The UK’s Financial Conduct Authority has decided to ban Richard Fenech and Heather Dunne from working in financial services and fine them £270,646 and £399,817 respectively.
The FCA said in a decision statement on 16 December that it found the pair operated a flawed advice model that put customers’ guaranteed pension benefits at significant risk, and that Ms Dunne failed to act with due skill, care and diligence when providing pension transfer advice.
However, Fenech and Heather Dunne have each referred their Decision Notice to the Upper Tribunal. The findings outlined in the Decision Notices given to them reflect the FCA’s belief as to what occurred and how it considers their conduct should be characterised. The proposed action outlined in their Decision Notices will have no effect pending the determination of the references by the Tribunal, whose decision will be made public on its website.
Fenech was the sole director of Financial Solutions Midhurst Limited (FSML) and responsible for overseeing Ms Dunne, who was FSML’s appointed representative (trading as HDIFA).
Dunne failed to take into account the destination of the customers’ investments when advising whether defined benefit pension transfers were suitable. This was due to the use of a flawed two-adviser advice model in which Ms Dunne provided the pension transfer advice while another firm provided investment advice on the proposed onward investment after the pension transfer had concluded. As a result, Dunne did not know where her clients’ money was going when advising on the transfer, leaving customers exposed to the risk of unsuitable pension transfers.
Dunne advised approximately 92% of her clients to transfer out of their DB pension schemes, resulting in over £126m of funds being transferred, often against her clients’ best interests.
Fenech was responsible for the oversight of HDIFA’s business. However, despite being made aware by FSML’s external compliance consultant of the risk arising from HDIFA’s use of the two-adviser advice model, Fenech did not stop HDIFA from operating it. He also failed to ensure that Dunne’s pension transfer advice complied with regulatory standards.
Fenech and Dunne also failed to act with integrity because of their involvement in the dishonest provision of a backdated appointed representative agreement to the FCA.
Therese Chambers, joint executive director of enforcement and market oversight, said: “People must be able to trust the advice they receive about their pension. The actions of these individuals are wholly unacceptable, as they exposed customers to significant financial risk.
“Ms Dunne provided advice which was fundamentally flawed, and Mr Fenech failed in his responsibilities to oversee her work. In doing so, both demonstrated a complete disregard for customers’ needs through retirement, and the suitability of pension transfers, and it is right we ban them from the industry.”
Dunne’s fine was reduced to £399,817 from £494,917, having shown this amount would cause her serious financial hardship.
FSML and HDIFA are both now in liquidation. To date, the Financial Services Compensation Scheme (FSCS) has paid over £770,490 in compensation to FSML clients, (with potential total losses estimated at nearly £2m) because of losses suffered by those clients following advice they received.
