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FSA fines Pi Financial Limited £58,300 for unsuitable sales of high risk products


19/09/2012

By Daniel Hunter

The Financial Services Authority (FSA) has fined Pi Financial Limited (Pi) £58,300 for advising its clients to invest in high risk products which were clearly unsuitable.

During the relevant period of 1 January 2009 to 3 February 2012, Pi failed to take reasonable care to ensure the suitability of its advice. Pi advised 168 clients to invest £6 million in Unregulated Collective Investment Schemes (UCIS) and 362 clients to invest £20 million in structured products.

Of the sample of files that the FSA reviewed, 50% were found to be unsuitable. Across the unsuitable files there was a clear disparity between the clients' moderate attitude to risk and the high risk nature of the products that were recommended. In several cases, clients who appeared to have low incomes, limited assets and limited capacity for loss were advised to invest in high risk products, which were clearly not right for them.

Examples of unsuitable advice include:

* Client A was advised to place £51,000 in a UCIS and £34,000 in a structured product, which constituted all of his pension funds (other than those held in a final salary scheme)

* Client B was advised to invest 93% of his SIPP funds in structured products, with the effect that 54% of his total investment portfolio was invested in structured products

* Client C, with an annual income of £18,500 and two dependant children, was advised to transfer his entire pension fund of £78,000 to one UCIS
Product sales were not effectively monitored and systems and controls at the firm were inadequate. Supervision of the two advisers who accounted for the highest sales of UCIS and structured products was poor, while the file checking process was unclear and the checks themselves incomplete. Pi employed a maximum of only 4 file checkers during the relevant period, serving a total of... continued on page two >

 

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