FINAL NOTICE

Individual ref:
AJM00031

TAKE NOTICE: The Financial Services Authority of 25 The North Colonnade,

Canary Wharf, London E14 5HS (“the FSA”) gives Anthony James Moss final

notice of the following action:

1.
THE ACTION

1.1.
The FSA gave Anthony James Moss (“Mr Moss”) a Decision Notice on 20

July 2011 which notified him that the FSA had decided to take the following

action against him:

(1)
to publish a statement of his misconduct pursuant to section 66 of the

Financial Services and Markets Act 2000 (the “Act”) for breaches of

Statement of Principle 7 of the FSA’s Statements of Principle and

Code of Practice for Approved Persons (the “Statements of Principle”)

for failings with respect to the systems and controls at Best Advice

Financial Planning Limited (“Best Advice”), in relation to which Mr

Moss was approved to perform controlled functions between 1 January

2007 and 9 July 2009 (“the relevant period”); and

(2)
pursuant to section 56 of the Act, to make an order prohibiting Mr

Moss from performing any significant influence function in relation to

any regulated activity carried on by any authorised person, exempt

person or exempt professional firm because he is not currently a fit and

proper person for such a role in terms of his competence and capability

(“the prohibition order”). The FSA would be minded to revoke the

prohibition order, on Mr Moss’s application, in the event that Mr Moss

is able to demonstrate to the satisfaction of the FSA that he has taken

adequate steps to remedy his lack of competence and capability.

1.2.
The FSA considers that the misconduct in this case warrants a financial

penalty of £20,000. However, Mr Moss has provided verifiable evidence that

imposing such a financial penalty would cause him serious financial hardship.

Under these exceptional circumstances, the FSA has decided to censure Mr

Moss publicly instead.

1.3.
Mr Moss agreed that he would not be referring the matter to the Upper

Tribunal (Tax and Chancery Chamber).

1.4.
Accordingly, and for the reasons set out below, the FSA takes the action set

out above. The prohibition order takes effect from 20 July 2011.

2.
REASONS FOR THE ACTION

2.1.
While at Best Advice, Mr Moss was approved by the FSA to perform the

controlled functions of CF1 (Director), CF10 (Compliance Oversight) and

CF11 (Money Laundering Reporting) from 12 January 2005 onwards. Mr

Moss was also approved to perform the controlled functions of CF8

(Apportionment and Oversight) from 12 January 2005 to 31 March 2009 and

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of CF21 (Investment Adviser) from 12 January 2005 to 1 December 2005.

2.2.
On the basis of the facts and matters described below, the FSA sanctions Mr

Moss for breaches of Statement of Principle 7 at Best Advice during the

relevant period.

2.3.
In summary, the FSA has concluded that Mr Moss failed to take reasonable

steps to ensure that the business of Best Advice, for which he was responsible

in his controlled functions, complied with the relevant requirements and

standards of the regulatory system, in breach of Statement of Principle 7, by

failing to:

(a)
ensure that Best Advice took reasonable care to give its customers

suitable advice, including, but not limited to, when recommending

investment in Unregulated Collective Investment Scheme (“UCIS”)

products;

(b)
ensure that the suitability of the advice given by Best Advice was

adequately demonstrated in customer files;

(c)
ensure that suitability letters sent by Best Advice were clear, fair and

not misleading;

(d)
ensure that advice given to customers of Best Advice in their personal

capacity did not relate to funds which those customers were holding in

trust for other entities;

(e)
implement internal compliance procedures which adequately ensured

that UCIS products were properly identified and promoted in

accordance with the relevant regulations;

(f)
inform himself about, and demonstrate an understanding of, the

regulatory requirements relating to the promotion of UCIS’ and, in

particular, the statutory restriction on the promotion of UCIS’ in

section 238 of the Act (“the section 238 restriction”) and the

exemptions to that restriction; and

(g)
ensure that Best Advice had regard to the section 238 restriction and

any relevant exemptions to it before promoting UCIS’ to its customers.

2.4.
The FSA considers that Mr Moss’s misconduct is serious because Best Advice

promoted or advised at least 22 customers to invest a significant proportion of

their investment in UCIS’, through a number of investment bonds, without

proper regard to the section 238 restriction or the suitability of that advice

generally. Mr Moss’s failings therefore exposed customers to a risk of

receiving unsuitable advice.

2.5.
The FSA has taken into account the following circumstances which have

served to mitigate the seriousness of Mr Moss’s misconduct:

(1)
the FSA does not consider that Mr Moss deliberately ignored or sought

to circumvent the statutory restriction on the promotion of UCIS’ in

section 238 of the Act;

(2)
the sale of regulated investment products represented a small

proportion of the total business of the firm during the relevant period;

and

(3)
Mr Moss has co-operated with the FSA’s investigation and accepted

the failings set out in this Final Notice.

