DECISION NOTICE

1.
ACTION

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

(1)
impose on Liam Martin a financial penalty of £128,356 pursuant to section 66

of the 2000 Act; and

(2)
make an order, pursuant to section 56 of the 2000 Act, prohibiting Mr Martin

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

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

2.
SUMMARY OF REASONS

2.1.
Mr Martin, a qualified Pension Transfer Specialist, was approved by the Authority

to perform the CF30 (Customer) function at St Martin’s Partners LLP (“SMP”)

Mr Martin has referred this Decision Notice 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
conduct of Mr Martin 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.

during the Relevant Period (1 October 2015 to 31 July 2016). SMP was a small

financial advice firm based in Essex which was authorised by the Authority during

the Relevant Period with permission to conduct regulated activities, including

advising on Pension Transfers and Pension Opt Outs.

2.2.
During the Relevant Period, SMP partnered with First Review Pension Services Ltd

(“FRPS”), an introducer firm which was not authorised by the Authority, to design

and operate the Pension Transfer Model. FRPS had a material financial interest in

promoting investments offered by its parent company The Resort Group plc

(“TRG”), a property developer based in Gibraltar offering investment opportunities

in hotel developments in Cape Verde. These investments were high-risk, illiquid

and unregulated property investments and unlikely to be covered by FOS or FSCS

protection, and therefore unlikely to be suitable for retail clients. The Authority

considers that FRPS instigated this advice model with a view to bringing about

investments of SMP clients’ pension funds into TRG. SMP, as a firm authorised by

the Authority, had a critical role in that process, namely to provide advice to those

clients and thereby provide the statutory basis upon which the trustees of the

ceding pension schemes were permitted to authorise the release of members from

their schemes.

2.3.
Mr Martin had a key role in designing the Pension Transfer Model which, as

designed, failed to gather sufficient information before advice was provided to

clients on the appropriateness of transferring out of their Defined Benefit Pension

Schemes. The Pension Transfer Model did not properly take account of clients’

financial circumstances and objectives, their attitude to risk and their capacity for

loss. Additionally, the Pension Transfer Model did not seek to understand the

nature, risks and fees of the actual onward investment and instead was designed

so that SMP’s advisers, including Mr Martin, would base their analysis and advice

on a generic onward investment across those clients who were subject to the

Pension Transfer Model. Investment advice was intended to be subsequently

provided to the clients by the Overseas Adviser Firm, a financial advisory group

based in Cyprus and not authorised by the Authority, and which was a business

partner of FRPS and TRG.

2.4.
The design of the Pension Transfer Model meant that SMP, including Mr Martin,

was not in a sufficiently informed position to give its clients appropriate advice on

the nature of the risks or benefits associated with transferring their pensions.

Although Mr Martin cautioned his clients that his advice was subject to limited

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information and in the majority of cases advised them not to transfer, the fact

that his clients had obtained advice from SMP, a firm authorised by the Authority,

nevertheless provided the statutory basis upon which the trustees of the ceding

pension schemes were permitted to authorise the release of members from their

schemes. This was not the case for a very small number of SMP clients whose

CETV was below the minimum threshold of £30,000, and for whom the trustees

were not under a statutory obligation to check that they had received appropriate

independent advice prior to making a transfer.

2.5.
In addition to FRPS, at least 16 other introducers introduced clients who were

advised by SMP during the Relevant Period. SMP advised at least 547 clients under

the Pension Transfer Model during the Relevant Period, of which 440 clients were

introduced to SMP by FRPS. The total value of the Defined Benefit Pension

Schemes on which SMP advised under the Pension Transfer Model was just under

£60 million, with an average value of approximately £104,000. Mr Martin advised

at least 492 of these 547 clients. The combined value of the Defined Benefit

Pension Schemes on which Mr Martin advised was more than £54 million, with an

average value of approximately £104,000.

2.6.
Mr Martin did not earn a base salary from SMP and was not an employee. Instead,

Audley Asset Management, a company in which Mr Martin and Adrian Douglas

were directors and the sole, equal, shareholders, during the Relevant Period

earned 70% of the fees charged to clients by way of commission, with the

remainder retained by SMP. Mr Martin received 50% of the fees payable to Audley

Asset Management. In total, he received £162,318 in respect of the financial

benefit from the fees generated from the Pension Transfer Model.

