On 31 July, the UK Upper Tribunal (Tax and Chancery) upheld a Financial Conduct Authority ban on Alistair Burns, who was a director and chief executive of TailorMade Independent (TMI).
The ban prohibits Burns from holding any FCA significant influence or senior management position on the basis “of his fundamental lack of competence and capability to perform such functions”.
The FCA had originally levied a fine of £233,600 against Burns, however the tribunal told the regulator to reduce this to £60,000 ($78,711, €67,407).
Inherently risky investments
Between January 2010 and January 2013, TMI provided advice to 1,661 customers who were considering transferring or switching their pension funds via self-invested personal pensions (Sipp).
The tribunal found that TMI’s customers were given wholly unsuitable advice to transfer pension benefits into a Sipp, which was to be invested in either a single or a very small number of inherently risky overseas property investments, including defunct Caribbean hotel scheme Harlequin.
Conflict of interest
Further, the tribunal found that Burns had a significant financial interest in the outcome of the unsuitable advice TMI was giving to customers.
He co-owned and co-directed an unregulated introducer, also operating under the “TailorMade” name, which referred clients to TMI.
The introducer was paid significant amounts of commission by the provider of the alternative investment product concerned when TMI advised a customer to transfer their pension into a Sipp, and the customer subsequently invested in that alternative investment.
Typically, the customer was not informed either by TMI or the introducer of the payment of this commission or its amount.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Burns failed to ensure that TMI managed its conflicts of interest, benefiting financially from his role as shareholder and director at an unregulated introducer alongside his regulated role, to the detriment of his customers.
“Our action sends a strong message that failing to manage conflicts of interest fairly and disclose them clearly is completely unacceptable,” Steward said.
Advisers must consider suitability
The tribunal’s decision also confirmed the FCA’s position that the financial adviser must consider not only the suitability of the Sipp itself, but the suitability of the investments to be held in it.
To date, compensation totalling more than £55.6m has been paid by the Financial Services Compensation Scheme (FSCS) in relation to claims upheld against TMI.
This does not cover all the losses suffered by investors, which the FSCS assesses at more than £106.5m.
The tribunal’s decision was issued following a hearing which took place from 14 to 25 May 2018.
The FCA issued its decision notice on 22 July 2016.
