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Will Ashcourt Rowan's fine bring down the curtain on ‘old fashioned’ broking?
by Danielle Levy on Nov 27, 2012 at 10:49
The Financial Services Authority’s (FSA) ongoing suitability review could spell a death knell for traditional stockbroking models, senior industry executives and commentators are warning.
The regulator found 23% of the Ashcourt Rowan portfolios it reviewed, which had been constructed by high net worth subsidiary Savoy Investment Management, showed a ‘high risk of unsuitability’.
Ashcourt chief Jonathan Polin revealed that although disclosed as a fine in the firm’s results, the penalty was actually a section 166, or a skilled persons order, which is linked to regulatory issues previously uncovered at the firm in another 166 issued in 2010.
Polin (pictured) 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. It was key for me to clean up that business and we have made significant changes.’
Polin added he expects a stream of section 166 orders are coming, related to legacy and ‘old fashioned’ business models.
More 166s and fines to come
His sentiments were echoed by David Couch, former Rowan Dartington and Arjent chief executive, who expects traditional stockbroking models to come under the spotlight even more beneath the new regulator, due to the historic tendency to give investment managers too much freedom.
In some cases, this was coupled with a lack of strong documentation or processes.
‘I think to a large extent the fine reflects how business used to be done and the fact that this approach to running portfolios is no longer acceptable,’ Couch said.
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