Sesame Limited, part of Sesame Bankhall Group, has been fined GBP6,031,200 (US$9.2 million) by the Financial Conduct Authority (FCA) with regard to Keydata advice failings.
According to the FCA, Sesame did not appropriately ensure that investment advice given to its customers was suitable, and also failed in the systems and controls that governed the oversight of its appointed representatives (ARs).
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The penalty comprises of a GBP245,000 fine for Sesame’s advice failings in relation to Keydata life settlement products, and a GBP5,786,200 fine for systems and controls weaknesses across its investment advice business.
FCA director of enforcement and financial crime, Tracey McDermott, said: "Sesame is one of the largest and most well-known financial services networks in the UK responsible for the oversight of some 1,220 appointed representatives. It describes itself as ‘perfectly placed to deliver expert guidance and services’ but the failings in this case fall far short of that.
"The weaknesses in Sesame’s systems and controls show that there was an ongoing risk that unsuitable advice could be given by Sesame’s appointed representatives. By allowing appointed representatives to use their regulatory permission to operate, principals are effectively vouching for them."
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McDermott further said Sesame must keep a close eye on what their appointed representatives do and keep them up to date with the regulator’s expectations. "Critically, they must also act decisively when things go wrong. Sesame failed on all of these counts," she added.
Sesame would have originally been fined GBP8,616,000, the FCA said, but the firm agreed to settle the case at an early stage of the investigation and therefore qualified for a 30% discount.
Sesame Bankhall Group chief executive officer, George Higginson said: "We regret these past issues and, in co-operation with the FCA, we have undertaken an immediate past business review to ensure that any customers who received unsuitable advice on Keydata Products have been compensated."
"The executive team and I are fully committed to ensuring our advisers are delivering the right customer outcomes that can be clearly evidenced. This commitment is fully endorsed by the SBG board. We have a long-term commitment to professional financial advice and I firmly believe the actions we are taking will put Sesame, our members and the consumers they serve in a stronger position moving forward."
Fines and investigations galore
Towards the end of May 2013, JP Morgan was fined GBP3.08 million by the FCA for being unable to prove it was giving clients the right advice.
According to the FCA, the shortcomings were not corrected until the watchdog brought them to JP Morgan’s attention while conducting a wider review of wealth management firms.
JP Morgan, reportedly, did not have complete records and the management did not have the information "they needed to recognise this" either.
The FCA is also investigating 29 financial adviser firms or individuals for enforcement action ranging from fraud to misselling.
The enforcement actions link with financial crime, mortgage fraud, misselling and suitability of advice, treating customers fairly as well as systems and controls issues.
