DECISION NOTICE

Born:
06/1978

To:
Stephen Joseph Burdett
(as a third party pursuant to section 393(4) of the Act)

1.
ACTION

1.1.
For the reasons given in this Decision Notice, the Authority has decided to:

(1) impose on James Paul Goodchild a financial penalty of £47,600 pursuant to

section 66 of the Act;

This decision notice has been referred to the Upper
Tribunal to determine, in the case of the decision to
impose a disciplinary sanction: what (if any) the
appropriate action is for the Authority to take, and remit
the matter to the Authority with such directions as the
Tribunal considers appropriate; and in relation to the
prohibition order: whether to dismiss the reference or
remit it to the Authority with a direction to reconsider and
reach a decision in accordance with the findings of the
Tribunal.

Therefore, the findings outlined in this Decision Notice
reflect the FCA’s belief as to what occurred and how it
considers the behaviour of Mr Goodchild should be
characterised. The proposed action outlined in the
Decision Notice will have no effect pending the
determination of the case by the Tribunal. The Tribunal’s
decision will be made public on its website.

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

from performing any function in relation to any regulated activity carried on

by an authorised person, exempt person or exempt professional firm; and

(3) withdraw, pursuant to section 63 of the Act, the approval given to Mr

Goodchild to perform the controlled function of SMF27 (Partner) at Westbury

Private Clients LLP (“Westbury”).

2.
SUMMARY OF REASONS

2.1.
Between 7 October 2015 and 5 August 2016 (the “Relevant Period”) Mr

Goodchild breached Statement of Principle 1 (Integrity) of the Authority’s

Statements of Principle and Code of Practice for Approved Persons by acting

recklessly when performing his controlled functions in relation to the pension

business of Westbury. Mr Goodchild recklessly invested 207 pension funds in

unsuitable, high risk investments and exposed pension holders to a significant risk

of loss.

2.2.
During the Relevant Period, Mr Goodchild held the controlled functions of CF4

(Partner – now SMF27) and CF30 (Customer) at Westbury. He was the Chief

Investment Officer and had ultimate responsibility for deciding on Westbury’s

business activity and investment decisions. A small financial advisory firm called

Synergy Wealth Limited (“Synergy”) advised retail pension holders on whether

to switch their pensions into a scheme called the Westbury SIPP, which was

created and managed by Mr Goodchild. Mr Goodchild used self-invested personal

pensions (“SIPPs”) to invest retail pension holders’ funds based on one of three

model portfolios of assets which he created and managed (“the Model

Portfolios”). The Model Portfolios exposed the majority of the pension holders

whom Synergy advised to switch into them to an unacceptable risk of financial

loss. Mr Goodchild was aware of, but unreasonably ignored, this obvious risk.

2.3.
Mr Goodchild’s failings in his role resulted in Westbury investing 39% of pension

holders’ aggregate funds in high-risk investments relating to a single offshore

property development business (the “Developer” and the “Developer

Investments”). His actions exposed pension holders to a significant risk of loss.

For 207 (89%) of the pension funds switched, it was obvious that the Model

Portfolios were unacceptably risky for the pension holders. The Financial Services

Compensation Scheme (“FSCS”) has to date paid over £1.4m in compensation to

over 100 pension holders who invested in the Westbury SIPP.

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2.4.
Pensions are a traditional way of saving and investing money in a tax-efficient

way for retirement. The value of someone’s pension can have a significant impact

on their quality of life during retirement and, in some circumstances, may affect

whether they can afford to retire at all. Pension holders place a significant amount

of trust in the firms they rely on to manage the funds in their pensions. Where a

firm or an individual fails to act with integrity, and puts their interests above those

of pension holders, it exposes pension holders to a significant risk of loss.

2.5.
A contract between Westbury and Synergy signed by Mr Goodchild provided that

Westbury was responsible for allocating the funds of pension holders advised by

Synergy to investments managed by Westbury based on pension holders’ Risk

Profile Scores. A Risk Profile Score is a score between 1 and 10 which is intended

to represent the level of risk an investor is comfortable in taking with an

investment (i.e. appetite for risk). The contract also stated that Westbury took

“full responsibility for ensuring the investment suitability at the point of sale and

on-going is appropriate for the [Synergy pension holder] client[s]”. Westbury

therefore undertook to invest the funds of pension holders referred to it by

Synergy in investments suitable for pension holders’ Risk Profile Scores.

Westbury’s three Model Portfolios, which were the only portfolios it made available

to pension holders referred by Synergy, thus had to be suitable for persons with

the Risk Profile Scores notified by Synergy to Westbury for all pension switch

clients. Mr Goodchild personally controlled this aspect of Westbury’s business.

2.6.
However, all three Model Portfolios designed by Mr Goodchild were high risk and

unsuitable for most pension holders referred by Synergy. The Developer had

indicated to Messrs Goodchild and Burdett (one of Synergy’s directors) that the

Model Portfolios designed by Mr Goodchild should allocate pension holders’ funds

to the Developer Investments. Mr Goodchild in response designed all Model

Portfolios – even those which he designed for pension holders seeking low or

medium risk investments – to allocate 40% of pension funds to the high-risk

Developer Investments. In return for providing funding to the Developer and its

affiliates through the 40% allocation to the Developer Investments, Westbury and

Synergy benefited from marketing and client referral provided by a subsidiary of

the Developer. Mr Goodchild also received a personal loan from a company

assisting the Developer (Company A).

2.7.
The Developer Investments to which Mr Goodchild through Westbury ultimately

allocated 39% of low and medium risk pension holders’ aggregate funds (the

target allocation having been 40%) included investments which the Developer or

its affiliates themselves described as “speculative” and involving “substantial risk”

in offer documents which Mr Goodchild admitted he read.

2.8.
During a recorded telephone conference call relating to a different, although

similar, planned investment scheme, Messrs Goodchild and Burdett acknowledged

that a high allocation to the Developer Investments would make a portfolio high

risk. When asked during the call whether they would allocate 60% of pension

holders’ funds to the Developer Investments, Messrs Goodchild and Burdett did

not say that they would do so because the Developer Investments were low risk.

Instead, Mr Goodchild endorsed Mr Burdett’s view that a 60% Developer

Investment allocation could be considered only for clients who were both willing

to accept “high risk” and were “a reasonable way [from] retirement”. Further, in

an email Mr Goodchild recognised that low risk clients should have a Developer

Investment allocation below 40%. In addition, on 4 April and 28 April 2016, an

affiliate of the Administrator of the SIPP sent Mr Goodchild emails specifically

highlighting the Administrator’s concerns about 40% of pension holders’ funds

being invested in assets relating to the Developer. Yet both Messrs Goodchild and

Burdett proceeded with a 40% Developer Investment allocation model for low and

medium risk clients. This was unreasonable, ignored the obvious risk that

consumers would receive unsuitable investments and would suffer loss, and was

reckless. Based on the information that Mr Goodchild accepts he considered, and

the other documents in his possession and/or which he should have had regard

to, it should have been obvious to him as a qualified and experienced investment

manager that the Developer Investments were high risk and unsuitable for

customers with a Risk Profile Score below 8. Mr Goodchild closed his mind to the

risk that the investments were not suitable, and in so doing he acted recklessly.

2.9.
In addition, it should have been obvious to Mr Goodchild that the names he gave

to two of the Model Portfolios were misleading. The Global Cautious and Global

Balanced portfolios were both designed to allocate 40% of pension holders’ money

to the Developer Investments, which were obviously high risk in the light of the

risk warnings in documents that Mr Goodchild accepts he read. Mr Goodchild

recklessly gave these two high risk portfolios names which falsely implied that

they were suitable for pension holders seeking low or medium risk investments.

2.10.
During the Relevant Period Westbury was paid £234,099 in commission as a result

of pension switches to the Westbury SIPP. Mr Goodchild was paid over £150,000

by Westbury in the year ending August 2016.

2.11.
The Authority considers Mr Goodchild’s failings to be serious because:

(1) they related to the pension funds of a large number of pension holders;

(2) Mr Goodchild recklessly designed Model Portfolios for pension holders for

whom they were unsuitable and allocated these pension holders’ funds to

them. Mr Goodchild was an experienced investment manager. The fact that

the Model Portfolios were unsuitable for the majority of the pension holders

was obvious from information reviewed by Mr Goodchild;

(3) Mr Goodchild failed to conduct his business with integrity, and his breaches of

Principle 1 were committed recklessly, repeatedly and over an extended period

of time.

