FSA censures IFA over geared TEP failures

The Financial Services Authority (FSA) has censured liquidated IFA firm The Garrison Finance Centre for failing to explain the risk of geared traded endowment policies (GTEPs) to clients but waived a £35,000 fine.

The FSA has ordered the liquidator of The Garrison Finance Centre to write to its customers and inform them that they have received unsuitable advice. The £35,000 fine was waived by the FSA so it could be used to meet consumer claims.

Yorkshire-based Garrison failed to explain why a GTEP investment was suitable for a client or the risks involved. Garrison also was unable to demonstrate why its recommendations were suitable because it did not gather adequate information or documents, according to the FSA.  

The FSA said the failings its investigation had uncovered were particulary serious because a number of clients had remortgaged their homes to purchase GTEP investments. Only one of Garrison clients had been warned that GTEP may require additional capital if it under performed, stated the FSA.  

One adviser at Garrison was responsible for all 29 GTEP investment schemes which were made over a four-year period and netted £165,000 in commission, according to the FSA. Established in May 2000, Eggar Forrester changed its name to Garrison in May 2003 before it was put into liquidation on 27 January 2009.

‘Geared traded endowment policies are complex investment products with significant risks attached to them. Garrison failed to make this clear to its customers so many of them may have received unsuitable advice,’ stated Margaret Cole (pictured), FSA director of enforcement and financial crime.  

‘It’s for this reason that we’re censuring the firm. We would have also fined them but decided the money would be best served meeting any compensation claims,’ stated Cole.

The FSA thematic review of GTEPS has resulted in fines for IFAs Knowlden Titlow Financial Services and Derrick Hales Financial Planning and public censure for provider Integrity Financial Solutions.