FCA bans IFA firm CEO as FSCS faces £106m bill

The Upper Tribunal has upheld an FCA decision to fine and ban Alistair Burns, chief executive of advice firm TailorMade Independent Limited, as it was confirmed that the FSCS compensation bill for his failed business could hit £106.5m. The Tribunal, however, directed the FCA to impose a reduced £60,000 fine on Mr Burns, whose firm specialised in pension transfers and SIPPs, because it judged this was more "appropriate and proportionate" for his failings as a director. He was originally handed a £233,600 fine by the FCA in 2016.The £60,000 fine was made on the basis that he had breached the FCA’s Statement of Principle 7 by failing to ensure that Tailor Made Independent complied with its regulatory obligations.So far, compensation totalling over £55.6 million has been paid by the Financial Services Compensation Scheme for claims upheld against TMI. This does not cover all the losses suffered by investors, which the FSCS assesses at more than £106.5 million.The Upper Tribunal upheld the FCA decision to prohibit Alistair Burns, director and CF1 of TailorMade Independent Limited (TMI), from performing any FCA significant influence or senior management function. This was due to his “fundamental lack of competence and capability to perform such functions.” Between January 2010 and January 2013, TMI gave financial advice to 1,661 customers who were considering transferring or switching their pension funds via SIPPs.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.The Tribunal also found that Mr 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 following the pension transfer.Typically, the customer was not informed either by TMI or the introducer of the payment of this commission or its amount. The FCA said there was therefore an “obvious conflict of interest” between Mr Burns and TMI’s customers which needed to be managed. Mr Burns did not identify, and TMI failed to manage, this conflict of interest.Mark Steward, executive director of enforcement and market oversight at the FCA, said: "Mr 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.”The Tribunal also confirmed the FCA’s position that when a financial adviser gives advice to a customer who wishes to transfer out of their current pension arrangement to release funds to allow them to invest in an overseas property investment through a SIPP, then the financial adviser “must consider” not only the suitability of the SIPP itself but the suitability of the investments to be held in it.The Tribunal found that in these circumstances a financial adviser cannot give suitable advice if it advises on the SIPP alone because the SIPP and its underlying investments are part of an 'indivisible package of rights' which form a customer’s overall pension arrangements.

FCA bans IFA firm CEO as FSCS faces £106m bill

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