2.6.
The FSA has concluded that Mr Moss’s failings while performing controlled

functions as an approved person at Best Advice warrant a public censure. The

FSA therefore issues a statement of Moss’s misconduct. Were it not for Mr

Moss having provided evidence of financial hardship, the FSA would have

imposed a financial penalty of £20,000.

2.7.
By virtue of the failings described above, the FSA has also concluded that Mr

Moss has failed to meet minimum regulatory standards in terms of competence

and capability and that Mr Moss is not fit and proper to perform any

significant influence function in relation to any regulated activity carried on by

any authorised person, exempt person or exempt professional firm.

Accordingly, the FSA imposes the prohibition order on Mr Moss.

2.8.
This action supports the FSA’s regulatory objectives of maintaining

confidence in the financial system and the protection of consumers. All

customers who may have been put at risk of receiving unsuitable advice have

been contacted and encouraged to seek independent advice. As a result of Best

Advice’s liquidation, any complaints that may arise against Best Advice will

be assessed by the Financial Services Compensation Scheme.

3.
RELEVANT STATUTORY AND REGULATORY PROVISIONS

3.1.
The relevant statutory provisions and regulatory requirements are set out at

Annex A and B to this Final Notice.

4.
FACTS AND MATTERS RELIED ON

4.1.
Best Advice was an independent financial advisory firm based in Surrey. With

effect from 12 January 2005, Best Advice was authorised by the FSA to carry

on the following regulated activities:

(1)
advising on investments (excluding pension transfers and opt

outs);

(2)
advising on regulated mortgage contracts;

(3)
agreeing to carry on a regulated activity;

(4)
arranging (bringing about) deals in investments;

(5)
arranging (bringing about) regulated mortgage contracts;

(6)
making arrangements with a view to regulated mortgage

contracts; and

(7)
making arrangements with a view to transactions in

investments.

4.2.
On 12 August 2009, Best Advice entered into liquidation.

4.3.
The FSA visited Best Advice in February and March 2009. During these

visits, and as a result of correspondence with Best Advice, it became apparent

that Best Advice might have breached a number of the FSA’s Principles for

Businesses and that Mr Moss might have breached a number of the Statements

of Principle. As a result of these concerns, the FSA appointed investigators on

9 July 2009 to conduct an investigation into Mr Moss’s conduct.

4.4.
Following the investigation, the FSA has concluded that Mr Moss’s conduct

fell below the standards expected of an approved individual, for the reasons set

out below.

Suitability of advice given by Best Advice

4.5.
Mr Moss failed to ensure that advice given by Best Advice was suitable for

customers by failing to implement and maintain adequate systems and controls

to ensure the suitability of advice given to customers by Best Advice.

4.6.
In all of the 22 cases reviewed, the Confidential Financial Review stated that

the customer had requested an investment review. However, Best Advice

failed in every one of these cases to demonstrate that such a review was

conducted, and recommended alternative investments without giving due

consideration to whether the customer’s existing investments actually already

achieved their objectives.

4.7.
In all of the 22 cases reviewed, the investment recommended for the customer

by Best Advice was an extremely expensive one, with no apparent added

value. Recommendations were made by Best Advice which resulted in a

double layer of commission being charged on a significant proportion of the

investments made. There was also an insufficient analysis of the costs and

charges incurred on the recommended investments to allow customers to

compare these to their existing investments. Given the advanced age of several

of the customers, and their stated investment needs, it would have taken some

considerable time for upfront costs to be recovered, if indeed they could have

been, and Best Advice failed in each case to communicate this adequately to

customers.

4.8.
In all of the 22 cases reviewed, the suitability letters followed standard

7

wording in each case and were not sufficiently detailed, bearing in mind the

complex nature of the advice given. In addition, there was insufficient

information on the customer file to establish why the advice was given.

4.9.
In two of the cases reviewed, Best Advice failed to identify that they were

advising customers in relation to funds which were not owned by those

customers, but instead held in trust by them for other individuals or by

companies which they control. Where money is held by individuals as trustees,

any investment decision must be made on behalf of the beneficiaries of that

trust as opposed to being made on behalf of the trustees in their own personal

capacity.

4.10. The FSA identified other serious failings in relation to advice given, including

making statements without providing justification. For example, throughout

the reviewed files, tax efficiency has been mentioned without a sufficient

explanation as to why a particular course of action is tax efficient. In addition,

the files reviewed do not provide sufficient detail to explain why products that

are often cheaper than those recommended have been ignored.

Promotion of UCIS

4.11. UCIS is defined in the glossary to the FSA Handbook of rules and guidance

(the “FSA Handbook”) as “a collective investment scheme which is not a

regulated collective investment scheme.” Unless a collective investment

scheme (“CIS”) falls within the narrow definition of a recognised CIS, an

authorised unit trust or a scheme constituted by an open ended investment

company, it will be a UCIS. A UCIS does not carry the same level of

regulatory oversight as a CIS but it is still subject to regulation, most notably

around the extent to which and the persons to whom it may be marketed.

