Release Date: 11th October 2021
To access the original FCA document, click here.
Summary
In its Final Notice, dated 11 October 2021, the Financial Conduct Authority (FCA) fined Mr. Omar Hussein £116,000 and revoked his approvals to perform several senior functions at Consumer Wealth Limited (CWL). Mr. Hussein was also prohibited from performing any function in relation to any regulated activity by any authorised or exempt person or firm. This action was due to his breaches of the FCA’s regulatory requirements, specifically failing to act with integrity and failing to ensure CWL complied with relevant standards between 20 March 2015 and 1 March 2017.
Reasons for the Fine
- Unsuitable Pension Advice: Mr. Hussein advised customers to switch their existing pensions into Self-Invested Personal Pensions (SIPPs) that invested heavily in a high-risk, unregulated investment portfolio known as Portfolio 6 (P6), managed by Greyfriars Asset Management LLP. This advice was found to be unsuitable in every customer file reviewed by the FCA.
- Misleading Customers: Mr. Hussein failed to communicate the high-risk nature of P6 and its underlying investments, which included speculative projects like overseas property developments and corporate mini-bonds. These investments were illiquid and unregulated, posing significant risks to customers’ retirement savings.
- Inadequate Due Diligence: Initial recommendations to invest in P6 were made without reasonable due diligence. Even after some due diligence was conducted, Mr. Hussein continued to recommend P6 despite clear indications of its unsuitability for CWL’s target market.
- False Representations: Mr. Hussein misrepresented customers as “experienced investors” to the fund manager, Greyfriars, and exaggerated their financial positions to meet investment thresholds. He also misled customers about the cost-effectiveness and risks of the recommended pension switches.
- Lack of Compliance: CWL’s internal controls and systems were inadequate under Mr. Hussein’s oversight. The firm also failed to provide ongoing advice services despite charging customers for them.
Key Takeaways for Other Firms
- Conduct Thorough Due Diligence: Ensure that comprehensive due diligence is performed on all investment products and services before recommending them to clients.
- Accurate Customer Assessment: Accurately assess and document customers’ financial situations, risk tolerance, and investment experience to provide suitable advice.
- Transparent Communication: Clearly communicate all relevant risks, costs, and potential disadvantages of recommended investments to customers.
- Maintain Compliance Systems: Establish and maintain robust compliance systems and controls to ensure adherence to regulatory standards.
- Avoid Misrepresentation: Do not misrepresent customer information to third parties or within internal documentation.
Conclusion
The FCA’s action against Mr. Hussein highlights the critical importance of integrity, thorough due diligence, and transparent communication in financial advisory services. Firms must ensure they have effective compliance systems in place and provide suitable, well-documented advice to protect consumers and maintain trust in the financial system.
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