2.12.
The Authority considers that Mr Goodchild’s reckless conduct during the Relevant

Period demonstrates that he lacks integrity and is therefore not a fit and proper

person. He poses a significant risk to consumers and the integrity of the United

Kingdom financial system. Accordingly, the Authority has decided to withdraw Mr

Goodchild’s approval to perform the SMF27 (Partner) function, and to impose a

prohibition order on him, as described at paragraphs 1.1(2) and 1.1(3) of this

Notice. Further, the Authority has decided to impose a financial penalty on Mr

Goodchild in the amount of £47,600 for his breach of Statement of Principle 1.

2.13.
This action supports the Authority’s operational objectives of securing an

appropriate degree of protection for consumers and protecting and enhancing the

integrity of the UK financial system.

3.
DEFINITIONS

3.1.
The definitions below are used in this Notice:

“the Act” means the Financial Services and Markets Act 2000.

“the Adviser” means an individual who advised the pension holders referred to in

this Notice on behalf of Synergy.

“Appointed Representative” means a firm or person which conducts regulated

activities as an agent for a firm directly authorised by the Authority. The Principal

takes full responsibility for ensuring that the Appointed Representative complies

with the Authority’s rules (see section 39 of the Act).

“the Authority” means the Financial Conduct Authority, formerly the Financial

Services Authority.

“the Bonds” means corporate bonds connected with the Developer.

“Company A” means the company that introduced Mr Goodchild to companies and

individuals (including the Developer) involved in switching pension holders’ funds

to the Westbury SIPP and the Developer Investments.

“the Custodian” means the firm that held the funds under Westbury’s

management, including those of the Westbury SIPP. The Custodian also acted as

a broker for Westbury, buying and selling investments as directed by Westbury.

“DEPP” means the Decision Procedure and Penalties Manual part of the Authority’s

Handbook.

“the Developer” means an offshore property developer which created a number

of investment products as a means of funding its property development projects.

“the Developer Investments” means the three investment products related to the

Developer in which 39% of pension holders’ aggregate funds in the Westbury SIPP

were invested. They are referred to as the Bonds, the Fund and the Notes.

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“DFM” means discretionary fund manager (i.e. a firm which makes investment

decisions for a fund on behalf of third parties).

“EG” means the Enforcement Guide part of the Authority’s Handbook.

“the Fund” means an investment fund connected with the Developer.

“FIT” means the Fit and Proper test for Employees and Senior Personnel part of

the Authority’s Handbook.

“FSCS” means the Financial Services Compensation Scheme.

“Handbook” means the Authority’s Handbook of Rules and Guidance.

“the Introducer” means a firm which introduced pension holders to Synergy to

receive advice on whether to switch their pensions into the Westbury SIPP.

“the Notes” means investment notes connected with the Developer.

“a model portfolio” means a portfolio designed by a discretionary fund manager

and managed within a set of investment parameters. These parameters are then

applied to the management of each individual pension holder’s funds.

“the Model Portfolios” means the three model portfolios designed by Westbury

called Global Cautious, Global Balanced and Global Growth.

“OECD” means the Organisation for Economic Co-operation and Development.

“Pension Switch” means the movement of funds from one personal pension

scheme to another where no safeguarded benefits are involved.

“Principal” means an authorised firm which permits its Appointed Representatives

to carry on regulated activities under its permission given by the Authority under

Part 4A of the Act.

“the Relevant Period” means 7 October 2015 to 5 August 2016.

“Risk Profile Questionnaire” means Synergy’s questionnaire containing 20

questions designed to measure a pension holder’s Risk Profile Score.

“Risk Profile Score” means a score between 1 and 10 which is intended to

represent the level of risk an investor is comfortable in taking with an investment

(i.e. appetite for risk). It is based on the scoring from the Risk Profile

Questionnaire.

“SIPP” means a self-invested personal pension, which allows individuals to make

their own investment decisions from the range of investments approved by Her

Majesty’s Revenue and Customs.

“SIPP Administrator” means the company having undertaken to act as

administrator for the Westbury SIPP and includes other affiliated companies which

were part of the same group, including the SIPP trustee.

“SWUK” means Strategic Wealth UK Limited. SWUK was a financial advisory firm

and the Principal firm which set up Synergy as its Appointed Representative.

“Synergy” means Synergy Wealth Limited. Synergy was a financial advisory firm

and an Appointed Representative of SWUK.

“the Tribunal” means the Upper Tribunal (Tax and Chancery Chamber).

“Westbury” means Westbury Private Clients LLP.

“Westbury Allocation Parameters” means the range of Risk Profile Scores that

Westbury told the Authority it allocated to each Model Portfolio: 3-4 to Global

Cautious; 5- 7 to Global Balanced; and 8-9 to Global Growth.

“the Westbury SIPP” means the SIPP product to which pension holders switched

their pensions as recommended by Synergy, funds in which were invested based

on the Model Portfolios.

4.
FACTS AND MATTERS

4.1.
Westbury was a discretionary investment manager based in London. It became

directly authorised by the Authority on 1 July 2013 with permission to conduct

regulated activities, including managing investments. In the first years of its

operation, Westbury managed the assets of private professional clients. From

October 2015, Westbury’s business model changed significantly with a new focus

on carrying out discretionary fund management for the clients of financial advisers.

4.2.
Mr Goodchild was the founder and Chief Investment Officer of Westbury. He had

ultimate responsibility for deciding on Westbury’s business activity and investment

decisions. Synergy advised pension holders referred to it by a subsidiary of the

Developer on whether to switch their pensions into individual SIPPs designed and

managed by Mr Goodchild for Westbury. Mr Goodchild invested pension holders’

funds held in the Westbury SIPPs based on the Model Portfolios.

4.3.
Mr Goodchild was responsible for ensuring the investments in the Model Portfolios

matched Risk Profile Scores assigned to pension holders by Synergy and

communicated to Westbury by Synergy. The Model Portfolios were all obviously

unsuitable for most pension holders because they were all designed by Mr

Goodchild to invest 40% of pension holders’ funds in the Developer Investments.

4.4.
The FSCS has to date paid over £1.4m in compensation to over 100 pension

holders because they had received unsuitable pension switch advice from Synergy

to switch their pensions into the Westbury SIPP designed and managed by Mr

Goodchild on behalf of Westbury.

4.5.
In August 2016, following intervention by the Authority, Mr Goodchild signed

undertakings on behalf of Westbury to cease pensions business where the

beneficiary of the pension scheme was a “retail client” as defined in the Handbook.

On 15 September 2017, Westbury entered liquidation. This Notice focusses on

Mr Goodchild’s activity between October 2015 and August 2016.

Mr Goodchild’s role at Westbury

4.6.
During the Relevant Period, Mr Goodchild held the controlled functions of CF4

(Partner) and CF30 (Customer) at Westbury. Mr Goodchild was one of two

Westbury employees approved to perform the controlled function of CF4 (Partner)

and one of four Westbury employees approved to perform the controlled function

of CF30 (Customer). As of 4 June 2016, Mr Goodchild had a controlling interest

in Westbury, holding between 50% and 75% of the voting rights.

4.7.
Mr Goodchild designed, created and managed the Model Portfolios and invested

pension holders’ funds held in the Westbury SIPPs based on them. Mr Goodchild’s

role involved allocating pension holders’ funds to the appropriate Model Portfolio

and selecting investments to be included in the Model Portfolios. Mr Goodchild was

responsible for ensuring the investments in the Model Portfolios matched the Risk

Profile Scores advised by Synergy for each client. A Risk Profile Score is a score

between 1 and 10 which is intended to represent the level of risk an investor is

comfortable in taking with an investment (i.e. appetite for risk).

4.8.
Mr Goodchild was responsible for establishing Westbury’s business arrangements

with the other entities involved in the process of switching pension holders’ funds

into the Westbury SIPP, including: Synergy; the Developer; the SIPP

Administrator; and the firm which introduced pension holders to Synergy (the

Introducer).