2.7.
On 14 June 2019 SMP entered liquidation. The FSCS declared SMP in default on

23 September 2019 and is investigating claims made by SMP’s clients who were

advised by SMP under the Pension Transfer Model. As at 26 May 2022, the FSCS

had paid over £9 million in compensation to SMP’s clients as a result of loss they

had suffered following advice they had received from SMP.

Mr Martin’s misconduct

2.8.
The Authority considers that, during the Relevant Period, Mr Martin acted

recklessly in relation to his role in designing the Pension Transfer Model and

thereby failed to act with integrity in carrying out his accountable functions at

SMP, in breach of Statement of Principle 1. In particular, Mr Martin:

(a) failed to address the significant risk that clients introduced to SMP by FRPS

for the purpose of receiving advice under the Pension Transfer Model would

be encouraged by the Overseas Adviser Firm to transfer out of their Defined

Benefit Pension Schemes and invest into high-risk, illiquid and unregulated

property investments offered by TRG which were unlikely to be suitable for

them. This was notwithstanding the clear indications he received, as a point

of contact with FRPS, of FRPS’ material financial interest in promoting

investments offered by TRG. This risk would have been clear to Mr Martin

particularly in light of his experience as a Pension Transfer Specialist with 25

years of industry experience. Mr Martin failed both to investigate the

investments promoted by FRPS and to ensure that, when SMP gave advice,

consideration was given to whether these investments were suitable for

clients who were transferring out of their Defined Benefit Pension Schemes.

Mr Martin was aware of this risk, and it was unreasonable for him to have

exposed SMP’s clients to it;

(b) had a key role in designing the Pension Transfer Model which had significant

and clear deficiencies, including that:

(i)
the Pension Transfer Model failed to take into account the client’s

attitude to risk, meaning SMP was unable to ascertain whether a

Pension Transfer was suitable in accordance with the client’s risk

tolerance;

(ii)
the Pension Transfer Model failed to gather information on the client’s

financial situation and income needs throughout retirement, meaning

SMP was unable to determine whether a client could bear the risks of

losing the guaranteed income they would otherwise receive during their

retirement from their Defined Benefit Pension Scheme;

(iii)
the Pension Transfer Model failed to gather information on the client’s

knowledge and experience of relevant investments, meaning SMP was

unable to assess whether their clients fully understood the financial

implications of their advice;

(iv)
Personal Recommendations were provided to clients on the basis of

very limited information gathered from the client and solely on the

basis of a TVAS Report;

(v)
the TVAS Report took no account of the onward investment scheme

and instead used a generic personal pension scheme; and

(vi)
confirmation of advice letters, enabling Pension Transfers, were issued

to the trustees of the ceding schemes at a point when SMP’s clients had

received this very limited advice.

Mr Martin was aware of the significant risk that SMP’s clients would proceed with

a Pension Transfer without receiving complete advice, and his failure to assess

and address the clear deficiencies in the Pension Transfer Model was unreasonable

in the circumstances.

For the above reasons, it appears to the Authority that Mr Martin’s actions during

the Relevant Period in relation to his role in designing the Pension Transfer Model

amount to a failure to act with integrity, in breach of Statement of Principle 1.

2.9.
The Authority has therefore decided to impose on Mr Martin a financial penalty of

£128,356 for his failure to comply with Statement of Principle 1.

Lack of Fitness and Propriety

2.10.
The Authority also considers that Mr Martin’s actions in relation to his role in

operating the Pension Transfer Model were reckless. In particular, Mr Martin:

(a) failed to gather sufficient information from clients to be able to provide

suitable Pension Transfer advice;

(b) facilitated Pension Transfers under the Pension Transfer Model by issuing

confirmation of advice letters to the trustees of ceding schemes at a point

when the client had only received very limited advice, thereby providing the

statutory basis upon which the trustees of the ceding pension schemes were

permitted to authorise the release of that member from their scheme;

(c) made Personal Recommendations to clients based solely on a TVAS Report

and a critical yield calculation;

(d) prepared the TVAS Report without consideration of the onward investment;

and

(e) failed to place clients who wished to proceed with a Pension Transfer against

his advice in an informed position to understand that they had received flawed

advice, through the process of expecting them to complete a ‘Reasons to

Transfer’ letter.

