FCA bans and fines two individuals for pension advice failings

This press release was amended on 24 March 2020.

The FCA found both men failed to ensure TMI assessed the suitability of investments made through self-invested personal pensions (SIPPs) for its customers, failed to ensure that TMI identified and managed its conflicts of interests and failed to oversee properly TMI’s compliance function, which had been outsourced to external consultants. Legerton also benefited financially from poorly managed conflicts of interest between TMI and an unregulated firm that introduced new business to TMI. TMI’s customers typically invested in high risk investments and more than half of them invested in overseas property operated by the Harlequin group of companies, which are under investigation by the Serious Fraud Office.

Georgina Philippou, acting director of enforcement and market oversight, said:

'Pope and Legerton exposed customers to risky investments without considering if these products met their needs. Their actions mean many customers face losing all of their hard earned pension funds and fell woefully short of the standards we expect of senior individuals.'

TMI provided advice to customers on transferring their existing pension funds into unregulated investments such as green oil, biofuels, farmland and overseas property via SIPPs. Between 2010 and 2013, 1,661 customers invested £112,420,985 in these investment products, many of which were not typically permitted by their existing pension schemes.

As directors with responsibility for the management and oversight of TMI, Pope and Legerton should have ensured that TMI considered the suitability of the investment products for customers but failed to do so.

They were also responsible for managing a number of conflicts of interest – including one created by commission payments to Legerton which he received when these investment products were sold to customers directly or through an unregulated firm which introduced customers to TMI for SIPP advice. During the relevant period Legerton’s total income from TMI was £300,567.

These payments created a conflict of interest and so should have been identified, and then disclosed to customers. However, no adequate disclosure was made.

The issue was compounded by Pope and Legerton’s failure to act quickly when TMI’s external compliance consultants warned them of the need to consider and disclose conflicts of interest to their customers.

TMI has ceased trading and is now dissolved. The Financial Services Compensation Scheme (FSCS) is investigating claims made by TMI’s customers and, to date, has paid compensation to 1,245 of TMI’s customers. Consumers that are concerned they may be affected should contact the FSCS. The FCA continues to undertake extensive work on SIPPs, and wrote to the CEOs of all SIPP firms in 2014 asking them to take action to ensure their business operates within the FCA’s rules. Customers should be alert to the risks of switching their pensions into risky investment product.

PLEASE NOTE THAT on 16 March 2020, the Authority decided to withdraw Mr Pope’s Decision Notice and Final Notice of 20 March 2015 and to impose on him a revised penalty, proportionate to that imposed by the Upper Tribunal in the closely connected disciplinary case of Mr Alistair Rae Burns (Mr Burns) (another director of TMI). Full details of the FCA’s decision are available in Mr Pope’s Further Final Notice[1].

The FCA did not revisit the 2015 statutory notices issued to Mr Legerton and the financial penalty imposed on him because Mr Legerton had successfully applied for serious financial hardship.

Notes to editors

1. The Further Final Notice for Lloyd Pope[1].
2. The Final Notice for Peter Legerton[2].
3. The FCA’s press release for the Upper Tribunal decision[3] to uphold the Authority’s decision to fine and ban Alistair Rae Burns.
4. Information on how to contact the FSCS[4].
5. Pope and Legerton agreed to settle at an early stage of the investigation, and received a 30% discount.
6. The FCA found that Pope and Legerton breached Statement of Principle 7[5] of its requirements for approved persons, and are not fit and proper to carry out any significant influence function in relation to any regulated activity carried on by any authorised person, exempt person or exempt professional firm.
7. The FCA has undertaken a number of enforcement actions against individuals for SIPP advisory failings, including Timothy Hughes and Andrew Rees of 1 Stop Financial Services[6].
8. Information on investments made through the Harlequin group[7].
9. The FCA reviewed SIPP operators in 2014. The FCA found that, despite previous warnings, some firms are still failing to fulfil their regulatory obligations. Many firms were found not to have the necessary expertise to assess high risk and non-standard investments and often failed to understand and identify the correct prudential rules which apply to their business. The Authority has written to the CEO’s of all SIPP firms[8] to warn them of the failings uncovered by this review.
10. On the 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
11. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
12. Find out more information about the FCA.