsman? Advising someone to pay for something they don't need is disingenuous at best and possibly much worse.

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Julian Stevens

Feb 22, 2013 at 09:40

To Adam Smith ~ I've never claimed that the IFA sector is uniformly perfect, that no rogues remain amongst our ranks or that we no longer need any regulation at all. There will always be a few bad apples in any basket.

My point is that the level of regulatory intrusion into our activities is excessive and disproportionate to the level of risk we pose collectively, in the context of all distribution channels as a whole. Of the total IFA population (tens of thousands of us), what proportion has ever (mis)recommended UCI Schemes? A few hundred, if as many as that, would be my guess ~ though, in the absence of any published data, I could be wrong.

I've never recommended a UCI Scheme or knowingly met anyone who has. Such cases, I suggest, are very much (shameful) exceptions rather than commonplace. When it comes to providing defective advice, compare this against the track records of many of the banks and building societies, the scale of whose misdemeanours is truly massive, not to mention the various unregulated outfits aggressively promoting all sorts of high risk unregulated schemes. These the FSA claims not to be able to take action against because neither is regulated. Yet I'd thought that the provision of advice on or the promotion of just about any investment product is supposed to be regulated. Apparently not. Does this not point to a rather serious gap in the current regulatory framework?

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Steven Davies

Feb 22, 2013 at 10:06

I feel sorry for the clients, But also the rest of us who will pick up the tab through increasing PI/retention/fee's. Those accountable will probably get a golden handshake!

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Peter William

Feb 22, 2013 at 10:14

Should have gone to a chartered fee based adviser.....whoops he was!!

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Keith Cobby

Feb 22, 2013 at 10:18

Why are regulated advisers advising on unregulated products. No compensation scheme should be available for this and these 'advisers' should be on their own. Otherwise advisers could be advising on other forms of gambling.

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SN6

Feb 22, 2013 at 10:19

DS

I can't believe you WROTE that! “Even if something sounds too good to be true, if information is coming from a seemingly professional, credible and trusted source, a lot of people would take it on faith”.

Are you for real? If you are one of the mugs who has fallen for the glossy brochure, the huge front end commissions and the promise of riches for the clients based on a professional looking brochure?

You deserve everything coming your way. Smell the coffee!!!!

There’s only one loser here, THE CLIENT.

These products were designed for the SOPHISTICATED INVESTOR with money to burn. NOT, I REPEAT NOT Joe Public, via a SIPP!

The motivation for selling these products is pure GREED.

If you are aware of any Regulated advisor “Selling” Non – Regulated Alternatives (Another term used for UCIS) or UCIS you need to whistle blow them to the FSA and or the Police.

JULIAN STEVENS

Unfortunately Julian there are many hundreds of regulated advisers selling these products, just browse the internet.

CONFUSED.COM

As for Sesame, my view for what it’s worth, I’m not a fan but in this case they probably didn’t know what the adviser was doing. No excuse.

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Usually found sitting on the fence

Feb 22, 2013 at 10:40

@ Keith Cobby - Which do you think is better value for money Euromillions or Lotto? I have a spare tenner and would like some free advice, is it covered by the FOS or FSCS if you call wrong? ;)

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Big J

Feb 22, 2013 at 10:41

I'm genuinely surprised at the number of people having a go at the Sesame compliance dept. Firstly I VERY much doubt they knew anything about these cases and secondly its time people took responsibility for their own actions! By the way i am no admirer of compliance depts but it irks me when peoples first reaction is to look for someone else to blame. There are some very bad and very dishonest advisers out there,simple.

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Smithling

Feb 22, 2013 at 10:47

@ Ric Green & Dandy Lion

As a genuine third party I'm interested. Obviously one can follow the procedure and get the same FOS/FSCS complaints procedure done without fees. I agree there are a number of clients out there. But let me ask you this;

Do you not think that there are little old ladies and very unknowledgable investors out there who have absolutely no idea what's going on? Just the sight of an FSCS claim form would send them into a flat spin and considering the FSCS will take a defensive position on the advice do you no think they may take huge comfort knowing that a "clever lawyer man thingy" is dealing with it?

Let's be honest, I am at a slight loss as to how any IFA can sit here and claim that RL or any other similar firm can "charge for something that's free." After all, isn't what we do for a living something that anybody can do for free? Who needs an IFA? All they do is something you can do yourself for free.

Fact is that I see value in what I do as an IFA and therefore I see why people use my services and pay for it. Do you not think the same could be said for these legal firms?

