Release Date: 17th November 2014
To access the original FCA document, click here.
Summary
The Financial Conduct Authority (FCA) has imposed a fine of £560,000 on Chase de Vere Independent Financial Advisers Limited for its inadequate handling of the sale of Keydata products. Between August 2005 and June 2009, Chase de Vere’s advisers sold Keydata life settlement products to 2,806 customers, resulting in a collective investment of £49.3 million. These products were not adequately researched by Chase de Vere, which led to significant misunderstandings about the risks involved.
Many customers suffered financially as the Financial Services Compensation Scheme, although compensating eligible customers up to its limit of £48,000 per customer, could not cover the total losses, particularly for 139 customers who invested over the scheme limit, totaling £4.4 million. The primary issue was the firm’s failure to ensure a thorough understanding of the Keydata products’ distinctive features and risks, resulting in a lack of clear, fair, and non-misleading communication to customers regarding the risks associated with these investments.
Key Takeaways for Other Firms:
- Thorough Product Research: Firms must conduct comprehensive research to fully understand the products they offer, including all associated risks.
- Effective Risk Communication: Advisors must be equipped with the necessary tools and standardised descriptions to accurately explain investment risks to customers.
- Adequate Training and Resources: Ensure that all advising staff are thoroughly trained and understand the products they are endorsing to provide accurate information to investors.
- Implementing Strong Internal Controls: Firms should have robust internal controls in place to monitor and restrict the sale of complex financial products, particularly to those customers with a cautious risk appetite.
- Proactive Redress and Compensation Measures: Establish procedures for reviewing sales and providing redress where necessary, especially for products found to be unsuitable post-sale.
By settling early in the investigation, Chase de Vere qualified for a 30% reduction on the potential £800,000 fine. This case underscores the FCA’s commitment to protecting consumers by ensuring that financial products are sold in a manner that is transparent, fair, and well-understood by all parties involved.
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