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FCA fines compliance boss £75k over due diligence failings

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FCA fines compliance boss £75k over due diligence failings

A compliance specialist has been fined £75,000 after around 500 investors were moved from defined benefit to defined contribution pension schemes without considering if this was in their best interests.

The Financial Conduct Authority found that David Watters had failed to exercise due skill, care and diligence in his role of compliance officer responsible for transferring £12.7 million in client funds.

Gary Dixon, a partner at compliance consultancy MomentumGRC, described the decision to single out Watters, rather than fining the business as at a corporate level, as a 'game changer' for the way oversight staff are regulated. 

'The clear message to regulated firms is that compliance needs to be a boardroom issue and they can’t simply dump it on one person and forget about it,' he added. 

The regulator made the judgement based on Watters’ time at Belfast tax advisers FGS McClure Watters (FGS) and then Lanyon Astor Buller, where he was responsible for pension transfers.

Head of enforcement and market oversight at the FCA Mark Steward said: ‘It was Mr Watters’ responsibility to take reasonable steps to put in place a compliant advice process. 

‘His failure to do this placed customers at risk of needlessly losing valuable benefits for their retirement.’

FGS McClure Watters was merged into LAB in 2008. Watters was granted regulatory approvals as a partner in FGS McClure in 2001 and as head of oversight at LAB in 2005.

He was additionally appointed a director of the firm in 2008.

The FCA said many clients transferred may have unnecessarily lost previously guaranteed benefits, and may not have received the correct advice and guidance about the decision to move accounts.  

Dixon pointed out the FCA had explicitly criticised Watters' failure to take a third party opinion, emphasising the danger of trusting subjective, personal calls.

'In my experience the vast majority of compliance officers do a good job in difficult circumstances, but the FCA is clear that however good a job they think they are doing, when areas are complex or contentious, they need to get an independent check to verify suitability or risk serious comebacks later on.

'For those officers who are out of their depth and struggling, they need to act quickly to prevent a similar misfortune for them and their firm’s clients.' 

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