4.9.
On 7 October 2015, Mr Goodchild signed a Memorandum of Understanding with

the SIPP Administrator on behalf of Westbury. The function of the Memorandum

of Understanding was to set out the terms of engagement between Westbury and

the SIPP Administrator regarding the creation of the Westbury SIPP. By 2

November 2015, Westbury and the SIPP Administrator had signed an agreement

to work together to create the Westbury SIPP.

4.10.
On 2 November 2015, a firm (Company A) introduced Mr Goodchild to a

representative of the Developer via email. The email from Company A to Mr

Goodchild, copying a representative of the Developer, indicated that Company A

and the Developer would like Mr Goodchild to allocate pension holders’ funds to a

particular Developer Investment. This email stated: “please meet Jamie who is

head of Buisness [sic] development for the [Developer] and is leading the launch

of there [sic] new … [F]und . … [A]s we discussed this morning of the funds that

pass to you as DFM [discretionary fund manager] from [the Developer’s] clients

we would like a % of those funds to be invested into the new … Fund based on

the clients [sic] risk profile assessment done by the IFA [Synergy]. We are looking

at switching the current regulated offering under the [Developer] model portfolios

to Westbury”.

4.11.
On 12 January 2016, Mr Goodchild signed the Terms of Business between Synergy

and Westbury, which provided that Westbury was responsible for allocating the

funds of pension holders advised by Synergy to investments managed by Westbury

based on pension holders’ Risk Profile Scores and that Westbury took “full

responsibility for ensuring the investment suitability at the point of sale and on-

going is appropriate for the [Synergy pension holder] client[s]”.

4.12.
The Introducer’s marketing of Synergy’s services and of the Westbury SIPP, and

the Introducer’s referral of pension holders directly to Synergy and indirectly to

Westbury, was conditional on Westbury’s agreement to include allocation to the

Developer Investments within its Model Portfolios, and Mr Goodchild was aware of

this.

4.13.
On 5 February 2016, Mr Burdett sent Westbury an email which stated that he had

met with the Developer that day and “they [the Developer] are ready to go with

the UK SIPP business as soon as we are in the UK. I reckon this will be in the

coming days”.

4.14.
The Authority considers that Mr Goodchild was directly involved in the business

model which Company A had introduced to him. Mr Goodchild established

Westbury’s relationships with individuals and corporate entities involved in each

stage of the process; was aware that the Introducer’s marketing of the Westbury

SIPP was conditional on allocation to the Developer Investments; and

corresponded with the Introducer and Company A to develop marketing material

for the Introducer and Westbury.

4.15.
Mr Goodchild was involved in the process of Westbury conducting due diligence on

the Developer Investments. Mr Goodchild corresponded with firms and individuals

involved in the advice process, including the Developer, and obtained material

relating to the Developer and the Developer Investments. A Westbury research

note was produced and this note was signed off by Mr Goodchild.

4.16.
Mr Goodchild and three other individuals were members of Westbury’s Investment

Committee, which met quarterly and also on an ad-hoc basis. The function of the

Investment Committee was to set the parameters within which Mr Goodchild could

trade on behalf of Westbury. In January 2016, the SIPP Administrator asked Mr

Goodchild to provide minutes of an Investment Committee meeting indicating the

committee’s approval of the inclusion of Developer Investments in the Model

Portfolios. In response, Mr Goodchild sent the SIPP Administrator minutes which

did not indicate approval by the Investment Committee but rather that further

due diligence on the Developer was to be carried out after the meeting. Mr

Goodchild subsequently told the Authority that the Investment Committee may

not have been required to approve an investment if it fitted within Westbury’s risk

assessment framework.

4.17.
Mr Goodchild and three other individuals also sat on Westbury’s Compliance

Committee, which met quarterly and also on an ad-hoc basis. The Compliance

Committee could overrule investment decisions made by the Investment

Committee, although this never happened in practice.

4.18.
By 2016, Mr Goodchild was an experienced investment manager with over 12

years’ investment experience. He holds a Master’s degree in finance with

distinction and an honours degree in law. He held the Investment Management

Certificate, Chartered status at the Chartered Institute for Securities and

Investment, and SII Level 3 Certificates in Investment Management, Financial

Regulation and Securities.

Risks associated with the Developer Investments and Model Portfolios

The Developer

4.19.
The Developer is an offshore property developer incorporated in a small

jurisdiction outside the OECD, with support offices in the UK and offshore. Mr

Goodchild designed the Model Portfolios to invest 40% of pension holders’ funds

in the Developer Investments and went on to invest 39% of pension holders’

aggregate funds in them. It should have been obvious to Mr Goodchild that all

three of the Developer Investments were high risk for reasons detailed in

paragraphs 4.21-4.45 below.

4.20.
At the end of the Relevant Period, 232 pension funds with a total value of

£10,492,857.27 had been switched into Westbury SIPPs following pension switch

recommendation advice to pension holders from Synergy. Mr Goodchild was

responsible for £4,065,146.01 (39%) of this being invested in the Developer

Investments. Across all pension holders, £2,431,437.01 (23%) was invested in

the Fund; £1,623,709.00 (15%) in the Notes; and £10,000 (0.1%) in the Bonds.

£2,788,653.68 (27%) was in cash.

The Bonds

4.21.
The undated draft offer document for the Bonds relied on by Mr Goodchild noted

that the Bonds were issued by a 100% owned subsidiary of the Developer which

would lend all of the funds it received from issuing the bonds to the Developer.

The Bonds therefore exposed investors to the credit risk of the Developer itself.

The Developer was: (i) a property development company; with (ii) a weak balance

sheet in its financial statements dated 31 December 2015; which (iii) operated in

a single non-OECD jurisdiction. OECD jurisdictions are generally considered to be

mature, developed economies, and lower risk than non-OECD jurisdictions. Each

of these factors should be considered as high-risk factors for credit exposure.

4.22.
The statement of financial position in the Developer’s consolidated financial

statements dated 31 December 2015 shows that the Developer had:

(1) negative total equity. Its liabilities were greater than its assets;

(2) negative current balance. Its current assets were less than its current

liabilities, indicating a high risk of failing through lack of liquidity; and

(3) included tens of millions of euros of deferred revenue in the balance sheet,

which was not yet recognised for accounting purposes. The Authority notes

that recognition of the deferred revenue would do little to improve the weak

liquidity position of the Developer.

4.23.
The Developer accounts present a picture of a company short of liquidity and with

a weak balance sheet. Should there be any adverse developments with regard to

the individual project developments, the political stability of the region or the

global tourism market then there would be clear risks to the viability of the

Developer.

4.24.
All of the points in paragraphs 4.21, 4.22 and 4.23 together mean an investment

into the Bonds could only be regarded as high risk.

4.25.
Note 2 in the financial statements under the heading “Going concern” indicates

that the business is only a going concern on the assumption that the deferred

revenue from a specified property development becomes fully recognised in the

accounts in the following financial year. Any due diligence would need to establish

a high degree of comfort on this point before recommending any investment into

the Bonds.

4.26.
The draft offer document states that the offer can only be made to, or directed at,

fewer than 150 persons or to persons who have professional experience in matters

relating to investments. Restricting an offer to fewer than 150 investors avoided

the requirements of issuing a full prospectus. The draft offer document also states

that: investment in a security of this nature is speculative, involving a degree of

risk; it may not be possible to obtain reliable information about the risks to which

investors are exposed; and investors will not have any recourse to the FSCS for

compensation. The risk factors section highlights that there are construction and

development risks; and cost overruns and delays will impact the ability of the

company to make repayments. Such overruns and delays are common in the

construction industry. Existing debt of £31 million is disclosed as well as the

Developer’s intention to raise further debt, and some of the same assets used as

security will be used as security for future debt issues, which severely undermines

the value of such security. Further, it is noted that the security interests will be

governed by the law of the non-OECD jurisdiction.

4.27.
All of the disclosures referred to in paragraphs 4.25 and 4.26 together mean an

investment into the Bonds could only be regarded as high risk. This should have

been obvious to Mr Goodchild, given his professional experience and qualifications.

Mr Goodchild told the Authority that he had reviewed the draft offer document and

consolidated financial statements referred to in paragraphs 4.21-4.26 above when

assessing whether to invest pension holders’ funds in the Developer Investments.

Mr Goodchild also told the Authority that he had considered a number of the risks

detailed in these paragraphs, including the financial position of the Developer, the

lack of recourse to the FSCS, and risk factors section of the offer document.

