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Ashcourt Rowan: we will be the first of many fined over legacy

Ashcourt Rowan boss Jonathan Polin believes there is a stream of section 166 orders in the pipeline all relating to legacy and 'old fashioned' business models.

Polin, who this morning informed investors that Ashcourt Rowan had settled a £412,000 fine with the Financial Services Authority (FSA) linked to legacy issues, told Wealth Manager the firm is likely to be one of many engaged with the regulator. 

Although disclosed as a fine in the firm's results, Polin revealed the penalty was actually a section 166, or a skilled persons order, a controversial power used by the FSA to monitor the processes and practices within wealth businesses.

Polin found out about the order, which relates to Savoy Investment Management, two days into his role as group chief executive officer. He said he now expects a series of similar penalties to come to light following the regulator's decision to scrutinise legacy issues more closely.

Polin explained: 'The section 166 revolves around the Savoy Investment Management business. That business was what we may refer to as a more "old fashioned" stockbroking business. 

'The world has moved on and I have taken pretty hard remedial action on that business,' the wealth boss continued.  'It was key for me to clean up that business. We have made significant changes.'

Speaking exclusively to Wealth Manager, Polin said the firm's latest skilled persons order is linked to regulatory issues that were previously uncovered at Ashcourt Rowan.

'One of the parts of our section 166 was that we had a previous 166 in 2010, promised a lot of stuff and not delivered,' he said.

While Polin, who came on board at Ashcourt last year, said he had 'no issue' with the FSA's fine, he said it had swallowed up a lot of his time. This has lead him to believe there are other firms in the same position but still working through the section 166 process of commissioning an approved person to examine their firm's systems and controls.

'I think that when we look at the sector there are a number of [firms] that due to historical reasons have legacy issues in their business and they are correcting these as part of the process of the regulator taking more interest in the sector which it hasn't hitherto done,' Polin said.

He added: 'Our section 166 goes back over a year. It was day two in the job that I found out was informed we were having one and now I am 14 months into that role,  It shows how long the process has taken.

'It is a huge undertaking for a business, not only the cost of the skilled persons review but the time that it takes....I think there could be a lot more than ours where the process will take longer, so there could be a series , I believe, going forward.'

A series of investigations by Wealth Manager has found that section 166, or skilled persons, orders, have cost some firms up to £2 million.  In some cases they have taken up to 500 hours to complete, with industry bodies like the Association of Private Client Stockbrokers (Apcims) warning that the FSA's use of these powers is no longer reserved for higher risk firms.

Moreover, incoming regulator the Financial Conduct Authority will be granted powers to order skilled persons reports more frequently once it replaces the FSA in 2013.

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