4.12. The relevant regulatory provisions relating to UCIS’ are set out in Annex B to

this Final Notice. In summary, section 238 of the Act precludes the promotion

of UCIS’ by an authorised person, except in certain circumstances. There are a

number of exemptions to the section 238 restriction which an authorised firm

could rely on to promote UCIS’ to its retail customers.

4.13. Specifically, in order to promote UCIS’ to retail customers, the customers

must be categorised in accordance with either the Financial Services and

Markets Act 2000 (Promotion of collective investment schemes) (Exemptions)

Order 2001 (“the PCIS Order”), or COBS 4.12 in the FSA Handbook, which

was preceded by COB 3.11.2.

4.14. UCIS’ are often characterised by high levels of volatility and illiquidity which

can in turn import a higher degree of risk for customers. Further, as UCIS’ fall

outside the regulatory regime, customers who invest in a UCIS may have

limited recourse to the Financial Ombudsman Service (the “FOS”) and the

Financial Services Compensation Scheme (the “FSCS”).

4.15. For these reasons there is a restriction on the categories of investor to which

UCIS’ can be promoted and a failure to adhere to the regulatory provisions in

relation to the promotion of UCIS’ leads to a risk that investors could receive

unsuitable advice.

4.16. In all of the cases reviewed, the customer was advised to invest in UCIS’

without any documentation on file to demonstrate that the section 238

restriction had been considered and that an appropriate exemption had been

applied.

4.17. The FSA considers that the failings identified above are demonstrated by the

following three customer files.

Mrs A

4.18. Mrs A requested that Best Advice conduct a review of her investment

portfolio and it was agreed that Best Advice would also assess her needs in

relation to inheritance tax. Mrs A was aged 87 at the time the advice was

given. Best Advice recommended encashment of a number of her existing

investments, and reinvestment in several UCIS’ through an offshore

investment bond. Mrs A’s inheritance tax requirements were intended to be

met by a discounted gift trust (“DGT”) in which the investment bond was to

be placed. The FSA considers that Best Advice failed in the following respects

when giving this advice to Mrs A:

(1)
there is no evidence on file that Best Advice conducted an assessment

of Mrs A’s existing investments before making its recommendation,

despite her specific request that it review her investment portfolio;

(2)
Mrs A’s attitude to risk was inadequately assessed by Best Advice,

with insufficient information on file to establish conclusively Mrs A’s

attitude to risk and why her attitude to risk had changed from being

relatively cautious to more adventurous as she got older. In addition,

there is no evidence on file that Best Advice had sought clarification or

elaboration regarding Mrs A’s expressed preference for certain types

of investment, or considered whether those investment types were

actually suitable for her;

(3)
Best Advice recommended that Mrs A encash her existing investments

with a view to reinvestment using a DGT to meet her inheritance tax

planning requirements, before a decision had been made by the product

provider to underwrite Mrs A in relation to that DGT. In making this

recommendation, the information recorded by Best Advice as to Mrs

A’s health was contradictory. Mrs A’s medical problems were detailed

in one section of the Confidential Financial Review, even though

another section recorded that she was in good health;

(4)
the provider eventually decided that it would not underwrite Mrs A and

the application for the DGT was rejected. Best Advice therefore

recommended that Mrs A encash eight of her existing investments to

reinvest in a product recommended by it, without having ensured that

the recommended product would be able to meets Mrs A’s

requirements for inheritance tax planning;

(5)
even if the DGT had been underwritten, the commission payable to

Best Advice in respect of the investment would have been sufficiently

high as to negate the inheritance tax benefit which Best Advice had

stated was the basis for its recommendation to Mrs A;

(6)
Best Advice recommended a number of UCIS’ to Mrs A and when the

recommended transactions had been undertaken, more than 80% of

Mrs A’s funds were invested in UCIS’. There is no evidence on file to

demonstrate that the section 238 restriction on the promotion of UCIS’

was considered by Best Advice. There is also no evidence of any

explanation of the nature of these investments or the risks associated

with them;

(7)
Best Advice recorded conflicting information on Mrs A’s customer

file. Income and net worth figures recorded by Best Advice on the

Confidential Financial Review for Mrs A were inconsistent with

figures recorded by Best Advice on the disclosure mandate. For

example, Mrs A’s net worth was recorded as £895,000 on the

Confidential Financial Review dated 9 April 2008, but as £2,185,000

on the Disclosure Mandate dated 27 June 2008, - a discrepancy of

£1,290,000;

(8)
the suitability letter was sent by Best Advice to Mrs A after her

existing investments had been enchased and before a decision as to

underwriting in relation to the DGT had been made by the provider;

and

(9)
the costs and charges of the recommended transactions were in excess

of £65,000. Taking into account Mrs A’s age at the time the

investments were made, it is unlikely that this cost would ever be

recouped.