The Fund

4.28.
The Fund is a sub-fund of an investment company meaning that it is a class of

shares in the investment company in respect of which a separate investment

portfolio of securities is maintained. Risks attributable to the investment company

are attributable to the Fund.

4.29.
The Fund was listed on an exchange in a non-OECD jurisdiction in 2015 and

delisted in 2020. During this period there was no trading in the Fund on the

exchange.

4.30.
A brochure for the Fund contained extensive references to the Developer and

investments connected with the Developer, identified the Developer as the

“promoter” of the Fund, and stated that the Fund focuses on the development of

property development projects and has secured deal flow for a number of projects

by association with the Developer.

4.31.
The front cover of the offering memorandum relating to the Fund dated 2015

stated that: [it] “is a Professional Investor Fund which is available to investors

qualifying as experienced and qualifying investors. Professional Investor Funds

are non-retail schemes”. This meant that protections and requirements for retail

schemes did not apply; investors in professional adviser funds were not protected

by any statutory compensation arrangements in the event of the fund’s failure.

4.32.
The offering memorandum also states the investment company to which the Fund

relates is an unregulated collective investment scheme (UCIS) for the purposes of

UK law and FSCS protections are not applicable. The lack of regulatory protections

alone is a high-risk factor for the investment for a retail client. Mr Goodchild was

aware that Synergy’s clients were retail clients. A fact sheet issued by the

Authority in 2011 (inter alia) stated “[UCIS] are generally considered to be a high

risk investment” and a Policy Statement in 2013 stated that “we regard UCIS as

niche products almost certainly inappropriate for ordinary retail investors”

4.33.
The investment risk section states that “Investment in the Company and its sub-

funds [which would include the Fund] carries substantial risk”.

4.34.
The front page of one of the offering supplements relating to the Fund also

highlights the Professional Investor Fund status and lack of investor protections.

The Investment Policies definition states that the assets of the Fund would

primarily seek opportunities linked with property development and infrastructure

projects related to tourist resorts. The offering supplement noted that there were

few investment restrictions that the directors were required to adhere to, other

than a 30% restriction on immovable property. There was no restriction on

exposure to a single firm like the Developer. Further, the terms of all the

underlying investments would need to be individually negotiated with the

Developer (or other firms if there were any) and would not be visible to investors

at the point of investment.

4.35.
The dividend policy section notes that the directors do not intend to pay dividends

or make any other distributions during the (indefinite) term of the fund. An

investor’s return is thus limited to potential capital gain when they choose to

redeem their holding.

4.36.
The risk factors section highlights:

(1)
the lack of operating history for the Fund;

(2)
the potential credit risks involved in the Fund’s investments;

(3)
some general risks of real estate development as an activity; and

(4)
the illiquidity of the assets held by the Fund and the potential impact on its

ability to meet redemptions.

4.37.
The brochure relating to the Fund makes clear that the Fund intends to invest in

mezzanine debt securities of the Developer, so that it should have been obvious

that the risks of investing in the Fund were likely to be similar to the risks

associated with investing in the Bonds. Taken together, the factors set out in 4.30

to 4.36 make the Fund a high-risk investment. This should have been obvious to

Mr Goodchild, given his professional experience and qualifications.

4.38.
On 26 February 2016, Mr Goodchild was emailed a copy of the brochure relating

to the Fund and forwarded this to the SIPP Administrator as an example of a

document reviewed by Westbury as part of its due diligence on the Fund. Mr

Goodchild told the Authority that he had reviewed the draft offering memorandum

and offering supplement referred to in paragraphs 4.31 to 4.36 above when

assessing whether to invest pension holders’ funds in the Developer Investments.

Mr Goodchild also told the Authority that he had considered all the risks referred

to in these paragraphs when assessing whether to invest in the Developer

Investments but considered the Fund to be low risk because it related to bonds

and property.

4.39.
On 22 April 2016, Mr Goodchild sent an affiliate of the SIPP Administrator an email

which stated: “We feel that the 40% [investment in the Fund] is appropriate for a

balanced client, a higher risk client may actually be deemed to warrant more of a

weighting and a lower risk client should have a weighting below 40%”. This

indicates that Mr Goodchild was subjectively aware that the Fund was a higher risk

investment.

The Notes

4.40.
The Notes were listed on two exchanges in OECD jurisdictions between 2016 and

2021. During this period there was no trading in the Notes on either exchange.

Although there was no trading, the price of the Notes quoted on one of the

exchanges fell by almost 30% between July 2016 and February 2021.

4.41.
A brochure relating to the Notes dated May 2016 stated all investments would be

linked to the development and operation of tourist resorts and related commercial

property and infrastructure projects created by the Developer. The brochure also

noted the assets would primarily be in a single non-OECD jurisdiction.

4.42.
Drawdown particulars relating to the Notes dated 2016 provide for the Developer

as “Sponsor” to make recommendations as to how funds raised from the Notes

would be invested. The drawdown particulars also highlight risk factors relating

to the Developer which are similar to those for the Bonds, as described above.

These included:

(1) exposure to external events, in particular to events in the non-OECD

jurisdiction in which the assets would primarily be based;

(2) the potential for cost overruns or delays in the construction phase of the

project;

(3) the fact that enforcement of security will take place in an external jurisdiction;

(4) the limited liquidity of the investment; and

(5) the expectation that further debt will be raised based on the same security.

4.43.
Property development is an inherently high-risk activity. A site must be purchased

at a large capital cost at an initial point in time, and then a construction project

must be undertaken, involving the purchase and management of labour and

materials, often subject to the vagaries of the weather and subject to local laws,

planning regulations and taxes. Only then can property sales or rentals be made

at prices pertaining at that time. Typically, debt is used to finance some of the

costs, which has the effect of magnifying positive or negative returns to equity for

the project.

4.44.
The Authority has not seen adequate information in the drawdown particulars, the

Notes brochure or among the material Westbury says it relied on for due diligence

on the Notes which would allow an investor to assess the value and quality of any

of the assets that the holding company associated with the Notes mentioned in

the drawdown particulars was to buy or any financial projections for the holding

company. Without these, no assessment of the Notes’ credit quality could be made

at the time of the issue of the Notes.

4.45.
Each of the points in paragraphs 4.42, 4.43 and 4.44 individually and all of them

together mean an investment into the Notes could only be regarded as high risk.

This should have been obvious to Mr Goodchild, given his professional experience

and qualifications. Mr Goodchild told the Authority that he had reviewed the

drawdown particulars referred to in paragraphs 4.42 above when assessing

whether to invest pension holders’ funds in the Developer Investments. Mr

Goodchild also told the Authority that he had considered all the risks referred to in

paragraph 4.42 when assessing whether to invest in the Developer Investments.

4.46.
Each of the Model Portfolios was designed by Mr Goodchild to invest 40% of

pension holders’ funds in the Developer Investments, while 60% of assets were to

be allocated to a range of assets unrelated to the Developer. For the reasons set

out above, each of the Developer Investments was high risk.

4.47.
All three Model Portfolios were obviously high risk because of the risks (including

concentration risks) arising from the 40% allocation to the Developer Investments.

The concentration risk created by allocating 40% of a pension holder’s funds to

investments in a single non-OECD jurisdiction and related to a single company and

operating in a single industry sector, is extremely high. Given the 40% allocation

to Developer Investments, all of Westbury’s Model Portfolios were obviously

unsuitable for pension holders willing to accept only a low or medium risk of loss

for their pensions. In addition, Westbury’s descriptions of two of the Model

Portfolios as “Global Cautious” and “Global Balanced” were obviously incorrect, as

any portfolio with a 40% Developer Investment allocation is high risk.

Persons involved in pension switches

4.48.
The following sections describe the role of different companies in the process of

pension holders’ pension funds being switched from their existing pension

scheme(s) to the Westbury SIPP and invested based on the Model Portfolios

containing the Developer Investments.

Call centre firm

4.49.
A call centre firm, which was wholly owned by the Developer, obtained pension

holders’ details from a data provider and called them offering a free summary of

their pension holdings. If a pension holder accepted, the call centre firm arranged

for the pension holder to give the Introducer the authority to obtain details of the

pension holder’s existing pension from their pension provider.