2.11.
The Authority considers Mr Martin’s actions in relation to his role in operating the

Pension Transfer Model to be serious because:

(a) it related to a large number of clients, both in terms of the (at least) 547

clients who were advised by SMP under the Pension Transfer Model which Mr

Martin had a key role in designing and the at least 492 clients Mr Martin

directly advised;

(b) it would have been clear to Mr Martin that there was a significant risk that

clients introduced to SMP by FRPS would be encouraged by the Overseas

Adviser Firm to invest into high-risk, illiquid and unregulated property

investments offered by TRG which were unlikely to be suitable for retail

clients, yet he took no steps to address this risk;

(c) Mr Martin was an experienced and qualified Pension Transfer Specialist, and

yet he still played a key role in designing and operating a clearly deficient

advice process which exposed his clients to significant risk of financial

detriment; and

(d) Mr Martin obtained substantial financial benefits as a result of his failings from

the deficient Pension Transfer Model.

2.12.
As a result of Mr Martin’s failure to have regard to the clear risks arising from the

matters described in paragraphs 2.8 and 2.10 above, of which he must have been

aware, and to take appropriate action in light of them, Mr Martin was reckless and

failed to act with integrity. For this reason, the Authority considers he is not fit

and proper to perform any function in relation to any regulated activity carried on

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by an authorised person, exempt person, or exempt professional firm. The

Authority has therefore decided to make an order prohibiting Mr Martin from

performing any such functions. The Authority considers that doing so is necessary

in order to secure an appropriate degree of protection for consumers.

3.
DEFINITIONS

3.1.
The definitions below are used in this Notice:

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

“the 2001 Order” means the Financial Services and Markets Act 2000 (Regulated

Activities) Order 2001;

“the 2015 Act” means the Pension Schemes Act 2015;

“the 2015 Regulations” means the Pension Schemes Act 2015 (Transitional

Provisions and Appropriate Independent Advice) Regulations 2015;

“ACER” means ACER IM Ltd (dissolved on 29 January 2019);

“the ACER Introducers Agreement” means a partially executed agreement dated

23 November 2015 between ACER and SMP for ACER to introduce third party

introducers to SMP;

“Audley Asset Management” means Audley Asset Management Limited, a

company incorporated on 7 September 2015 in which Mr Douglas and Mr Martin

were directors and the sole, equal, shareholders, during the Relevant Period;

“the Authority” means the Financial Conduct Authority;

“CETV” means cash equivalent transfer value, which is the cash value of benefits

which have been accrued to, or in respect of, a member of a pension scheme at

a particular date, representing the expected costs of providing the member’s

benefits within the scheme;

“COBS” means the Conduct of Business Sourcebook, part of the Handbook;

“Compliance Consultant” means the independent, third-party compliance

consultancy engaged by SMP during the Relevant Period;

“Compliance Manager” means SMP’s compliance manager to whom Mr Cuthbert

delegated compliance responsibilities throughout the Relevant Period;

“COO” means Chief Operating Officer;

“Defined Benefit Pension Scheme” means an occupational pension scheme as

defined by Article 3(1) of the 2001 Order, namely where the amount paid to the

beneficiary is based on how many years the beneficiary has been employed and

the salary the beneficiary earned during that employment (rather than the value

of their investments);

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

the Handbook;

“EG” means the Authority’s Enforcement Guide set out in the Handbook;

“FOS” means the Financial Ombudsman Service;

“FRPS” means First Review Pension Services Ltd (dissolved on 12 September

2017);

“the FRPS Introducers Agreement” means an agreement between FRPS and SMP

dated 1 April 2016 for FRPS to introduce clients to SMP;

“FSCS” means the Financial Services Compensation Scheme;

“Full Advice Model” means a Pension Transfer advice model where a single adviser

gives the defined benefit transfer advice and the investment advice on the

proposed onward investment, in order for the Pension Transfer to proceed;

“the Handbook” means the Authority’s Handbook of rules and guidance;