Mr and Mrs B

4.19. In January 2007, Mr and Mrs B were advised to encash five existing

investments and to reinvest the proceeds into a Collective Redemption Bond

(“CRB”) with a company in the Isle of Man. The FSA considers that Best

Advice failed in the following respects when giving this advice to Mr and Mrs

(1)
Mr and Mrs B requested that Best Advice conduct a review of their

investment portfolio prior to the advice. There is no evidence on file

that Best Advice conducted an assessment of Mr and Mrs B’s existing

investments before making its recommendation, despite their specific

request that it do so. It is therefore not clear from Mr and Mrs B’s

customer file how Best Advice concluded that Mr and Mrs B’s existing

investments were unsuitable;

(2)
Best Advice failed to explain adequately in its suitability letter, and

there is insufficient information on the customer file to assess, whether

the series of recommended transactions were necessary and offered

any benefit to Mr and Mrs B;

(3)
Best Advice failed to make clear to Mr and Mrs B the costs involved in

switching from their existing investments into a new one. The table of

costs and charges provided to Mr and Mrs B by Best Advice within the

suitability letter omitted to include certain costs. Further, no analysis

was set out in the suitability letter to demonstrate to Mr and Mrs B the

performance required of the new investment in order to achieve the

same level of return as their existing investments;

(4)
Best Advice recommended UCIS funds to Mr and Mrs B, and when

the recommended transactions had been undertaken, 70% of the

amount invested in the CRB was invested in UCIS’. There is no

evidence on file to demonstrate that the section 238 restriction on the

promotion of UCIS’ was considered by Best Advice; and

(5)
there was no evidence on file to demonstrate that Mr and Mrs B

possessed sufficient knowledge or experience to understand the nature

of the UCIS’ recommended to them, and the associated risks.

Mrs C

4.20. In October 2007, Mrs C was advised to encash an existing investment and

invest the proceeds in an offshore bond. The FSA considers that Best Advice

failed in the following respects when giving this advice to Mrs C:

(1)
Mrs C requested that Best Advice conduct a review of her investment

portfolio in September 2007. There is no evidence on file that Best

Advice conducted an adequate assessment of Mrs C’s previous

investment before making its recommendation, despite her specific

request that it do so. Consequently, Best Advice recommended that

Mrs C encash her existing investments to reinvest in another product

without being able to demonstrate that her existing investments were

actually unsuitable for her;

(2)
Best Advice assessed Mrs C’s attitude to risk as significantly higher in

October 2007, when Mrs C was 75, than it had been in 2004.

Insufficient information was recorded on Mrs C’s file to demonstrate

the reason for this increase in her attitude to risk;

(3)
Best Advice recommended that Mrs C invest in UCIS funds, and once

the recommended transactions had been undertaken, 80% of the funds

invested were invested in UCIS’. There is no evidence on file to

demonstrate that the section 238 restriction on the promotion of UCIS’

was considered by Best Advice. In addition, there was no evidence on

file to demonstrate that Mrs C possessed sufficient knowledge or

experience to understand the complexity of the product recommended

to her; and

(4)
the suitability letter sent by Best Advice to Mrs C was dated after her

existing investments had been encashed. Furthermore, Best Advice

failed to set out adequately the costs and charges involved in the

recommended investment.

Conduct in issue

4.21. A description of Best Advice’s conduct which fell short of the required

regulatory standards is set out in paragraphs 4.5 to 4.20. The FSA considers

that there were serious weaknesses in the systems and controls in place at Best

Advice which should have ensured that customers were not exposed to the risk

of receiving unsuitable advice. Additionally, the FSA has identified at least 22

customers who were advised by Best Advice to invest in one UCIS or more,

but found no evidence to demonstrate that Best Advice had correctly applied

the relevant exemptions before promoting UCIS’ to its customers, in

contravention of the section 238 restriction.

4.22. During the course of the investigation, Mr Moss admitted that he did not have

sufficient knowledge of the statutory and regulatory restrictions relating to

UCIS’. Specifically, Mr Moss acknowledged that he did not have an adequate

understanding of the general prohibition imposed by section 238 and the

applicable exemptions required when customers were advised to invest in

UCIS’.

4.23. Mr Moss did not identify the serious weaknesses in Best Advice’s systems and

controls for ensuring that suitable advice was provided when performing his

compliance oversight function, including the monitoring of customer files.

Internal compliance reviews conducted at Best Advice failed to identify that

customers were invested in UCIS’. As a result, no consideration was given to

whether an appropriate exemption to the section 238 restriction had been

applied.

4.24. As a result of Mr Moss’s failure to identify systems and controls weaknesses

at Best Advice, and his lack of knowledge of the statutory and regulatory

restrictions on the promotion of UCIS’, Best Advice may have exposed its

customers to the risk of receiving unsuitable investment advice.