The Introducer

4.50.
The Introducer, also wholly owned by the Developer, told the Authority:

(1) it obtained information from pension providers and gave the pension holder a

summary of their pension holdings including information such as fund values

and projected income at retirement;

(2) it gave pension holders information about the possibility of holding their

pensions in alternative structures and the possibility of those structures

holding commercial property and other investments;

(3) it referred pension holders that showed an interest to Synergy to receive

advice on whether to switch their pensions funds to new investments; and

(4) it met with the pension holder to complete documentation which would be

sent to Synergy.

4.51.
All the pension holders advised by Synergy to switch their pension funds into the

Westbury SIPP who agreed to switch were introduced to Synergy by the

Introducer.

4.52.
The Introducer’s marketing of Synergy’s services and of the Westbury SIPP, and

the Introducer’s referral of clients directly to Synergy and indirectly to Westbury,

was conditional on Westbury’s agreement to include allocation to the Developer

Investments within its Model Portfolios and Mr Goodchild was aware of this. Mr

Goodchild had worked with the Developer, the Introducer and Synergy on the

marketing campaign and had assisted the Introducer with the preparation of

marketing materials for the Westbury SIPP.

4.53.
Synergy obtained documents from the Introducer including: a signed client

agreement between Synergy and the pension holder detailing the terms of their

relationship; and a completed questionnaire containing 20 questions designed to

measure a pension holder’s Risk Profile Score (“Risk Profile Questionnaire”).

4.54.
The Westbury SIPP was the only product Synergy advised pension holders on

whether to switch their pensions into. Pension holders who accepted Synergy’s

recommendation to switch their pensions into the Westbury SIPP signed

application documentation, which stipulated that individual pension holders were

thereby accepting Westbury’s terms and conditions of business (as well as those

of the SIPP Trustee and SIPP Administrator).

4.55.
Synergy communicated pension holders’ Risk Profile Scores to Westbury. As

noted in paragraph 4.7, Mr Goodchild designed, created and ran the Model

Portfolios and invested pension holders’ funds held in the Westbury SIPPs based

on these Risk Profile Scores. Mr Goodchild’s role involved allocating pension

holders’ funds to the appropriate Model Portfolio and selecting investments to be

included in the Model Portfolios. Mr Goodchild was responsible for ensuring the

investments in the Model Portfolios matched certain Risk Profile Scores.

4.56.
As noted above, all Risk Profile Scores were between 1 and 10, with 1 applying to

the most risk averse individuals and 10 indicating the greatest willingness to

accept risk. A document titled “DT Risk Profiling”, dated 28 October 2013,

described the appetite for risk which particular Risk Profile Scores represented

and the types of investment appropriate for pension holders with a particular Risk

Profile Score. Mr Goodchild confirmed that he used this document when designing

the Model Portfolios in the Westbury SIPP. All of Synergy’s clients who switched

their funds into the Westbury SIPP had a Risk Profile Score of between 3 and 9.

The descriptions of these Risk Profile Scores in the DT Risk Profiling document are

in the table in Annex B.

4.57.
Westbury told the Authority that pension holders’ funds were allocated to a Model

Portfolio as follows: funds of a pension holder with a Risk Profile Score of 3-4

would be allocated to the “Global Cautious” Model Portfolio; scores 5-7 would be

allocated to the “Global Balanced” Model Portfolio; and scores 8-9 would be

allocated to the “Global Growth” Model Portfolio (Westbury Allocation

4.58.
The Introducer had conveyed to Mr Goodchild that they and the Developer wished

to see a percentage of pension holders’ funds allocated to the Developer

Investments. The Introducer’s marketing efforts and referral of clients to Synergy

and Westbury were conditional on this allocation and Mr Goodchild was aware of

this. In response, Mr Goodchild allocated 40% of each of the Model Portfolios to

the Developer Investments, which Mr Goodchild told the Authority he classified as

low risk. The remaining 60% was to be invested in assets which Mr Goodchild

told the Authority he considered to be “making up the risk” of the Model Portfolios.

As noted above, the Authority considers each of the Developer Investments to

have been obviously high risk.

4.59.
The table in Annex B details the number of pension funds associated with different

Risk Profile Scores switched to the Model Portfolios.

4.60.
Westbury received management fees from pension holders equal to a percentage

of the pension funds under management. Thus, Westbury’s fee income increased

directly as a result of referral of pension holders to Synergy through the marketing

efforts of the Introducer (a wholly owned subsidiary of the Developer) and through

pension holders accepting Synergy’s advice to switch their pensions into the

Westbury SIPP. The total fees paid to Westbury as a result of pension holders

advised by Synergy switching to the Westbury SIPP were £234,099. These fees

were received by Westbury as annual management charges paid by the SIPP

Administrator, calculated at 1.09% of the funds under management plus VAT. As

of 4 June 2016, Mr Goodchild had a controlling interest in Westbury, and so he

stood to derive significant personal benefit from profits made by Westbury as a

result of the marketing efforts of the Introducer, which were dependent on

allocation of a percentage of pension holders’ funds to the Developer Investments.

Mr Goodchild was paid over £150,000 by Westbury in the year ending August

2016. Had the Authority not intervened in 2016, Westbury’s profit distributions to

Mr Goodchild resulting from the Westbury SIPP are likely to have continued over

subsequent years.

4.61.
Mr Goodchild thus stood to derive significant financial benefits from his willingness

to allocate a substantial portion of pension holders’ funds to the Developer

Investments, as requested by the Introducer. In addition, Mr Goodchild in an

email expressed anxiety that the Developer should not be “annoyed”. Further,

under an agreement dated 28 June 2016, Mr Goodchild received a short-term

£50,000 interest free loan from Company A, which had introduced him to the

Developer. Mr Goodchild wanted the loan to enable him to purchase a residential

house close to a popular school.

Mr Goodchild’s reckless decision to expose low and medium risk clients

to high-risk Developer Investments

4.62.
Westbury was a discretionary fund manager which managed retail consumers’

pension funds. Pension holders agreed to Westbury’s terms and conditions when

signing application documentation to transfer their pensions into the Westbury

SIPP and accepted the terms and conditions of the SIPP Administrator and the

SIPP Trustee. Westbury had a duty under COBS 9.2 to “take reasonable steps to

ensure that … a decision to trade, [was] suitable for its client”. Further, COBS

2.1.1R provided that “a firm must act honestly, fairly and professionally in

accordance with the best interests of its client”, and COBS 9.3.1G directed

attention to suitability of both investments and portfolios.

4.63.
Mr Goodchild, who held the CF4 function and led Westbury’s business, was aware

of Westbury’s suitability obligation. Westbury, in a contract with Synergy signed

by Mr Goodchild himself, undertook to invest pension holders’ funds in accordance

with the Risk Profile Scores advised by Synergy and took “full responsibility for

ensuring the investment suitability at the point of sale and on-going is appropriate

for the [Synergy pension holder] client[s]”. Further, during a conference call

discussing the Westbury SIPP and a similar pension switching scheme also

involving allocation of a high percentage of pension holders’ funds to Developer-

related assets, Mr Goodchild acknowledged that “I mean yeah basically Westbury

is obviously taking full responsibility in the grand scheme of things for investment

suitability.” In addition, Mr Goodchild confirmed to the Authority that his role was

to design Model Portfolios to match pension holders’ risk profiles.

4.64.
Synergy communicated to Westbury the Risk Profile Scores of pension holders who

wished to switch their pensions into the Westbury SIPP. Mr Goodchild was thus

aware that most pension holders had low and medium Risk Profile Scores. Mr

Goodchild acknowledged in correspondence with the Authority that “we appreciate

that the underlying SIPP clients are retail customers and the funds represent their

pensions”.

4.65.
All pension holders advised by Synergy who switched their pensions into the

Westbury SIPP had their funds invested on the basis of Westbury’s Model

Portfolios, each of which was designed to have a 40% allocation to the Developer

Investments. For 207 of the 232 pension funds switched to the Westbury SIPP

with Risk Profile Scores between 3 and 7 (low and medium risk), it should have

been obvious to Mr Goodchild, given his qualifications in finance and law and his

fund management experience, that all the Model Portfolios were unsuitable

because the 40% allocation to the Developer Investments was high risk, for the

reasons outlined above.