I know the above looks like I'm defending RL, possibly I am, I'm just curious as to whether you think there's much of a difference between what they do and what we do.

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Spell Cheque via mobile

Feb 22, 2013 at 10:50

Tens of thousands of IFAs according to JS - which year was that I ask. If the percentage of those, as represented in this chain, cannot differentiate between there and their, then it's time their ( or there) regulator made GCSE English a base requirement for this exceptionally talented and ethical community.

Prize of a free UCIS for those who know the right ( or write) answer! Anything but up- market.

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Usually found sitting on the fence

Feb 22, 2013 at 10:59

@ Smithling - You do raise a valid point, as those clients stupid enough not to have discussed their attitude towards risk with their adviser, do need someone to help them through the process. But are they being helped through the process or as they are stupid enough to have trusted one professional that ripped them off, is history repeating itself?

Don't get me wrong, I know little of RL, except what I see on here and from someone I know who works in law in London. So where they may come across as mercenary, they may actually be moral and ethical and be better representation as a result, who knows?

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Dandy lion

Feb 22, 2013 at 11:05

I'm not saying thy shouldn't be paid for what they do but I'm questioning how many clients will they have told, look, if you want to you can do this simply by writing a policy number and the word "Complaint" and post to sesame compliance dept. admittedly a fscs form is a bit trickier but hardly rocket science. Generally lawyers are no better than the ifa in my view, they are opportunistic, scare mongerers, fee chasing hypocrites. That's my weekly rant over with!!

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Usually found sitting on the fence

Feb 22, 2013 at 11:07

@ Spell Cheque - I am not an English expert, but should it not be "make" and not "made", as, for example, a cook does not made a cake, they make a cake and when the cake is done, it is made...

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Greg M

Feb 22, 2013 at 11:15

@ Smithing - I think the point about RL is that the FSCS is intended (and in my experiance is) helpful and accesible to ordinary people, and in many cases chargeing a fee for helping someone make a complaint is akin to a financial advisor charging a fee for directions to the nearest building society branch.

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Greg M

Feb 22, 2013 at 11:16

@ Smithing...for FSCS I meant FOS, too many acronyms!

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Smithling

Feb 22, 2013 at 11:20

@ USFSOTF

Fair point. But then you're assuming that in all cases these people didn't discuss their attitude to risk. I would suggest that in EVERY case these people discussed their attitude to risk. I would just suggest that in every case the adviser manipulated them or the paperwork to reflect what they needed it to to do what he/she wanted with their money.

I would suggest it would actually take a conscious and deliberate effort NOT to talk about attitude to risk. Virtually every meeting you get a client saying "oh but I can't afford to lose it" or something similar. Obviously a conversation is then had and a good adviser will take on board what they've said. Even if that conversation never comes up, nobody can honestly tell me with a straight face that they can't get a pretty good idea of capacity for loss and ATR simply by looking at a the questionnaire from a first meeting. A eighty year old widow with just her husband's pension in the world is clearly NOT going to be high risk unless she is absolutely emphatic. Too often these advisers think they know best and start shepherding people into the areas that they want. It's always the same with these UCIS cases. It's quite obvious that the adviser likes to look of a fund and just does whatever is required on the paperwork to make it fit.

I think really the big factor on whether RL and similar firms are "ambulance chasers" or not comes down to whether they make it clear that the FOS/FSCS is something that clients can do themselves for free. I don't know if they do which is why I can't pass judgement.

I do, however, know that when somebody turns up at my office and says "i'm in interested in using your services" that it would sound rather odd if I said "sure, but i'm not going to do anything that you can't do yourself for free". If I go to a lawyer then I go to a lawyer, I don't think there's much a solicitor can do that I can't do myself either. I just have no idea what they're doing and I can't be bothered to find out or do it myself. That's why I pay them. I also get taxi's in London because I can't be bothered to drive and find parking. I also buy bread at a bakers because I don't know how to make it at home and don't have time to learn.

I guess if the costs are clear then it's just a service like any other. It also depends on the cost. If they're charging 30% like these PPI firms then I would hold less regard for RL.

Out of interest, what do you think would be a fair % them to charge without taking advantage of people for the amount of work done?

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Dandy lion

Feb 22, 2013 at 11:21

Greg, that's very true. You could virtually send a blank form to fos and they will find for the client. I ask myself why we bother doing reason why letters any more as fos ignores risk warnings, client experience and the holistic nature of advice. Basically, if a fund goes bust chances are the client will win, aka keydata.

