Further to Friday’s update and the enforcement action against Richard Rhys, this Final Notice notes a prohibition order against the inpidual, a former director and compliance officer of MNFA. FSA has prohibited him from performing any significant influence function at any authorised or exempt person or exempt professional firm, other than as, or through, an appointed representative within the meaning of FSMA. FSA concluded that he failed to understand the restrictions on promoting UCIS and was partly responsible for MNFA promoting the EBP Scheme, a UCIS,, and failed to take any steps to ensure that there was compliance monitoring of MNFA’s sale of the EBP Scheme (despite being the compliance officer).

FSA has imposed a prohibition order against the inpidual, a former director of MNFA Limited (which went into creditors’ voluntary liquidation in 2009 and lost its Part IV permission that year), who was mainly responsible for the investment and business development side of the business. He was also the leading approved person in the marketing and promotion of a scheme called the environmentally beneficial plant scheme (the "EBP Scheme”) by the firm, whose customers invested around £11.6m in the EBP Scheme that it unlawfully promoted and the majority of investors have subsequently sustained substantial losses. FSA concluded that the scheme had been promoted in a way that risked it being mis-sold to the investors and that the inpidual had been directly responsible for this. FSA said that he had made statements in order to promote the EBP Scheme that obviously risked misleading investors (and did in fact mislead them), without applying his mind to that risk; caused the firm to promote the EBP Scheme without conducting proper due diligence and without complying with the regulatory standards, including the required statutory and regulatory promotional requirements for an unregulated collective investment scheme; failed to inform himself of and understand the relevant UCIS requirements and failed to take any steps to ensure MNFA assessed the suitability of its advice to customers. It is noted that the matter had originally been referred to the Upper Tribunal, but that the reference was withdrawn following settlement discussions with FSA.

FSA has published Final Notices which publicly censure the firm and inpidual and impose a prohibition order on the latter. The firm’s breaches relate to the conduct of pension transfer and income drawdown business by, failings in a financial promotion made by the firm on behalf of the issuing company for which it was acting as agent, and a failure to have adequate systems and controls to monitor its advisers’ and appointed representatives’ compliance and training and competence. FSA notes that in July 2009 the firm had been fined (£42,000) for materially similar systems and controls failings in relation to the approval of financial promotions and monitoring of appointed representatives. The firm failed to address the issues identified in that action and take steps to ensure that they did not recur. In addition, it breached the variation which took effect following the previous enforcement action and thus breached s20(1)(a) FSMA, in that it conducted pension transfer and income drawdown business after 13 July 2009, which was beyond the scope of its permission. FSA notes that the firm went into voluntary liquidation in November 2010 and, were it not the firm’s financial circumstances, FSA would have imposed a financial penalty of £180,000 in respect of the breaches identified. With regard to the inpidual, who had CF1, CF10, CF11 and CF30 approvals, FSA concluded that he had failed to exercise due skill, care and diligence in managing the business of the firm for which he was responsible in his controlled functions, by failing to ensure that a financial promotion issued by the firm as agent for another company complied with FSA rules and failed to take reasonable steps to ensure that the business of the firm which he was responsible in his controlled functions, complied with the relevant requirements and standards of the regulatory system, FSA concluded that the nature and seriousness of the breaches warranted a fine of £70,000, taking into account that FSA considered his cooperation with the investigation was a mitigating factor. However, as the imposition of any financial penalty would cause him serious financial hardship, FSA published this statement of his misconduct, rather than imposing a financial penalty. With regard to the earlier enforcement action, FSA notes that no action was taken against the inpidual, as he “was also a director, and responsible for compliance oversight at City Gate during the period relevant to that investigation. Mr Domke was therefore personally responsible for addressing the failures identified and for ensuring that City Gate complied with the regulatory requirements imposed as a result of that action. He failed to do so. The FSA considers that this seriously aggravates the matters set out in this Notice” and has thus imposed a prohibition order against him. (NB: other inpiduals received fines in the 2009 enforcement action).

Further to the Upper Tribunal’s Decision (see 10 July 2012 news update), FSA has now published the Final Notice with regard to this case. FSA had refused an application from First Financial Advisers Limited for Stephen Danner to be approved to perform Controlled Function CF30 on the grounds of fitness and properness. The Upper Tribunal had found that FSA had been correct to refuse the application. This Final Notice includes several extracts from the Decision.