5.
ANALYSIS OF THE BREACHES

5.1.
As a result of the facts and matters set out in paragraphs 4.5 to 4.20 above, the

FSA considers that Mr Moss has breached Statement of Principle 7 by failing

to take reasonable steps to ensure that Best Advice complied with the relevant

requirements and standards of the regulatory system in relation to the

investment advice it was giving to customers. Where customers had invested

in a UCIS, the UCIS investment represented a significant proportion of their

overall portfolio. Additionally, advice was given to customers without due

consideration having been given to the age and attitude to risk of those

customers, such that they were at risk of receiving unsuitable advice. As such,

the FSA considers that Mr Moss is not a fit and proper person to carry out any

significant influence functions in relation to any regulated activity carried on

by any authorised or exempt person, or exempt professional firm.

6.
ANALYSIS OF THE SANCTIONS

Public censure

6.1.
The FSA’s policy in relation to the issue of public censures that applied during

the majority of the relevant period was set out in Chapter 6 of the Decision

Procedures and Penalties Manual (“DEPP”). DEPP forms part of the FSA

Handbook. The relevant sections of DEPP are set out in more detail in Annex

A to this Final Notice. In addition, the FSA has had regard to the

corresponding provisions of Chapter 13 of the Enforcement Manual in force

during part of the relevant period.

6.2.
In determining whether a financial penalty or a public censure is appropriate

the FSA is required to consider all the relevant circumstances of a case.

6.3.
The factors in this case would ordinarily merit the imposition of a financial

penalty. However, the FSA considers that, in accordance with DEPP

6.4.2(8)G, there are exceptional circumstances under which a person’s

conduct, that would ordinarily attract a financial penalty, could be dealt with

by way of a public censure. In this case, there is evidence that Mr Moss has

insufficient resources to pay a financial penalty. Mr Moss’s breaches are such

that the FSA would have otherwise imposed a financial penalty of £20,000 on

him.

6.4.
The principal purpose of imposing a public censure is to promote high

standards of regulatory conduct by deterring persons who have committed

breaches from committing further breaches, helping to deter other persons

from committing similar breaches and demonstrating generally the benefits of

compliant behaviour. A public censure is a tool that the FSA may employ to

help it achieve its regulatory objectives.

6.5.
The FSA considers that a public censure, rather than a financial penalty, is

appropriate.

6.6.
DEPP 6.4.2G sets out a list of factors that may be of relevance in determining

whether it is appropriate to issue a public censure rather than impose a

financial penalty. The factors are not exhaustive and the FSA will consider all

the relevant circumstances of the case. The FSA considers that the following

factors are particularly relevant in this case.

Deterrence (DEPP 6.4.2G(1))

6.7.
In determining whether to publish a statement of Mr Moss’s misconduct, the

FSA has had regard to the need to ensure those who are approved persons

must act with the appropriate levels of competence and capability and in

accordance with regulatory requirements and standards. The FSA considers

that a public censure should be imposed to demonstrate to Mr Moss and others

the seriousness with which the FSA regards his behaviour.

The seriousness of the breach (DEPP 6.4.2G(3))

6.8.
In determining the appropriate sanction, the FSA has had regard to the

seriousness of the breaches, including the nature of the requirements breached

and the duration of the breach.

6.9.
The purpose of the section 238 restriction is to protect customers from the

risks associated with potentially high risk, speculative and sophisticated

investments which they may not properly understand. As a result of Mr

Moss’s failings, Best Advice exposed customers to a risk of investing in UCIS

for which they may not have adequate knowledge or experience.

Conduct following the breach (DEPP 6.4.2G(5))

6.10. Mr Moss has co-operated with the FSA’s investigation.

Previous action taken by the FSA (DEPP 6.4.2G(7))

6.11. In determining the appropriate sanction, the FSA has taken into account

sanctions imposed by the FSA on other approved persons for similar

behaviour. This was considered alongside the deterrent purpose for which the

FSA imposes sanctions.

The financial impact on the person concerned (DEPP 6.4.2G(8))

6.12. Mr Moss has breached Statement of Principle 7. The breaches are serious and

the FSA would have imposed a financial penalty of £20,000 on him as a result.

However, Mr Moss has provided verifiable evidence that imposing such a

financial penalty would cause him serious financial hardship. Under these

exceptional circumstances, the FSA has decided to publish a statement of his

misconduct and censure him publicly instead.

6.13. The FSA has had regard to the guidance in Chapter 9 of EG in proposing that

Mr Moss be prohibited from performing any significant influence function in

relation to any regulated activity carried on by any authorised person, exempt

person or exempt professional firm because he is not currently a fit and proper

person for such a role in terms of his competence and capability. The FSA

would be minded to revoke the prohibition order, on Mr Moss’s application, in

the event that Mr Moss is able to demonstrate satisfactorily that his

shortcomings have been remedied. The relevant provisions of EG are set out in

Annex A to this Final Notice.

6.14. Given the nature and seriousness of the failures outlined above, the FSA has

concluded that Mr Moss is not fit and proper to perform any significant

influence function in relation to any regulated activity carried on by any

authorised person, exempt person or exempt professional firm.