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Sam De Zoysa

Feb 22, 2013 at 11:28

I was shocked when I read he was chartered as well!

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Keith Cobby

Feb 22, 2013 at 11:32

'Usually' - free advice is not advice, it is opinion.

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Sam De Zoysa

Feb 22, 2013 at 11:32

I feel no schadenfreude. Who's to say all those clients that were advised to contract out are not the next tsunami of complaints? Or passive clients that should have been active? Or vice versa?

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Sam De Zoysa

Feb 22, 2013 at 11:36

@Keith Cobby

We advise on non or unregulated products all the time. What about emergency cash holdings? NSandI?

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Smithling

Feb 22, 2013 at 11:40

Hmm, okay I take some of those points on board.

So basically what we're saying is that as long as it is made abundantly clear to the client that the FOS/FSCS is free and can be approached without cost or too much complication, then clients have an informed decision to make on whether to use a legal firm or not?

Seems reasonable. I'd be interested to hear from somebody at RL on that.

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Smithling

Feb 22, 2013 at 11:42

Oh and for those of you that were shocked to read he was chartered. Really? I'm assuming you're being facetious.

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Julian Stevens

Feb 22, 2013 at 11:59

The FSA declared some years ago that it did not intend to initiate a hindsight review of advice to contract out, though whether or not the FCA will consider itself bound by that remains to be seen ~ regulators have a habit of being very selective about what they do and do not carry forward from their predecessors.

There is a body of opinion that the switch to an improved flat rate basic state pension will mean that everyone who contracted out (via a PP) will be better off than if they never had, though I'm not quite sure it'll as simple as that (it never is).

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Usually found sitting on the fence

Feb 22, 2013 at 12:16

@ Keith - Maybe, but in your opinion which is the better of Lotto v Euros? Anyone have an opinion? ;)

My only other observation is that in this day and age too many people try and sidestep their own accountability. There is little encouragement or reward for those that 'fess up and admit their mistakes, so it makes sense to sit quietly and point the finger elsewhere.

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Mr Man

Feb 22, 2013 at 12:53

The way the FSA have it , is that every single piece of advice given can if they so wish it be unpicked and be relabelled mis-sold/ mis advised. They work from a rear view mirror. Being a regulated adviser in the UK is a fools game. Its also sad that every time an adviser is fined or chastised or sued so many other advisers join in the bashing. The FSA have got you all bitching about each other as they or legal parasites pick you off one by one.

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Keith Cobby

Feb 22, 2013 at 13:42

Sorry to be so boring but I don't do either lottery. Having some statistical knowledge I do rather subscribe to the view that it is a tax on the poor.

I do, however, have a modest number of Premium Bonds!

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Smithling

Feb 22, 2013 at 13:47

Mr Man,

What career would you suggest instead? Genuine question, I'm open to suggestion.

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Marion

Feb 22, 2013 at 14:17

I remember being at a seminar where Aberdeen zeros were being described as "low to medium risk" and afterwards talking to a couple of colleagues who, like me, could not accept that risk rating. We all agreed that we wouldn't be using them.

Correct me if I'm wrong, but the FSA must have some responsibility for checking the wording of product brochures to ensure that the level of risk has been stated correctly?

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Sam De Zoysa

Feb 22, 2013 at 14:24

@ Marion.

Seriously? No regulator in the world could reasonably review and approve every KFD or IM produced by every product provider!

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Short of Understanding

Feb 22, 2013 at 15:56

As is usual in the discussion on these cases of "IFA done bad by investors for commission's sake" - it always ends up being a whole load of bickering about how useless, expensive and unfair the FSA/FOS/FSCS is. Well has anyone actually read any of the Arck marketing material. It's witless, ungrammatical, inpenetrable drivel from start to finish. Some is reproduced below. The key thing here is that if any IFA cannot see what a half-bottomed amateurish load of rubbish this promotion was, then he deserves a right good sorting out. Not that I absolve greedy investors from not spotting it either, but any IFA falling for this is truly an idiot.

Here's a sample of the text, but google arck llp for loads more. I assure you, its incredible stuff. Arguably the least polished that I've ever seen.

[So what is the risk?

Risk is; the build takes longer than it is contracted to. The build cannot go over-budget as it is a fixed price build. But if the build took longer there would obviously be a delay in the completion of the site. As the properties are bought on stage payments as they are completed one by one it would only leave a small shortfall. This would be able to be covered by ARCK LLP’s profit which is substantially loaded to the front of the development.

