The Financial Services Authority has publicly censured Park Row Associates, a national IFA network, for failing to ensure its sales were suitable and secured customer redress estimated at between £5m and £7.8m.
The FSA has also fined Peter Sprung, the firm’s former chief executive, £49,000 and has withdrawn his approval to perform a controlled function at Park Row. He has also undertaken not to perform a significant function at any firm for five years.
Between January 2007 and January 2009, a number of serious failings by Park Row were identified in relation to the suitability of its customer advice. These include:
Failing to ensure that advisers properly evidenced the suitability of sales,
- failing to ensure advisers offered suitable advice to customers at all times and for all products;
- Failing to ensure that its systems and controls were adequate; and
- Consistently failing to take action to rectify these failings despite the fact that concerns were highlighted to the firm on a number of occasions.
Peter Sprung was chief executive of Park Row and between January 2007 and January 2009 his conduct fell short of what was expected of a senior manager of an authorised firm. He failed to take steps to ensure that Park Row and its advisers properly evidenced the suitability of sales and that sales were actually suitable, in particular in relation to pension advice.
Advisers sometimes provided advice in relation to certain products on which they were not authorised to advise and it was identified that there was a danger that some of them may have selected products based on the fact that they would receive higher commission. Sprung also failed to ensure that the systems and controls were adequate to manage the risks to the business, and to ensure the suitability of advice through compliance checks.
Margaret Cole, FSA director of enforcement, says: “Park Row failed to take adequate action to address failings in systems and controls to ensure its advisers were giving customers suitable advice, despite the real risk of customer harm.
“The FSA has secured funding estimated at between £5m and £7.8m to ensure that where customers were not given suitable advice, or where Park Row can not demonstrate suitable advice, they will receive redress.
“As chief executive, Peter Sprung was responsible for ensuring that there were appropriate systems and controls at the firm and that it treated its customers fairly. He failed to do this despite being given the opportunity to do so on a number of occasions. As a result, he has been fined and can no longer work in a significant influence function for five years.”
Once informed of the FSA’s concerns, Park Row co-operated fully with the FSA. The firm’s breaches were such that the FSA would have imposed a financial penalty of £2.4m were it not for the fact that the firm can not pay such a fine and is currently undertaking an orderly wind-down of its business. Importantly, the FSA has been able to secure customer redress estimated at between £5m and £7.8m with the support of the firm’s parent company, Royal Liver Assurance Limited.
Sprung also co-operated fully with the FSA and settled at an early stage of the FSA’s investigation and therefore qualified for a 30% discount. Without the discount, the fine would have been £70,000.