6.15. In particular, Mr Moss has demonstrated a fundamental lack of understanding

of the restrictions and risks associated with promoting UCIS to retail

customers, and failed to ensure that adequate systems and controls were in

place such that customers were exposed to the risk of receiving unsuitable

advice generally. In the interests of consumer protection, the FSA deems it

appropriate to impose a prohibition order on him in the terms set out above.

7.
CONCLUSION

7.1.
On the basis of the facts and matters described above, the FSA concludes that

Mr Moss’s conduct fell short of the minimum regulatory standards required of

an approved person and that he has breached Statement of Principle 7.

7.2.
The FSA, having regard to all the circumstances, therefore considers that it is

appropriate and proportionate to issue a public censure of Mr Moss’s

misconduct and to make the prohibition order against him.

8.
DECISION MAKERS

8.1.
The decision which gave rise to the obligation to give this notice was made on

behalf of the FSA by the Settlement Decision Makers.

9.
IMPORTANT

9.1.
This Final Notice is given to Mr Moss in accordance with section 390 of the

Act.

9.2.
Sections 391(4), 391(6) and 391(7) of the Act apply to the publication of

information about the matter to which this notice relates. Under those

provisions, the FSA must publish such information about the matter to which

this notice relates as the FSA considers appropriate. The information may be

published in such manner as the FSA considers appropriate. However, the

FSA may not publish information if such publication would, in the opinion of

the FSA, be unfair to Mr Moss or prejudicial to the interests of consumers.

9.3.
The FSA intends to publish such information about the matter to which this

Final Notice relates as it considers appropriate.

9.4.
For more information concerning this matter generally, Mr Moss should

contact Rachel West of the Enforcement and Financial Crime Division at the

FSA (direct line: 020 7066 0142/ fax: 020 7066 0143).

…………………………………………………….
Tom Spender
Head of Department
FSA Enforcement and Financial Crime Division



ANNEX A

STATUTORY PROVISIONS, REGULATORY GUIDANCE AND POLICY

1.
STATUTORY PROVISIONS

1.1.
The FSA’s regulatory objectives are set out in section 2(2) of the Act and

include maintaining confidence in the financial system and the protection of

consumers.

1.2.
Section 56 of the Act provides that the FSA may make a prohibition order if it

appears to the FSA that an individual is not a fit and proper person to perform

functions in relation to a regulated activity carried on by an authorised person.

Such an order may relate to a specific regulated activity, an activity falling

within a specified description or all regulated activities.

1.3.
Section 66 of the Act provides that the FSA may take action to impose a

penalty on an individual of such amount as it considers appropriate or publish

a statement of his misconduct where it appears to the FSA that the individual

is guilty of misconduct and it is satisfied that it is appropriate in all the

circumstances to take action. Misconduct includes failure, while an approved

person, to comply with a statement of principle issued under section 64 of the

Act or to have been knowingly concerned in a contravention by the relevant

authorised person of a requirement imposed on that authorised person by or

under the Act.

2.
REGULATORY PROVISIONS

2.1.
In exercising its power to issue a public censure, the FSA must have regard to

relevant provisions in the FSA Handbook of rules and guidance (“the FSA

Handbook”).

2.2.
The FSA’s Enforcement Guide (“EG”) and Decision Procedure and Penalties

Manual (“DEPP”) came into effect on 28 August 2007. Although the

references in this Final Notice are to DEPP and EG, the FSA has also had

regard to the appropriate provisions of the FSA’s Enforcement Manual, which

preceded DEPP and EG and applied during part of the relevant period.

2.3.
The guidance and policy that the FSA considers relevant to this case is set out

below.

Statements of Principle and the Code of Practice for Approved Persons

(“APER”)

2.4.
APER sets out the Statements of Principle as they relate to approved persons

and descriptions of conduct which, in the opinion of the FSA, do not comply

with a Statement of Principle. It further describes factors which, in the

opinion of the FSA, are to be taken into account in determining whether or not

an approved person’s conduct complies with a Statement of Principle.

2.5.
APER 3.1.3G states that when establishing compliance with or a breach of a

Statement of Principle, account will be taken of the context in which a course

of conduct was undertaken, including the precise circumstances of the

individual case, the characteristics of the particular controlled function and the

behaviour to be expected in that function.

2.6.
APER 3.1.4G provides that an approved person will only be in breach of a

Statement of Principle where he is personally culpable, that is in a situation

where his conduct was deliberate or where his standard of conduct was below

that which would be reasonable in all the circumstances.

2.7.
APER 3.1.6G provides that APER (and in particular the specific examples of

behaviour which may be in breach of a generic description of conduct in the

code) is not exhaustive of the kind of conduct that may contravene the

2.8.
The Statement of Principle relevant to this matter is:

(1)
Statement of Principle 7 which provides that an approved person

performing a significant influence function must take reasonable steps

to ensure that the business of the firm for which he is responsible in his

controlled function complies with the relevant requirements and

standards of the regulatory system.

