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FCA wins battle to fine adviser for mis-selling complex investments

FCA wins battle to fine adviser for mis-selling complex investments

The Upper Tribunal has upheld the Financial Conduct Authority’s (FCA) decision to fine an advice firm £100,000 over unsuitable sales of geared traded endowment policies (Gteps).

The regulator first set out its intention to fine Lanarkshire-based Westwood Independent Financial Planners in December 2011, but Westwood appealed the penalty to the Upper Tribunal with a hearing taking place this year.

The then regulator, the Financial Services Authority (FSA), said it had found ‘very serious’ failings in the suitability of advice given by Westwood to its clients adding that the firm had not communicated its advice in a way that was fair, clear and not misleading.

The Upper Tribunal has upheld the regulator’s proposed fine and ruled that Westwood had breached conduct business rules by failing to pay due regard to clients’ needs, communicate in a way which was not misleading and take reasonable care to ensure the suitability of its advice.

The Tribunal highlighted that Westwood made £509,123 in commission from the sale of Gteps between September 2005 and October 2007.

It said any penalty should punish the firm's breaches and deter others from doing so.

It said: ‘We take the view that a penalty of £100,000 or more is a significant amount and would be an effective deterrent to others. Our conclusion is that a penalty of £100,000 is an appropriate starting point in this case.’

'In our view, Westwood’s communications about the Gtep plan were neither clear nor fair in that, while they were not misleading, the communications were unbalanced because they emphasised the positive aspects of the Gtep plan without 20 properly considering alternative investments or the risks inherent in the Gtep plan

In its original decision notice the FSA said Westwood had invested 10 clients, including a retired 73-year-old widow in financial difficulties, to re-mortgage their homes in order to invest in Gteps which promised returns of 10% per annum.

The FSA first contacted Westwood as part of its thematic review of Gteps, which has resulted in censures for Integrity Financial Solutions and Garrison Finance Centre while Knowlden Titlow Financial Services, Derrick Hales Financial Planning and Matrix Model Group were fined. Westwood reported that it had no significant issues with its sales but the FSA investigation uncovered serious failings.

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