Release Date: 5th June 2013
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Summary
Sesame Limited was fined £6,031,200 by the Financial Conduct Authority (FCA) due to serious breaches related to customer trust and internal management control. This financial penalty was reduced from an initial figure of £8,616,000 due to Sesame’s early cooperation in the investigation, resulting in a 30% discount.
The fine comprised two parts: £245,000 for breaches of Principle 9 (Customers: Relationship of Trust) and £5,786,200 for breaches of Principle 3 (Management and Control) of the FCA’s Principles for Businesses. These breaches occurred over two separate periods. From 26 July 2005 to 8 June 2009, Sesame failed to ensure the suitability of its advice on Keydata Products, leading to a significant mismatch between the products sold and the customers’ investment objectives and risk attitudes. Additionally, Sesame inaccurately described these investments as low risk with guaranteed outcomes, which was not the case.
Between 5 July 2010 and 21 September 2012, the firm also failed to organise and control its affairs with effective risk management systems. This failure was evident in its oversight of Appointed Representatives (ARs), lack of robust monitoring, and insufficient internal controls over the sales of products and funds unsuitable for most customers.
Key takeaways for other firms to avoid similar sanctions include:
- Ensuring advice on investments is thoroughly aligned with customers’ risk profiles and investment objectives.
- Maintaining and strictly following robust internal controls and risk management systems to oversee operations, especially concerning ARs and product suitability.
- Implementing effective monitoring and training systems to ensure all personnel understand and comply with regulatory requirements and internal policies.
- Keeping detailed and accurate records that support the advice given and decisions made, thereby facilitating easier reviews and compliance checks.
- Promptly addressing any identified risks or failures in internal controls and taking corrective action to prevent recurrence.
These measures are critical not only for compliance but also to uphold the integrity of financial advice and protect consumer interests.