2.9.
APER 3.1.8G states that in applying Statements of Principle 5 to 7, the nature,

scale and complexity of the business under management and the role and

responsibility of the individual performing a significant influence function

within the firm will be relevant in assessing whether an approved person's

conduct was reasonable.

2.10. APER 3.3.1E states that in determining whether or not the conduct of an

approved person performing a significant influence function complies with

Statements of Principle 5 to 7, the following are factors which, in the opinion

of the FSA, are to be taken into account:

(1)
whether he exercised reasonable care when considering the information

available to him;

(2)
whether he reached a reasonable conclusion which he acted on;

(3)
the nature, scale and complexity of the firm’s business;

(4)
his role and responsibility as an approved person performing a

significant influence function; and

(5)
the knowledge he had, or should have had, of regulatory concerns, if

any, arising in the business under his control.

2.11. APER 4.7 lists types of conduct which, in the opinion of the FSA, do not

comply with Statement of Principle 7.

2.12. APER 4.7.3E states that failing to take reasonable steps to implement (either

personally or through a compliance department or other departments) adequate

and appropriate systems of control to comply with the relevant requirements

and standards of the regulatory system in respect of its regulated activities is

conduct that does not comply with Statement of Principle 7.

2.13. APER 4.7.4E states that failing to take reasonable steps to monitor (either

personally or through a compliance department or other departments)

compliance with the relevant requirements and standards of the regulated

system in respect of its regulated activities is conduct that does not comply

with Statement of Principle 7.

2.14. APER 4.7.7E provides that failing to take steps to ensure that procedures and

systems of control are reviewed and, if appropriate, improved, following the

identification of significant breaches (whether suspected or actual) of the

relevant requirements and standards of the regulatory system relating to its

regulated activities is conduct that does not comply with Statement of

Principle 7.

Enforcement Guide (“EG”)

2.15. The FSA’s approach to exercising its power to make a prohibition order under

sections 56 of the Act is set out in Chapter 9 of EG.

2.16. EG 9.1 states that the FSA’s power under section 56 of the Act to prohibit

individuals who are not fit and proper from carrying out controlled functions

in relation to regulated activities helps the FSA to work towards achieving its

regulatory objectives. The FSA may exercise this power to make a prohibition

order where it considers that, to achieve any of those objectives, it is

appropriate either to prevent an individual from performing any functions in

relation to regulated activities, or to restrict the functions which he may

perform.

2.17. EG 9.4 sets out the general scope of the FSA’s power in this respect. The FSA

has the power to make a range of prohibition orders depending on the

circumstances of each case and the range of regulated activities to which the

individual’s lack of fitness and propriety is relevant.

2.18. EG 9.5 provides that the scope of the prohibition order will depend on the

range of functions which the individual concerned performs in relation to

regulated activities, the reasons why he is not fit and proper and the severity of

risk which he poses to consumers or the market generally.

2.19. In circumstances where the FSA has concerns about the fitness and propriety

of an approved person, EG 9.8 to 9.14 provides guidance. In particular, EG 9.8

states that the FSA may consider whether it should prohibit that person from

performing functions in relation to regulated activities, withdraw that person’s

approval or both. In deciding whether to withdraw approval and/or make a

prohibition order, the FSA will consider whether its regulatory objectives can

be achieved adequately by imposing disciplinary sanctions.

2.20. EG 9.9 provides that when deciding whether to make a prohibition order

against an approved person and/or withdraw approval, the FSA will consider

all the relevant circumstances of the case. These may include, but are not

limited to, the following:

(1)
whether the individual is fit and proper to perform the functions in

relation to regulated activities. The criteria for assessing the fitness and

propriety of approved persons in terms of competence and capability is

set out in FIT 2.2;

(2)
whether, and to what extent, the approved person has failed to comply

with the Statements of Principle issued by the FSA with respect to the

conduct of approved persons, or been knowingly involved in a

contravention by the relevant firm of a requirement imposed on the

firm by or under the Act (including the Principles and other rules (EG

9.9(3)(a) and (b));

(3)
the relevance and materiality of any matters indicating unfitness (EG

9.9(5));

(4)
the length of time since the occurrence of any matters indicating

unfitness (EG 9.9(6));

(5)
the particular controlled function the approved person is (or was)

performing, the nature and activities of the firm concerned and the

markets in which he operates (EG 9.9(7)); and

(6)
the severity of the risk which the individual poses to consumers and to

confidence in the financial system (EG 9.9(8)).

2.21. EG 9.12 provides a number of examples of types of behaviour which have

previously resulted in the FSA deciding to issue a prohibition order or

withdraw the approval of an approved person. The examples include serious

lack of competence.

2.22. EG 9.23 provides that in appropriate cases the FSA may take other action

against an individual in addition to making a prohibition order and/or

withdrawing its approval, including the use of its power to issue a public

censure.