Another risk is the contractors ceased trading. The team is comprised of a large group of professional all offering bank guarantees. It is unlikely they would cease trading. If they did, as the build is paid for in stage payments on certification, payments are always made in arrears. ARCK would simply bring in a new principle contractor to complete the build. This may cause a time delay.]

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sol trader

Feb 22, 2013 at 15:56

Of course, post rdr, this kind of thing won't happen because we greedy IFAs won't have our heads turned by that old siren "commission".

There could be a danger the regulator is doing itself out of a job, but maybe that is why they introduced the new rule that to remain "independent", you have to offer clients crappy products and providers as well as good ones (if I have understood the new rule correctly).

I think, in the past, judgements against IFAs appear to have been made based on a (moveable and hindsight inspired) notion of the minimum service you should expect from an adviser Going forward, this is likely to change as the service and level of care is dictated by the client and how much he decides to pay the adviser....

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Marion

Feb 22, 2013 at 15:57

@Sam De Zoysa

So, basically, nothing is checked at all and they can come out with anything they like on KFD then?

Thanks for that! :-)

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Sam De Zoysa

Feb 22, 2013 at 16:25

@ Short of Understanding

Bloody hell, you weren't kidding!

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Julian Stevens

Feb 22, 2013 at 16:53

To Sol Trader ~ surely you don't believe there's the remotest prospect of the FSA/FCA doing itself out of a job? They'll ALWAYS manage to dream up some new scheme or procedure or profiling process or reporting requirement or SOME bloody thing ~ probably over that fifth pint or bottle of Merlot on a Friday afternoon in the Regulator's Arms (all on expenses, of course) ~ to impose on the Great Errant Unwashed in their endless yet endlessly futile pursuit of that Utopian pot of gold at the end of the rainbow.

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Sam De Zoysa

Feb 22, 2013 at 17:18

@Marion

Happy to help!

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sol trader

Feb 22, 2013 at 17:21

JS - you are absolutely right. I used to believe in lots of things - Saddam had WMD, a 25 year endowment was subject to the law of contract and you couldn't sue an adviser 5 years into the term, product providers and their literature were not just authorised by the regulator but regulated by them as well, those who tell us what to do and how to behave have more experience, ethics and qualifications than we do, etc, etc.. turns out, I was completely wrong.

It strikes me that whilst we are still being asked to interpret the rules ourselves, we should get our point of view in first, before there is any trouble, and let it be known that, in this brave new world, we are not responsible for product failure any longer because there is no commission bias.

Don't see how anyone can argue against this.

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Tim via mobile

Feb 22, 2013 at 18:33

Sesame would have known as they receive the commissions before distributing for ars

Reg legal bit like the pub hare and hounds whose side you on

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Dathan Steele

Feb 22, 2013 at 19:03

Not sure how the investment commission was paid? Surely it should have gone directly to the network, and the network would have set up an agency with the 'provider' (snake oil salesman?) When I was with Sesame they did not allow UCIS investments, so how does the setting up of an agency with a UCIS provider not raise a red flag?

Re Regulatory Legal. Most lawyers will work for anyone who will pay them, nothing new there. They are not on anyone's 'side', well apart from their own! Slagging a lawyer off for this is like trying to stop the tide coming in....

Re UCIS. There is nothing intrinsically wrong or dodgy about them. Some UCIS are ran by highly professional people who know exactly what they are doing, its just that the COLL rules don't allow specialist, non diversified investment vehicles to be set up as UK regulated funds. They are tarred by the brush of all the crooks, fools and idiots setting up 'funds', which were then sold by idiots/crooks/fools who were in it for the commission.

Tip: If the client might actually be either a professional client, or falls under the various exemptions (PCIS Order etc), then this does not mean that a UCIS is suitable.

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Julian Stevens

Feb 22, 2013 at 19:14

Maybe the guy set up an agency outwith Sesame and was paid without Sesame knowing about it.

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Sam De Zoysa

Feb 22, 2013 at 20:08

I'd struggle to come to that conclusion based on the article. Sesame appear to be taking on the complaints handling. If he had done such a thing I'd say they would have been well within their rights to cut him loose!

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Dathan Steele

Feb 24, 2013 at 22:46

@ sam, The 'adviser' was an AR of the Network. Network is Principal, therefore liable. End of. They'll prob sue him for damages and breach of contract if he has any assets.

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