A UK financial adviser has been banned for 13 years after advising clients to transfer money from their pension pots into high-risk unregulated investments.
Darren Reynolds was the sole director of IFA firm Active Wealth (UK). He advised hundreds of clients on investing their pension funds from December 2014 to the company’s liquidation in February 2018, after its involvement in the British Steel Pension Scheme (BSPS) scandal.
Following Active Wealth’s liquidation, an Insolvency Service investigation found that between “December 2014 and December 2016, Reynolds had failed to act in the best interests of the company’s clients”.
Investments
Following his advice, at least 288 clients transferred more than £23m ($31.7m, €26.7m) from their existing pensions to self-invested personal pension schemes (Sipps) which “saw their funds invested in a portfolio of investments in corporate bonds called Portfolio Six”, the Insolvency Service reported.
These were “high risk” and described as “relatively illiquid” and “unregulated”. They were specifically excluded from the protection offered by the Financial Services Compensation Scheme (FSCS) when investments were made directly.
The bonds “were only available for direct investment to experienced high net worth or sophisticated investors, or those who had received advice from an independent financial company who declared they had the experience and knowledge to understand the risks”, according to the Insolvency Service.
Investigation
According to the Insolvency Service, Reynolds said that “Active Wealth relied upon due diligence undertaken by the fund manager of Portfolio Six”.
It added: “However, he knew or ought to have known that this was not impartial nor independent as its directors were associated with companies within Portfolio Six.
“The investigation found that, in at least eight applications, Darren Reynolds made inaccurate declarations when describing his clients’ investment experience and appetite for financial risk.”
At liquidation, Active Wealth’s clients had claimed more than £10m in compensation from the FSCS as a result of advice received.
However, as individual claims were capped at £50,000, the actual loss suffered by Active Wealth’s clients is more than £24m.
Banning
Reynolds was disqualified as a company director for a period of 13 years on 25 May 2021 at the Manchester High Court of Justice.
This means he cannot, directly or indirectly, become involved, without the permission of the court, in the promotion, formation or management of a company.
Rob Clarke, chief investigator at the Insolvency Service, said: “This is a very sad situation for these victims who believed Darren Reynolds and his company was providing professional investment advice in their best interests but instead placed their future financial security in high risk and unsuitable investments.
“13 years is a significant ban and removing Darren Reynolds from the corporate arena will protect other investors from further harm for a lengthy period of time.”
