FCA Bans Two Financial Group Units from Hiring After Mis-selling Risks

The Financial Conduct Authority (FCA) has used its suspension power for the first time, by banning two of the Financial Group's (FG) subsidiaries from hiring new staff, after the regulator found that the firm failed to supervise and control its current workforce into giving proper advice.

The watchdog said in a statement that the FG subsidiaries, Financial Limited and Investments Limited, had failed to ensure its Appointed Representatives (ARs) and individual advisers were adequately supervised and controlled, in order to minimise the risk of mis-selling and the provision of unsuitable advice to consumers.

The units will not be able to hire any new ARs for four and a half months.

"This is the first time the FCA has used its suspension or restriction powers to punish a firm for serious misconduct," said Tracey McDermott, the FCA's director of Enforcement and Financial crime.

"In this case, it is a direct intervention by the FCA in the way the firm runs its business. The sanction is intended to send a message of deterrence to the rest of the industry, and serve as a reminder that the FCA takes systems and controls failings very seriously and is able to respond with sanctions that target the specific revenue streams of different types of business.

"The FCA's disciplinary action in this case reinforces the importance of collating quality MI, embedding risk-focused systems and controls and encouraging a consumer-focused culture."

ARs are responsible for giving financial advice to customers.

The regulator revealed that between 20 August 2008 and 30 April 2013, there were "systemic weaknesses in the design and execution of the firms' systems and controls and risk management framework."

It added that the firms' failings were directly attributable to the firms' cultural focus which viewed the "ARs and individual advisers, rather than their customers, as the end consumer".

The FCA said, at its peak, the network was responsible for approximately 400 ARs and 500 individual advisers, who gave advice to over 60,000 customers, including in relation to high risk transactions such as UCIS, pension switching and occupational pension transfers.