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Dodgy dealings

Dodgy dealings


Date published

Here at Gibson Lamb, we’re pretty straight talking and what you see is what you get. We like to think we’re approachable and, above all else, trusted by our clients. But it seems not all firms share our priorities…

We read a story last week about an independent financial advisory firm in Portsmouth who have been banned from any regulated activity by the FCA, with the individuals concerned also banned.

Why? Because they withdrew more than two million pounds from their clients’ platform accounts as ad-hoc advice fee payments between September 2021 and December last year. These withdrawals were made without the clients’ consent and then over one million pounds was transferred from their business account to the firm’s director’s personal bank account!

It’s not clear which platforms they used, or how they got away with it for so long without any clients noticing. Perhaps the platform didn’t send a notification to the client for each withdrawal, and one assumes the amounts were relatively modest at least initially.

As we understand it, they were found out when a client did notice an unauthorised payment and reported it to, we think, the platform directly.

Looking at the FCA register, the firm had 8 advisers. It should have had processes in place to prevent a rogue employee – even if that’s the most senior person at the company – from getting away with these actions for well over a year.

The regulations might be partly at fault here because there is no obligation for the platform to tell the client in real time about such deductions. And even if they did, the platforms generate so much paperwork that it’s not really a surprise that it doesn’t all get read. There is an obligatory annual fee disclosure summary, but who looks all that closely at those documents?

All advisory firms must carry professional indemnity insurance, but I doubt that the insurance will cover fraud by one of the Directors of the business. Ours certainly doesn’t – I’ve just checked. The firm has been suspended from regulatory activity and has already gone bust, preventing redress being paid from the firm’s own funds. It’s also worth noting that the FCA’s register for the firm warns that the compensation schemes may not cover some of this firm’s activities.

If the theft isn’t covered by the compensation schemes and isn’t insured, then what happens to the clients? Aside from suing the Director who stole their money – who surely would be bankrupt pretty quickly – I fear they will be out pocket.

We see looking after your wealth as a privilege and it’s not one we take lightly. The Financial Services industry has come a long way from the rogues and charlatans who caused so much pain and anguish in decades gone by. However, there is still work to do routing out dishonest individuals and ensuring the regulator, platforms and senior management within a firm have checks and balances to prevent such large-scale theft from happening in the first place.