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UK fines compliance officer for his firm’s bad advice

The Financial Conduct Authority penalized a compliance officer Friday for allowing customers of the wealth management firms he worked for to receive wrong advice about their pensions.

David Watters was fined £75,000 ($98,000) for failing to "exercise due skill, care and diligence in his role as compliance oversight officer" at two firms.

Watters first worked for FGS McClure Watters (FGS) and then Lanyon Astor Buller Ltd (LAB).

LAB took over FGS in 2008. Watters now chairs the combined Belfast-based firm and is the desginate compliance officer.

The FCA said Watters "failed to take reasonable steps to ensure that the process in place at FGS and LAB for giving advice" about converting guaranteed pensions to a lump sum distribution "was adequate and met regulatory standards."

Watters' failure led to "a serious risk of unsuitable advice being given to customers of FGS and LAB about the merits of transferring their pension," the FCA said.

About 500 customers who received advice from FGS or LAB converted their guaranteed pensions to cash, with a combined value of £12.7 million ($16.6 million), the FCA said.

"In many cases, it may have been unnecessary for customers to leave their [periodic payout] schemes, thereby losing their guaranteed benefits," the financial regulator said.

According to the FCA,

Mr Watters failed to give sufficient consideration to whether the advice process was compliant; he did not take reasonable steps to gain a sufficient understanding of the relevant regulatory requirements; and did not obtain an appropriate third party review of the processes to ensure compliance. Mr Watters also failed to take reasonable steps to ensure that advisers were properly monitored to reduce the risk of unsuitable . . . pension transfer advice being given to customers.

The FCA's Mark Steward said Friday that Watters should have taken reasonable steps "to put in place a compliant advice process."

"His failure to do this placed customers at risk of needlessly losing valuable benefits for their retirement,” Steward said.

LAB has agreed to contact customers harmed by the advice and, if they lost money, to make "appropriate redress" by paying damages.

The UK two years ago gave people 55 and over the choice to cash in pensions and spend the money. The number of people swapping defined benefit pensions for cash lump sums has risen dramatically, the Financial Times said.

Last month the FCA proposed putting restrictions on some wealth management firms that have advised clients to cash in their pensions. Between 50 to 100 firms are under FCA scrutiny, the Financial Times said.

The Financial Conduct Authority’s July 14, 2017 release is here.


Richard L. Cassin is the publisher and editor of the FCPA Blog.