4.66.
Further, Mr Goodchild must have recognised the risk that these pension holders

would receive unsuitable investments. Mr Goodchild told the Authority that he

read the offer documents for the Developer Investments before allocating pension

holders’ funds, and these documents included warnings that the Developer

Investments were “speculative” and involved “substantial risk”. Mr Goodchild

claimed that he regarded the Developer Investments as “the low risk proportion

of the Model Portfolios” because of their “bonds and property” components. But

during a recorded telephone conference call relating to a planned investment

scheme similar to the Westbury SIPP he and Mr Burdett acknowledged that a high

allocation to the Developer Investments would make a portfolio high risk. When

asked during the call whether they would allocate 60% of pension holders’ funds

to the Developer Investments, Messrs Goodchild and Burdett did not say that they

would be willing to do so because they viewed the Developer Investments as low

risk. Instead, Mr Goodchild endorsed Mr Burdett’s view that a 60% Developer

Investment allocation could be considered only for clients who were willing to

accept “high risk” and were “a reasonable way [from] retirement”. While he said

that a 40% Developer Investment allocation was acceptable, Mr Goodchild was

acknowledging that a high Developer Investment allocation in a portfolio created

significant risks. Similarly, Mr Goodchild commented in an email that “a higher

risk client may actually be deemed to warrant more of a weighting and a lower

risk client should have a weighting below 40% [of the Developer Investments in

their portfolio]”. This again was a recognition by him of the risks created by a high

allocation to the Developer Investments in a portfolio.

4.67.
Despite recognising that clients seeking low risk investments should have a

Developer Investment allocation below 40%, Mr Goodchild caused low risk pension

holders to receive a 40% Developer Investment allocation through the Westbury

SIPP. Despite reading offer documents which made the high-risk nature of the

Developer Investments obvious and despite his comments quoted above

acknowledging the high-risk nature of a portfolio with a high Developer Investment

allocation, Mr Goodchild allocated 40% of the pension funds of pension holders

seeking low and medium risk portfolios to the high risk Developer Investments,

comprising bonds and property funds all related to a single offshore property

development company. Mr Goodchild’s conduct in the face of the obvious risk, at

least at times acknowledged by him, that consumers would receive wholly

unsuitable pension investment portfolios, was wholly unreasonable and reckless.

In the light of the foregoing the Authority infers that Mr Goodchild failed to address

his mind to the unreasonable risk that the Developer Investments were not low

risk investments and that the Model Portfolios were unsuitable for most pension

holders. Mr Goodchild wilfully disregarded the information which indicated that

the Developer Investments were high risk and/or failed to follow up on obvious

signs that the investments were high risk.

4.68.
On 4 April and 28 April 2016, the SIPP Administrator sent Mr Goodchild emails

which highlighted the Administrator’s concerns about a high proportion of a

pension holders’ funds being allocated to the Developer Investments.

4.69.
On 3 June 2016, Mr Goodchild received an email from a Westbury employee which

stated: “a comment below has scared me a little - 8.5% comm[ission]s???? Are

they mad? That will take a couple of years to earn back effectively!”. While Mr

Goodchild pointed out to the Authority that the commissions were “up to” 8.5%

and might have been lower, he did not say that he investigated this at the relevant

time and satisfied himself that commissions were in fact significantly less than

8.5%. As the Westbury employee appreciated, if the Developer paid 8.5%

commission to those marketing its financial products, then its property

developments had to generate very high returns in order to allow both repayment

of investors’ original investment and some additional return for investors. The

significant risks to pension holders’ funds which this created were obvious to the

employee and should have been obvious to Mr Goodchild, particularly after receipt

of the 3 June 2016 email.

4.70.
The Authority infers that the remuneration which Westbury received from the SIPP

Administrator, coupled with the financial benefits of the relationship with the

Introducer and Synergy, which was conditional on investments into the Developer

Investments, at least subconsciously influenced Mr Goodchild’s decision both to

include the Developer Investments within the Model Portfolios and to invest 39%

of pension holders’ aggregate funds in the Developer Investments. In order to

retain the benefit of pension holder introductions, Mr Goodchild closed his mind to

the true risks of the Developer Investments.

Mr Goodchild recklessly gave two of Synergy’s Model Portfolios

misleading names implying lower risk

4.71.
Mr Goodchild named two of Westbury’s Model Portfolios “Global Cautious” and

“Global Balanced”, or allowed others at Westbury to give them these names,

despite knowing that 40% of both portfolios was allocated to the Developer

Investments. For the reasons detailed in paragraphs 4.21-4.69 it should have

been obvious to Mr Goodchild, given his qualifications and experience and the due

diligence material he reviewed, that these two portfolios were in fact high risk and

were unsuitable for investors seeking “cautious” or “balanced” investments. Given

his recognition at least at times of the risks created by a high Developer

Investment allocation in a portfolio (as explained above in paragraphs 4.21-4.69),

Mr Goodchild recklessly risked misleading pension holders and others who saw the

“Global Cautious” and “Global Balanced” portfolio names in factsheets and other

marketing material.

5.
FAILINGS

5.1.
Regulatory provisions relevant to this Notice are referred to in Annex A.

5.2.
Statement of Principle 1 (APER 2.1A.3R) required Mr Goodchild to act with integrity

in carrying out his controlled functions. An individual may lack integrity where

they act recklessly by turning a blind eye to what was obvious to them in their

position. It was obvious from the information Mr Goodchild reviewed that the

Developer Investments were high risk. By virtue of the documents identified

above, which he accepts he read, Mr Goodchild had been alerted to numerous

factors which obviously made the Developer Investments high risk. Mr Goodchild

wilfully disregarded this information and/or failed to follow up on obvious signs

that the investments were high risk. During the Relevant Period, Mr Goodchild

breached Principle 1 by acting recklessly as detailed below:

(1) Mr Goodchild was responsible for creating the Model Portfolios and ensuring

that pension holders’ funds were invested in investments consistent with their

Risk Profile Scores. Mr Goodchild acted recklessly by unreasonably ignoring

the obvious risk that he would allocate pension holders’ funds to Model

Portfolios that were not suitable by: designing Model Portfolios containing 40%

high risk Developer Investments for pension holders with a low and medium

Risk Profile Scores; and allocating these pension holders’ funds to them. As

noted in paragraph 4.65, Mr Goodchild allocated 207 of 232 pension funds

(89%) to unsuitable Model Portfolios which were inconsistent with pension

holders’ Risk Profile Scores, exposing them to a significant risk of loss and/or

causing actual loss.

(2) Mr Goodchild used the names Global Cautious and Global Balanced for high-

risk Model Portfolios. Mr Goodchild acted recklessly by unreasonably ignoring

the obvious risk that this could mislead pension holders and others as to the

high risks involved when investing in these two Model Portfolios.

Lack of fitness and propriety

5.3.
The Authority considers that based on the matters set out above, and in particular

his reckless conduct, that Mr Goodchild lacks integrity and is not a fit and proper

person. He poses a serious risk to consumers and to the integrity of the UK

financial system.

6.
SANCTION

6.1.
The Authority’s policy for imposing a financial penalty is set out in Chapter 6 of

DEPP. In respect of conduct occurring on or after 6 March 2010, the Authority

applies a five-step framework to determine the appropriate level of financial

penalty. DEPP 6.5B sets out the details of the five-step framework that applies in

respect of financial penalties imposed on individuals in non-market abuse cases.

Step 1: disgorgement

6.2.
Pursuant to DEPP 6.5B.1G, at Step 1 the Authority seeks to deprive an individual

of the financial benefit derived directly from the breach where it is practicable to

quantify this.

6.3.
It is not practicable to quantify the benefit that Mr Goodchild directly derived from

his breaches of Principle 1.

6.4.
Step 1 is therefore £0.

Step 2: the seriousness of the breach

6.5.
Pursuant to DEPP 6.5B.2G, at Step 2 the Authority determines a figure that

reflects the seriousness of the breach. That figure is based on a percentage of the

individual’s relevant income. The individual’s relevant income is the gross amount

of all benefits received by the individual from the employment in connection with

which the breach occurred, and for the period of the breach.

6.6.
Pursuant to DEPP 6.5B.2G(2), where the breach lasted less than 12 months, the

relevant income will be that earned by the individual in the 12 months preceding

the end of the breach.

6.7.
The period of Mr Goodchild’s breach of Statement of Principle 1 was from 7

October 2015 to 5 August 2016. The Authority therefore considers the relevant

income to be that earned by Mr Goodchild in the 12 months preceding 5 August

2016. The Authority considers Mr Goodchild’s relevant income for this period to

be £151,298.45.

