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FCA fines Catalyst compliance officer £20,000 for 'recklessly misleading' bond promo
by Danielle Levy on Oct 04, 2013 at 12:56
The Financial Conduct Authority (FCA) has fined the former compliance officer of Catalyst Investment Group after censuring the company for 'recklessly misleading' investors in the way it promoted bonds offered by ARM Asset Backed Securities.
Alison Moran, Catalyst’s former compliance officer has been fined £20,000 for what the FCA described as a failure to act with due skill, care and diligence. The fine relates to the period November 2009 and May 2010. Catalyst has been censured as it is unable to pay a fine and is in default – the FCA would otherwise have imposed a £450,000 penalty.
The FCA said of Moran: 'Although she was aware of the issues with ARM’s licence in December 2009, she failed to ensure this was properly communicated to investors,' the FCA said.
UK investors have pumped almost £54 million in ARM bonds, including £17.1 million in unissued ARM bonds, and they may lose a significant part of their investment.
Catalyst offered bonds issued by Luxembourg-based ARM to investment intermediaries and independent financial advisers in the UK, who in turn promoted and sold them to retail investors. ARM applied for a licence to issue the bonds from the Luxembourg financial regulator, the CSSF.
Catalyst knew that ARM had applied for a licence in July 2009 and had been asked to stop issuing bonds by the CSSF in November 2009, pending a decision. However the FCA noted that Catalyst continued to accept funds from investors without disclosing ARM’s position in its marketing material, alongside the risk that ARM could be liquidated if its licence application failed. This should have been included in Catalyst’s marketing material for ARM bonds.
Catalyst also wrote to IFAs and investors on separate occasions suggesting that ARM’s licence application was voluntary, but did not spell out the implications if the licence was not granted, the regulator noted.
'To ensure consumers are properly protected, the FCA expects firms and individuals to act with integrity, and communicate clearly and fairly with their customers. Catalyst didn’t follow these principles, exposing investors to significant risks without their knowledge,' the FCA said.Tracey McDermott, the FCA’s director of enforcement and financial crime, added: 'Catalyst showed a reckless disregard for investors’ interests, exposing them to significant risks. We expect firms, and their senior managers, to put customers’ needs first - and will take tough action against those who fall short of our standards.'
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