Decision Procedure and Penalties Manual (“DEPP”)

2.23. Guidance on the imposition and amount of penalties is set out in Chapter 6 of

DEPP. Changes to DEPP 6 were introduced on 6 March 2010. The FSA has

had regard to the appropriate provisions of DEPP that applied during the

relevant period.

2.24. DEPP 6.1.2G provides that the principal purpose of imposing a financial

penalty or issuing a public censure is to promote high standards of regulatory

and/or market conduct by deterring persons who have committed breaches

from committing further breaches, helping to deter other persons from

committing similar breaches, and demonstrating generally the benefits of

compliant behaviour. Financial penalties are therefore tools that the FSA may

employ to help it to achieve its regulatory objectives.

2.25. DEPP 6.4.1G(1) provides that the FSA will consider all the relevant

circumstances of a case when deciding whether to impose a penalty or issue a

public censure.

2.26. DEPP 6.4.2G sets out a non-exhaustive list of factors that may be relevant to

determining whether it is appropriate to issue a public censure. The following

factors are relevant to this case:

Deterrence: DEPP 6.4.2G(1)

2.27. When determining whether to issue a public censure, the FSA will have regard

to the principal purpose for which it imposes sanctions, namely to promote

high standards of regulatory and/or market conduct by deterring persons who

have committed breaches from committing further breaches and helping to

deter other persons from committing similar breaches, as well as

demonstrating generally the benefits of compliant business.

The seriousness of the breach in question: DEPP 6.4.2G(3)

2.28. The FSA will consider the seriousness of the breach in relation to the nature of

the rule, requirement or provision breached, which can include considerations

such as the duration and frequency of the breach, whether the breach revealed

serious or systemic weaknesses in the person’s procedures or of the

management systems or internal controls relating to all or part of a person’s

business and the loss or risk of loss caused to consumers, investors or other

market users.

Conduct following the breach: DEPP 6.4.2G(5)

2.29. The FSA may take into account the degree of co-operation the person showed

during the investigation of the breach by the FSA.

Other action taken by the FSA: DEPP 6.4.2G(7)

2.30. The FSA seeks to apply a consistent approach to determining the appropriate

level of penalty. The FSA may take into account previous decisions made in

relation to similar misconduct.

The financial impact on the person concerned: DEPP 6.4.2G(8)

2.31. In exceptional circumstances, if the person concerned has inadequate means to

pay the level of financial penalty which their breaches would otherwise attract

this may be a factor in favour of a lower penalty or a public statement.

Examples of circumstances where this might be appropriate include whether

the person concerned has provided verifiable evidence that they would suffer

serious financial hardship if the FSA imposed a financial penalty.

ANNEX B

CONDUCT OF BUSINESS PROVISIONS

2.32. Section 238(1) of the Act provides that an authorised person must not

communicate an invitation or inducement to participate in a collective

investment scheme. Section 238(4) provides that certain authorised schemes

are exempted from this prohibition.

2.33. UCIS is defined in the glossary to the FSA Handbook of Rules and Guidance

as “a collective investment scheme which is not a regulated collective

investment scheme”. Unless a collective investment scheme (“CIS”) falls

within the narrow definition of a regulated CIS1 , it will be a UCIS.

2.34. The PCIS Order and COBS 4.12 provide for circumstances when UCIS may

be promoted to customers without advisers falling foul of section 238 of the

Act. There are a number of exemptions that may be applied to the section 238

restriction. For example, under the PCIS Order, UCIS’ may be promoted to

persons defined as “certified high net worth investors” and “sophisticated

investors”.

2.35. Section 4.12 of COBS defines eight categories of persons to whom an

authorised person may promote UCIS’. These include:

(1)
Category 2: a person for whom a firm has taken reasonable steps to

ensure that investment in a collective investment scheme is suitable

and who is an “established” or “newly accepted” client of the firm; and

(2)
Category 8: a person to whom the firm has undertaken an adequate

assessment of expertise, experience and knowledge and to whom the

firm has provided certain written warnings.

1 A CIS is defined in the Handbook Glossary as follows: (a) an investment company with variable
capital; or (b) an authorised unit trust scheme: or (c) a recognised scheme, (i.e. a CIS constituted
overseas and formally recognised under sections 264, 270 or 272 of the Financial Services and Markets
Act 2000); whether or not the units are held within an ISA or personal pension scheme.

2.36. An authorised firm must take reasonable steps to ensure that its personal

recommendations to customers are suitable in compliance with the rules in

Chapter 9 of COBS and Principle 9.

2.37. The predecessor to COBS 4.12, COB 3.11.2, requires that a firm may only

communicate an invitation or inducement to participate in an unregulated

collective investment scheme if the communication falls within COB 3 Annex

5 R.

2.38. COB 3 Annex 5 R defines seven categories of persons to whom an authorised

person may promote UCIS’.