Release Date: 27th March 2013
To access the original FSA document, click here.
Summary
Care Asset Management Limited was fined £56,000 by the Financial Services Authority (FSA) for breaches of Principle 9, which pertains to maintaining trustful customer relationships. This penalty was a result of the firm’s failure to provide suitable advice regarding the sales of products provided by Keydata Investment Services Limited.
The investigation by the FSA highlighted several key failings by Care, specifically their inadequate system for assessing and communicating the risks associated with Keydata products to their customers. Most notably, Care misclassified these products as “secure” with a lower risk profile despite their complexity and inherent risks, which were not suitably communicated to the customers, many of whom were elderly and potentially more vulnerable to capital loss.
Additionally, Care’s internal processes for monitoring the sale of these products were insufficient. The firm’s senior management, involved in both selling and reviewing these product sales, lacked the necessary independence to objectively assess and rectify the failings in the sales and advice process.
This situation serves as a critical reminder to other firms in the financial services industry about the importance of accurate risk assessment, clear and understandable communication with clients, and the need for an independent review process to ensure compliance with regulatory standards. It underscores the importance of transparency and suitability in client interactions to uphold trust and meet regulatory expectations. To avoid similar pitfalls, firms must ensure robust internal controls and that their product risk assessments are accurate and communicated effectively to clients.
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