6.8.
In deciding on the percentage of the relevant income that forms the basis of the

Step 2 figure, the Authority considers the seriousness of the breach and chooses

a percentage between 0% and 40%. This range is divided into five fixed levels

which represent, on a sliding scale, the seriousness of the breach; the more

serious the breach, the higher the level. For penalties imposed on individuals in

non-market abuse cases there are the following five levels:

Level 1 – 0%

Level 2 – 10%

Level 3 – 20%

Level 4 – 30%

Level 5 – 40%

6.9.
In assessing the seriousness level, the Authority takes into account various factors

which reflect the nature and impact of the breach, and whether it was committed

deliberately or recklessly. The Authority considers the following factors to be

relevant:

Impact of the breach

6.10.
DEPP 6.5B.2G(8) lists factors relating to the impact of a breach committed by an

individual.

6.11.
Mr Goodchild gained significant financial benefit from the breach (DEPP

6.5B.2G(8)(a).

6.12.
Mr Goodchild’s breaches of Principle 1 caused a significant and unacceptable risk

of loss to a large number of pension holders who switched in excess of £10 million

to the Westbury SIPP. As a result of Mr Goodchild’s breaches, the FSCS has paid

over £1.4m compensation to date to over 100 pension holders advised by Synergy.

The value of someone’s pension can have a significant impact on their quality of

life during retirement and, in some circumstances, may affect whether they can

afford to retire at all (DEPP 6.5B.2G(8)(c)).

6.13.
Mr Goodchild’s breaches of Principle 1 caused inconvenience and potentially

distress to pension holders who switched to the Westbury SIPP (DEPP

6.5B.2G(8)(e)).

Nature of the breach

6.14.
DEPP 6.5B. 2G(9) lists factors relating to the nature of a breach committed by an

individual.

6.15.
Mr Goodchild breached Principle 1 repeatedly and over an extended period of time

(DEPP 6.5B.2G(9)(a) and (b)).

6.16.
Mr Goodchild failed to act with integrity (DEPP 6.5B.2G(9)(e)).

6.17.
Mr Goodchild was an experienced industry professional (DEPP 6.5B.2G(9)(j)).

6.18.
Mr Goodchild held a senior position at Westbury as the Chief Investment Officer

as well as being one of only two staff to hold the CF4 (Partner) controlled function

(DEPP 6.5B.2G(9)(k)).

6.19.
The subject of the breaches was investment suitability for which Mr Goodchild had

a large degree of responsibility as he was Westbury’s Chief Investment Officer

(DEPP 6.5B.2G(9)(l)).

Reckless misconduct

6.20.
Mr Goodchild acted recklessly in respect of the pension switches to the Westbury

SIPP (DEPP 6.5B.2G(11)).

Level of seriousness

6.21.
DEPP 6.5B.2G(12) lists factors likely to be considered ‘level 4 or 5 factors’. Of

these, the Authority considers the following factors to be relevant:

(1)
Mr Goodchild’s breaches of Principle 1 caused a significant risk of loss to a

large number of pension holders (DEPP 6.5B.2G(12)(a));

(2)
Mr Goodchild failed to act with integrity (DEPP 6.5B.2G(12)(d)); and

(3)
Mr Goodchild’s breaches of Principle 1 were committed recklessly (DEPP

6.5B.2G(12)(g)).

6.22.
DEPP 6.5B.2G(13) lists factors likely to be considered ‘level 1, 2 or 3 factors’. The

Authority considers that none of these factors applies.

30

6.23.
Taking all of these factors into account, the Authority considers the seriousness

of the breach to be level 4 and so the Step 2 figure is 30% of £151,298.45.

6.24.
Step 2 is therefore £45,389.54.

Step 3: mitigating and aggravating factors

6.25.
Pursuant to DEPP 6.5B.3G, at Step 3 the Authority may increase or decrease the

amount of the financial penalty arrived at after Step 2, but not including any

amount to be disgorged as set out in Step 1, to take into account factors which

aggravate or mitigate the breach.

6.26.
There are no mitigating factors.

6.27.
The Authority considers that the following factor aggravates the breach:

(1) The Authority had previously issued an alert on investing pension monies into

unregulated products through a SIPP, in which it specified a model similar to

the customer journey in this case as well as naming overseas property

developments as an example of a concerning investment. Following this, a

second alert was issued after further Supervisory work on the issue, which

stated that pension switches to SIPPs intended to hold non-mainstream

propositions are unlikely to be suitable options for the vast majority of retail

customers. In addition, a fact sheet issued by the Authority in 2011 stated

“[UCIS] are generally considered to be a high risk investment”, and a 2013

Policy Statement stated that “we regard UCIS as niche products almost

certainly inappropriate for ordinary retail investors” (DEPP 6.5B.3G(2)(k)).

6.28.
Having taken into account this aggravating factor, the Authority considers that

the Step 2 figure should be increased by 5%.

6.29.
Step 3 is therefore £47,659.01.

Step 4: adjustment for deterrence

6.30.
Pursuant to DEPP 6.5B.4G, if the Authority considers the figure arrived at after

Step 3 is insufficient to deter the individual who committed the breach, or others,

from committing further or similar breaches, then the Authority may increase the

penalty.

6.31.
The Authority considers the Step 3 figure of £47,659.01 represents a sufficient

deterrent, and so has not increased the penalty at Step 4.

6.32.
The Step 4 figure is therefore £47,659.01.

Step 5: settlement discount

6.33.
Pursuant to DEPP 6.5B.5G, if the Authority and the individual on whom a penalty

is to be imposed agree the amount of the financial penalty and other terms, DEPP

6.7 provides that the amount of the financial penalty which might otherwise have

been payable will be reduced to reflect the stage at which the Authority and the

individual reached agreement. The settlement discount does not apply to the

disgorgement of any benefit calculated at Step 1.

6.34.
No settlement discount applies.

6.35.
Step 5 is therefore £47,600 (rounded down to the nearest £100).

6.36.
The Authority has therefore decided to impose a financial penalty of £47,600 on

Mr Goodchild for breaching Statement of Principle 1.

Prohibition Order and Withdrawal of Approval

6.37.
The Authority has the power to prohibit individuals under section 56 of the Act

and under section 63 to withdraw approvals given. The Authority has had regard

to the guidance in Chapter 9 of EG and FIT 2 of the Handbook, including at EG

9.3.2 and FIT 2.1.3, in considering whether Mr Goodchild is a fit and proper person

and whether to impose a prohibition order on him.

6.38.
The Authority has had regard to all relevant circumstances of the case. In

particular, the Authority has considered Mr Goodchild’s fitness and propriety and

the severity of the risk which Mr Goodchild poses to consumers and to confidence

in the financial system. Given the nature and seriousness of the failings outlined

above, the Authority considers that during the Relevant Period Mr Goodchild acted

recklessly and without integrity in breach of Statement of Principle 1.

6.39.
The Authority considers that Mr Goodchild is not a fit and proper person to perform

any function in relation to any regulated activity carried on by an authorised

person, exempt person or exempt professional firm. The Authority considers that

it is therefore appropriate and proportionate in all the circumstances to withdraw

the approval given to Mr Goodchild to perform the controlled function of SMF27

(Partner) at Westbury and to impose a prohibition order on him under section 56

of the Act.

7.
PROCEDURAL MATTERS

7.1.
This Notice is given to Mr Goodchild under sections 57, 63 and 67 and in

accordance with section 388 of the Act.

7.2.
The following statutory rights are important.

Decision maker

7.3.
The decision which gave rise to the obligation to give this Notice was made by the

Settlement Decision Makers.

The Tribunal

7.4.
The person to whom this Notice is given has the right to refer the matter to the

Tribunal. The Tax and Chancery Chamber is the part of the Upper Tribunal, which,

among other things, hears references arising from decisions of the Authority.

Under paragraph 2(2) of Schedule 3 of the Tribunal Procedure (Upper Tribunal)

Rules 2008, the person to whom this Notice is given has 28 days to refer the

matter to the Tribunal.