FSA has fined the bank £294,000 for breaching the Money Laundering Regulations 2007. It is the first occasion in which FSA has taken enforcement action against a firm in relation to money laundering weaknesses in its correspondent banking arrangements, The firm is a wholly owned subsidiary of Turkish Bank Limited which is incorporated in Northern Cyprus. The firm, described as “mostly retail”, offers correspondent banking. The firm acted as a correspondent bank for nine respondent banks in Turkey and six respondent banks in Northern Cyprus between 15 December 2007 and 3 July 2010. During this period, Turkey and Northern Cyprus did not have AML requirements that were equivalent to those in the UK. FSA visited the firm in July 2010 as part of a thematic review of how banks operating in the UK were managing money laundering risks. The firm failed to establish and maintain appropriate and risk-sensitive AML policies and procedures for its correspondent banking relationships carry out adequate due diligence on, and ongoing monitoring of, the respondent banks it dealt with and failing to reconsider these relationships when this was not possible; and maintain adequate records relating to the above. FSA notes that it had previously warned the firm of deficiencies in its approach to AML controls over correspondent banking.

By this Final Notice, FSA has issued a prohibition order against the inpidual and a fine of £10,500 and has withdrawn his Part IV and CF10 approvals. FSA reports that the inpidual, an IFA trading as a sole trader, failed to pay due regard to the interests of his customers and treat them fairly, in that he incorrectly categorised advised sales as execution-only, which led him to make potentially misleading statements to customers about their rights and the nature of his service; sought to exclude or restrict his duties to his customers by encouraging them to sign declarations that they had not identified any poor advice at the point of sale; failed to ensure that complaints that he received were recognised; and failed to ensure that an adequate complaints handling process was in place. He also failed to assess or record adequately his customers’ personal and financial circumstances, objectives or attitudes to investment risk before giving advice to them; failed to ensure that products were researched adequately or that the result of such research was communicated to customers; failed to take adequate steps to record why his recommendations were suitable to customers’ needs and circumstances and communicate those reasons to customers; and recommended and arranged regulated mortgages for his customers when he was not qualified to do so; and failed to take reasonable steps to maintain his professional development and attend appropriate training.

FSA has imposed a fine of £471,846 and issued a prohibition order against the inpidual, a former commercial insurance broker who used clients’ insurance premiums to fund his business. Between 2008 and 2010, Stephen Goodwin, a former partner of Goodwin Best in Bury, Lancashire and his (now deceased) business partner, accepted insurance premiums from clients, but sometimes paid this money into their business account rather than to the relevant insurer or intermediary to arrange the policy. In total, they misappropriated £303,846. The fine consists of the disgorgement of benefit of £303,846 and an additional £168,000 punitive element. The total fine, £471,846, is one of the largest ever levied on an inpidual for insurance fraud. FSA notes that at least three clients suffered financial loss: one tried to make a claim only to find they were uninsured and; two other clients paid the same premium twice to ensure their policies remained in force - these clients are now in contact with FSCS. Stephen Goodwin was declared bankrupt in April 2011 in relation to debts incurred by his firm and his bankruptcy was discharged in April 2012. The firm is no longer operating.

FSA has published this Final Notice which imposes a fine of £30,000 (reduced from £160,000 on the grounds of financial hardship) and a prohibition order on the inpidual. FSA took this action as a result of the inpidual’s conduct as a senior broker employed by Pacific Continental Securities (UK) Limited where he deliberately defied compliance procedures, acted against the interests of customers and disclosed inside information in order to improperly maximise sales by his team. On four separate occasions between January and April 2007, he was responsible for drafting sales scripts to be used by the firm’s brokers when trying to sell shares to customers over the telephone in which scripts the risk warnings and risk factors normally used by the firm were significantly watered down. He circulated these sales scripts to brokers knowing that they had not been approved by the firm’s compliance department (or one of the firm’s two directors) and knowing that he was not permitted to circulate non-approved scripts. In one of the four scripts, he also improperly disclosed inside information to his colleagues for use when trying to sell shares to customers. On about 27 March 2007, he obtained inside information that an AIM-traded company Provexis Plc had entered into an agreement (“the Collaboration Agreement”) with a major international company details of which would be announced shortly to the market. This information was not public and was price sensitive. Shortly thereafter, the inpidual circulated to brokers a sales script that contained inside information about the Collaboration Agreement and the forthcoming announcement. FSA had censured the firm in January 2009 and, had it not been in insolvent liquidation, would have imposed a financial penalty of £2,000,000. FSA also imposed fines and prohibition orders to the two directors of the firm in January 2009 .

FSA has published this Decision Notice setting out its reasons for objecting to the acquisition of at least 70% of the issued share capital of Think Finance.com by Ewa Karczewska. FSA’s concerns are summarised as lack of honesty and integrity; lack of reputation and experience directing the business; acquiring control without giving notice and repeated failure to comply with FSA requirements. In 2010, the inpidual had acquired 70% of the firm without seeking prior FSA approval and there FSA states that there is now “considerable confusion” regarding the ownership of the firm.

Further to the recent Upper Tribunal Decision, FSA has now published this Final Notice which imposes a financial penalty of £1,250,000 and a prohibition n the order with effect from 27 June 2012