Release Date: 14th July 2017

To access the original FCA document, click here.

Summary

The Financial Conduct Authority (FCA) has fined David Samuel Watters £75,000 for failing to exercise due skill, care, and diligence in his role as Compliance Oversight (CF10) at Lanyon Astor Buller Limited (LAB) and previously at McClure Watters. This penalty is related to advice given during Enhanced Transfer Value (ETV) exercises between February 2006 and April 2009, where over 700 defined benefit (DB) scheme members were advised to transfer to defined contribution (DC) schemes, resulting in transfers totalling about £12.7 million.

Reasons for the Fine:

• Non-compliance with Regulatory Requirements: Mr. Watters failed to ensure the advice process was compliant with the Conduct of Business (COB) and Conduct of Business Sourcebook (COBS) rules. This failure led to a serious risk of unsuitable advice being given, which could result in customer detriment.
• Inadequate Oversight: Mr. Watters did not adequately oversee the ETV advice process or the advisers involved. One adviser had a direct financial incentive to recommend transfers, which was not appropriately managed or mitigated.
• Failure to Act on Recommendations: Despite engaging external compliance consultants, Mr. Watters did not ensure that their recommendations were properly implemented.
• Poor Record-Keeping: The advice process lacked adequate documentation, and key customer interactions and recommendations were not sufficiently recorded or retained.
• Conflict of Interest: The firms received commission from pension providers, creating a potential conflict of interest which was not properly disclosed to customers.

Key Takeaways for Other Firms:

• Ensure Compliance with Regulatory Requirements: Firms must ensure their advice processes comply with relevant COB and COBS rules, particularly when advising on complex products like pension transfers.
• Maintain Robust Oversight: Compliance officers must actively oversee advisory processes and address any potential conflicts of interest, ensuring that incentives do not compromise the quality of advice.
• Implement and Act on External Advice: When engaging external consultants for compliance reviews, ensure their recommendations are fully implemented and monitored.
• Maintain Comprehensive Records: Adequate record-keeping is essential for demonstrating the suitability of advice and for regulatory compliance.
• Disclose Conflicts of Interest: Firms must disclose any financial incentives or conflicts of interest to clients before they act on advice.

Conclusion:

The FCA’s action against David Samuel Watters underscores the importance of compliance oversight and the need for firms to ensure that their advice processes are robust, compliant, and in the best interest of clients. Firms must take proactive steps to manage conflicts of interest and maintain thorough documentation to avoid similar penalties.