7.5.
A reference to the Tribunal is made by way of a reference notice (Form FTC3)

signed by the person making the reference (or on their behalf) and filed with a

copy of this Notice. The Tribunal’s correspondence address is 5th Floor, The Rolls

7.6.
Further details are available from the Tribunal website:

chamber

7.7.
A copy of Form FTC3 must also be sent to Rory Neary at the Financial Conduct

Authority, 12 Endeavour Square, Stratford, London E20 1JN at the same time as

filing a reference with the Tribunal.

Access to evidence

7.8.
Section 394 of the Act applies to this Notice.

7.9.
The person to whom this Notice is given has the right to access:

(1)
the material upon which the Authority has relied in deciding to give this

Notice; and

(2)
the secondary material which, in the opinion of the Authority, might

undermine that decision.

7.10.
There is no such secondary material.

Third party rights and interested parties

7.11.
A copy of this Notice is being given to the following person as a third party

identified in the reasons above and to whom in the opinion of the Authority the

matter to which those reasons relate is prejudicial. This party has similar rights

of representation and access to material in relation to the matter which identifies

them:

(1) Mr Stephen Joseph Burdett.

7.12.
This Notice would ordinarily be given to Westbury as an interested party in the

withdrawal of Mr Goodchild’s approval pursuant to section 63(3) of the Act and

also to Westbury and SWUK as third parties identified and to whom this Notice is

prejudicial. However, the liquidators of Westbury and SWUK have notified the

Authority that these firms will not exercise any rights as third or interested parties.

Confidentiality and publicity

7.13.
This Notice may contain confidential information and, unless it has been published

by the Authority, should not be disclosed to a third party (except for the purpose

of obtaining advice on its contents). Under section 391(1A) of the Act a person to

whom a decision notice is given or copied may not publish the notice or any details

concerning it unless the Authority has published the notice or those details.

Authority contacts

7.14.
For more information concerning this matter generally, contact Rory Neary at the

Authority (direct line: 020 7066 7972/email: Rory.Neary2@fca.org.uk).

Settlement Decision Maker, for and on behalf of the Authority

Settlement Decision Maker, for and on behalf of the Authority

ANNEX A - STATUTORY AND REGULATORY PROVISIONS

1.
Statutory Provisions

1.1.
The Authority’s statutory objectives, set out in section 1B(3) of the Act, include

the consumer protection objective and integrity objectives.

1.2.
Section 66 of the Act provides that the Authority may take action against a person

if it appears to the Authority that he is guilty of misconduct and the Authority is

satisfied that it is appropriate in all the circumstances to take action against him.

A person is guilty of misconduct if, while an approved person, he has failed to

comply with a statement of principle issued under section 64 of the Act, or has

been knowingly concerned in a contravention by a relevant authorised person of

a relevant requirement imposed on that authorised person.

1.3.
Section 56 of the Act provides that the Authority may make an order prohibiting

an individual from performing a specified function, any function falling within a

specified description or any function, if it appears to the Authority that that

individual is not a fit and proper person to perform functions in relation to a

regulated activity carried on by an authorised person, exempt person or a person

to whom, as a result of Part 20, the general prohibition does not apply in relation

to that activity. Such an order may relate to a specified regulated activity, any

regulated activity falling within a specified description, or all regulated actives.

1.4.
Section 63 provides that the Authority may withdraw an approval under section

59 in relation to the performance by a person of a function if the Authority

considers that the person is not a fit and proper person to perform the function.

2.
Regulatory Provisions

Statements of Principle and Code of Practice for Approval Persons

(“APER”)

2.1.
The Authority’s Statements of Principle and Code of Practice for Approved Persons

have been issued under section 64 of the Act.

36

2.2.
APER sets out descriptions of conduct which, in the opinion of the Authority, do

not comply with a Statement of Principle. It also sets out factors which, in the

Authority’s opinion, are to be taken into account in determining whether an

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

2.3.
APER 2.1A.3R, which applies from 1 April 2013, sets out Statement of Principle 1

which states that an approved person must act with integrity in carrying out his

accountable functions.

2.4.
APER 3.1.3G (from 7 March 2016) provided 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 expected in that function.

2.5.
APER 3.1.4G provides that an approved person will only be in breach of a

Statement of Principle if they are personally culpable, that is, where their conduct

was deliberate or where their standard of conduct was below that which would be

reasonable in all the circumstances.

The Fit and Proper Test for Approved Persons

2.6.
The part of the Authority’s Handbook entitled “The Fit and Proper Test for

Approved Persons” (“FIT”) sets out the criteria that the Authority will consider

when assessing the fitness and propriety of a candidate for a controlled function.

FIT is also relevant in assessing the continuing fitness and propriety of an

approved person. The Authority has had regard to FIT, including the criteria

identified in FIT 1.3.1G and 2.1.3G.

The Authority’s policy for exercising its power to make a prohibition order

2.7. The Authority’s policy in relation to prohibition orders is set out in Chapter 9 of the

Enforcement Guide (“EG”). The Authority has had regard to this, including the

criteria identified in EG 9.3.

2.8. EG 9.3.2 provides that when the Authority decides whether to make a prohibition

order against an approved person the Authority will consider all the relevant

circumstances of the case. These may include, but are not limited to:

(2) Whether the individual is fit and proper to perform functions in relation

to regulated activities;

(5) The relevance and materiality of any matters indicating unfitness;

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

confidence in the financial system.

Decision Procedure and Penalties Manual (“DEPP”)

2.9.
Chapter 6 of DEPP sets out the Authority’s statement of policy with respect to the

imposition and amount of financial penalties under the Act.

Conduct of Business Sourcebook (“COBS”)

2.10.
COBS contains relevant rules and guidance concerning discretionary fund

managers, including the following:

COBS 9.2.1R

(1)
A firm must take reasonable steps
to ensure that
a personal

recommendation, or a decision to trade, is suitable for its client.

(2)
When making the personal recommendation or managing his investments,

the firm must obtain the necessary information regarding the client's:

(a)
knowledge and experience in the investment field relevant to the

specific type of designated investment or service;

(b)
financial situation; and

(c)
investment objectives; so as to enable the firm to make the

recommendation, or take the decision, which is suitable for him.

38

Annex B – Table with details of Risk Profile Scores 3-9

Name
Description of Risk Profile Score
No. pension
holders

3
Low risk
• Your attitude to accepting risk is ’low’.
• While you are likely to be concerned with not getting as much back from your investments as you

put in, you may also want to make higher returns on your investments.

• Your preferred investments are likely to be mainly lower-or medium-risk investments such as cash,

bonds or property, with a few higher-risk investments such as shares.

2

4
Lowest
medium
risk

• Your attitude to accepting risk is 'lowest medium'.
• While you are likely to be concerned with not getting as much back from your investments as you

put in, you may also want to make higher returns on your investments.

• Your preferred investments are likely to be mainly lower-or medium-risk investments such as cash,

bonds or property, with typically fewer higher-risk investments such as shares.

5
Medium
risk

• Your attitude to accepting risk is 'medium'.
• While you are likely to be concerned with not getting as much back from your investments as you

put in, you also probably want to make higher returns on your investments.

• Your preferred investments are likely to include a balanced mix of lower- and medium-risk

investments such as cash, bonds and property, and higher-risk investments such as shares.

6
High
medium
risk

• “Your attitude to accepting risk is 'high medium'.
• While you are likely to be concerned with not getting as much back from your investments as you

put in, you also want to make higher returns on your investments.

• Your preferred investments are likely to include mainly higher-risk investments such as shares and

typically some lower-and medium-risk investments such as cash, bonds and property.”

7
Highest
medium
risk

• Your risk is 'highest medium'.
• Your priority is likely to be making higher returns on your investments but you are still probably

concerned about losing money due to rises and falls.

• Your preferred investments are likely to contain mainly higher-risk investments such as shares with

a few lower-and medium-risk investments such as bonds and property.

8
High risk
• Your attitude to accepting risk is 'high'.
• Your priority is likely to be making higher returns on your investments but you are still probably

concerned about losing money due to rises and falls.

• Your preferred investments are likely to contain mainly higher-risk investments such as shares with

the occasional lower-and medium-risk investments such as bonds and property.

9
Very high
risk

• Your attitude to accepting risk is 'very high'.
• Your priority is likely to be making higher returns on your investments and so you accept that you

may not get as much back from your investments as you put in.

• Your preferred investments are likely to contain a large percentage of higher-risk investments such

as shares.

1