The Financial Conduct Authority has fined Pembrokeshire Mortgage Centre Limited (PMC) £2,354,331 for unsuitable British Steel transfers.
The firm trading as County Financial Consultants is in liquidation and gave unsuitable advice to consumers to transfer out of the British Steel Pension Scheme (BSPS).
The FCA has published a Final Notice against PMC that explains the reasons for the fine.
PMC advised 420 consumers, nearly two-thirds of whom were BSPS members, on whether to transfer out of their DB scheme.
According to the FCA, overall 93% were advised to transfer and PMC earned over £2m in transfer and ongoing advice fees.
Many of the people advised were in a vulnerable position due to the uncertainty surrounding the future of BSPS and the short timescale they had to make a decision.
The FCA said they did not receive the quality of advice they needed to make an informed decision.
Instead, PMC gave unsuitable advice in 60% of cases, even higher than BSPS as a whole.
The total value of the transferred funds on which PMC gave advice was approximately £123m, with an average transfer value per customer of approximately £293,000 (£314,000 for BSPS members).
As at 30 November 2022, the Financial Services Compensation Scheme (FSCS) has upheld 213 pension transfer claims against PMC and paid out over £13.3m in compensation.
FCA executive director of enforcement and market oversight Mark Steward said: “Pembrokeshire Mortgage Centre advised hundreds of consumers to give up valuable defined benefit pensions without any adequate justification or rationale, using generic, templated advice not tailored to the specific circumstances of their customers while earning fees in doing so.
“The quality of advice seen here was woeful. The failings were particularly egregious in the context of the British Steel Pension Scheme, where customers were in an unusually vulnerable position. The FCA’s investigation into the involvement of others in these matters remains ongoing.
“Any consumers who were advised to transfer should contact the Financial Services Compensation Scheme to see if they are owed redress.”
The FCA said the failings included the provision of generic suitability reports that were not tailored to the circumstances of individual consumers and contained contradictory, misleading and confusing statements.
PMC also failed to have adequate resources to deal with the increase in cases caused by BSPS, further impacting the quality of advice provided.
Many consumers were advised to transfer out even though they were relying on the guaranteed income to fund their retirement and could not afford to bear the risk of transferring out.
This included those who needed the money to provide for dependents needing long-term care.
PMC is currently in liquidation. The FCA will give preference to creditors (some of whom may be consumers), ahead of its financial penalty, to maximise funds available for redress.
The overall FSCS uphold rate in relation to Pembrokeshire Mortgage Centre was 88%.
In 80 cases (38%), the FSCS awarded the claimant the maximum compensation available of £85,000.
Had it not been for the compensation limit of £85,000, the total compensation payable to customers would have been approximately £14.6m.
The FCA added it continues to progress c.30 ongoing enforcement investigations into firms and individuals relating wholly or partly to BSPS advice, all of which are at a very advanced stage and some are in litigation.
On 28 November the FCA published final rules for a redress scheme for former members of the BSPS who received unsuitable advice to transfer out of their DB scheme.
The FCA is providing a tool that firms will have to use to calculate redress payments.
Customers of firms in liquidation should contact the FSCS.
How is the firm supposed to pay this fine? More to the point, why didn’t the FCA see this coming? They have the intelligence to monitor the number of pension transfers taking place (even before the introduction of RMA-M). Was it beyond the wit of man to identify that a particular firm was advising hundreds of members of the same scheme to transfer out (probably into the same receiving scheme)?
Apparently, PMC’s net worth is about £2k so for the FCA, at this stage in the proceedings, to impose a fine of £2.5m is utterly pointless.
in liquidation who is going to pay this fine?
Obviously not the company. Whether or not it’ll pass to the FSCS may perhaps be found somewhere amongst the 142 pages of https://www.handbook.fca.org.uk/handbook/COMP.pdf
Personally, I can’t be bothered to look.
This fine is about a useless as cap ad …
Still …collective punishment will save the day ….
Fine the many for the sins of the few !!
1) the firm has no assets. The FCA is not applying a fine in any meaningful sense. 2) the firm does not appear to have ever had the correct permissions for pension transfer advice. The FCA need to publish the full details of who actually gave the advice. 3) the firm has a history of changing ARs. Somewhere in there a network has known of issues and terminated them. Why did the FCA not question such a change.
This is the third of presumably at least 50 firms to be sanctioned. None will pay a meaningful fee.
We always seem surprised when we read these examples of bad practice, why?
Do we assume everyone has the same work ethics and honesty as us?
Is it because we don’t trust the FCA and media, it cannot be that bad?
I would suggest there is fact in all the these statements.
However.
Advisers are selfish, sorry this is a fact, as this has happened so many times over the last 3 decades I cannot come to any other concussion.
Until advisers self regulate, have one Governing body, regulating only them, issuing all the advisers SPS, with inspection and withdrawal rights, well, hay ho, history will repeat.
The FCA is always going to be behind the curve, powerless to act until the damage is done, does not have the resources and has no liability for the financial loss. It is also so easy for them to blame all advisers for their failing, the failings of a few advisers, as advisers are so unwilling to act as a unified unit. Better to stay quite, hide, stay out of site and then complain when the bill arrives.
The issue is advisers are quick to complain individually, point the finger at others, complain about other advisers, but unwilling to work together.
I feel sorry for the good advisers now tarred and suppressed, unwilling to speak up as the media, politicians and regulator have insured no one wants to listen.
The recent BSPS compensation scheme announced on Monday will drive almost all into insolvency.
Why do you consider the FCA to be powerless to act until the damage has been done and lacking the necessary resources? It DOES have both the necessary powers and resources but fails to use the former until it’s too late and mis-allocates the latter to projects and initiatives of vastly lesser import.
It claims to be keen to encourage whistle blowing, yet so often we read on forums such as this reports from people (not just advisers) who blew the whistle, in response to which the regulator did nothing.
Advisers surely would be willing to act as a unified unit but the bodies representing them have no clout. All they can do is make recommendations to the regulator but the regulator is free to and regularly does ignore them. Hence I have suggested on many occasions the need for an independent body to oversee the regulator, armed with statutory powers to force it to act on its directives (not mere recommendations) and to impose meaningful sanctions against named individuals for failure to comply. Such a proposal has been put to the Treasury by bodies such as the TTF but the FCA has resisted it tooth and nail and, for its part, the Treasury has done nothing.
I wonder how long before we start getting complaints from spouses/dependents when their loved one dies and leave a pension which doesnt pay the gas bill as opposed to a six figure lump sum !!!!