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View the article online at http://citywire.co.uk/wealth-manager/article/a746843

FCA bans two advisers for Sipp switch into unregulated products

by Dylan Lobo on Apr 17, 2014 at 11:37

FCA bans two advisers for Sipp switch into unregulated products

The Financial Conduct Authority (FCA) has banned two advisers over unsuitable advice which saw them switch clients into Sipps and then invest them in unregulated and high risk products such as diamonds and overseas property.

According to the FCA, Andrew Rees and Timothy Hughes, partners at 1 Stop Financial Services, advised 2,000 customers on switching their existing pensions, valued at in excess of £112 million, into Sipps between October 2010 and November 2012.

The FCA said that 49%, or 958, of 1 Stops’s client invested into overseas property investments operated by Harlequin.

The FCA reviewed 15 files and while they addressed their clients' attitude to risk in 12 of them, 1 Stop failed to adequately clarify their clients’ aims and objectives in eight of those 12 cases. The FCA also said that of the 15 files it reviewed, none of them actually established the correct attitude to risk.

The firm advised a 51-year-old pub landlord earning approximately £20,000 per year, who said he wanted to plan a ‘secure retirement’, to invest in a Sipp and purchase overseas property. The client used more than £64,000, funded by a transfer of funds from their existing pension schemes, as a down payment on the overseas property.

The two men would have been fined a total of £490,100 but they have instead agreed to pay that amount to the Financial Services Compensation Scheme (FSCS) which is investigating claims that redress may be payable to 1 Stop customers.

Tracey McDermott, director of enforcement and financial crime at the FCA, said: ‘By enabling customers to invest in unregulated and often high risk products without assessing suitability, these men exposed customers to the risk of losing their hard earned pension funds. This was then compounded by the partners’ failure to ensure that their customers fully understood these risks.’

The two advisers were also shareholders and directors of EGI, a firm that introduced a quarter of 1 Stop’s Sipp customers, during the relevant period, which Rees and Hughes failed to adequately disclose.

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