FSA fines IFA over pension switching

Andrew Goldsmith

March 3, 2010

Financial Ltd has also agreed to carry out a past business review, which may lead to customer redress if it is found that unsuitable advice was given.

During its investigation, the FSA found shortcomings in the way the firm organised its business and how responsibility for monitoring advisers was allocated to senior management. In turn, this led to concerns about the monitoring of the quality of pension switching advice given by advisers between April 2006 and August 2008.

The FSA concluded Palmer failed to:

•establish and maintain a clear and appropriate reporting structure to ensure senior management understood and carried out their responsibilities for monitoring the network’s advisers;

•ensure the firm complied with rules and requirements to ensure that pension switching advice was demonstrably suitable; and

•ensure that the firm recruited sufficient and adequate compliance and support staff during a period rapid expansion of the firm’s network of advisers.

The fine takes into account the changes Palmer made to the firm’s governance and compliance monitoring arrangements since December 2007 and following a visit from the FSA to ensure it complies with FSA standards and treats customers fairly.

Margaret Cole, the FSA’s director of enforcement and financial crime, said: “This is the second enforcement action we have taken following the FSA’s review of pension switching advice. As the director of the firm, Palmer was personally accountable for failing to take the steps needed to manage the risk of advisers giving potentially unsuitable advice during a period when the IFA network was expanding so rapidly.

“Palmer’s realisation of the need to improve the firm’s governance and monitoring arrangements, reinforced by the FSA’s intervention, mean the risk to consumers has now been greatly reduced.

“As we have demonstrated with this case, and the Tenon example last week, we are following up on our promise to take action against firms who are failing to offer customers suitable pension switching advice.”

Because Palmer co-operated fully with the FSA and agreed to settle at an early stage of the FSA’s investigation, he qualified for a 30% reduction in penalty. Were it not for this discount, the FSA would have imposed a financial penalty of £70,000.

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