“Mr Cuthbert” means Alec Cuthbert, a qualified Pension Transfer Specialist who

held the CF4 (Partner), CF10 (Compliance Oversight), CF11 (Money Laundering

Reporting), CF30 (Customer) and Responsible for Insurance Mediation functions

at SMP during the Relevant Period;

“Mr Douglas” means Adrian Douglas, a qualified Pension Transfer Specialist who

held the CF30 (Customer) function at SMP during the Relevant Period;

“Mr Martin” means Liam Martin;

“Mr Oxberry” means Frank Oxberry who held the CF4 (Partner) and CF30 functions

at SMP during the Relevant Period;

“the October 2016 Meeting” means the meeting the Authority held with Mr

Oxberry, Mr Cuthbert and Mr Douglas on 3 October 2016;

“the Overseas Adviser Firm” means a financial advisory group based in Cyprus

which was not authorised by the Authority and which was a business partner of

FRPS and TRG;

“Pension Opt Out” has the meaning given in the Handbook and includes a

transaction resulting from the decision of a retail client to opt out of an

occupational pension scheme to which his employer contributes and of which he

is a member;

“Pension Transfer” has the meaning given in the Handbook and includes the

transfer of deferred benefits from an occupational pension scheme (with

safeguarded benefits, such as a Defined Benefit Pension Scheme) to a personal

pension scheme;

“Pension Transfer Model” means the Pension Transfer advice model operated by

SMP during the Relevant Period characterised by advice provided solely on the

basis of critical yield values of the ceding scheme against a generic scheme with

no consideration of the client’s final investment;

“Pension Transfer Specialist” has the meaning given in the Handbook and includes

an individual appointed by a firm to check the suitability of, amongst other things,

a Pension Transfer, who has passed the required examinations as specified in the

Training and Competence Sourcebook, part of the Handbook;

“Personal Recommendation” means a recommendation that is advice on transfer

of pension benefits into a personal pension or SIPP, and is presented as suitable

for the client to whom it is made, or is based on a consideration of the client’s

circumstances;

“RDC” means the Regulatory Decisions Committee of the Authority (see further

under Procedural Matters below);

“Relevant Period” means 1 October 2015 to 31 July 2016;

“SMP” or “the Firm” means St Martin’s Partners LLP;

“Statements of Principle” means the Authority’s Statements of Principle and Code

of Practice for Approved Persons;

“Suitability Report” means the report which a firm must provide to its client under

COBS 9.4 which, amongst other things, explains why the firm has concluded that

a recommended transaction is suitable for the client;

“TRG” means The Resort Group plc, a property developer based in Gibraltar

offering investment opportunities in hotel developments in Cape Verde;

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

“TVAS” means ‘transfer value analysis’ and is the comparison that a firm must

carry out in accordance with COBS 19.1.2R when a firm gives advice or a Personal

Recommendation about, amongst other things, a Pension Transfer;

“TVAS Report” means a document that reports to the client in respect of the

comparison firms are required to carry on in accordance with COBS 19.1.2R;

“Two-Adviser Model” means a Pension Transfer advice model operated by some

firms where one firm gives defined benefit transfer advice and another firm, acting

as an introducer, gives investment advice on the proposed onward investment, in

order for the Pension Transfer to proceed; and

“Warning Notice” means the Warning Notice given to Mr Martin dated 13 July

2023.

4.
FACTS AND MATTERS

4.1.
Mr Martin was approved by the Authority to perform the CF30 (Customer) function

at SMP from September 2015 and held this function throughout the Relevant

Period. Prior to his approval as CF30 (Customer) at SMP, Mr Martin was approved

by the Authority at other firms authorised by the Authority as CF21 (Investment

Adviser) and as CF24 (Pension Transfer Specialist). Mr Martin had approximately

25 years of industry experience within the pension advice sector by the start of

the Relevant Period and held all Pension Transfer qualifications. Mr Martin and

Mr Douglas set up Audley Asset Management in September 2015 and were the

sole, equal, shareholders and its two directors.

Mr Martin’s relationship with SMP

4.2.
SMP was a small financial advice firm based in Chelmsford, Essex which was

authorised by the Authority during the Relevant Period to, amongst other things,

advise on Pension Transfers and Pension Opt Outs. SMP entered liquidation on 14

June 2019.

4.3.
Mr Martin and Mr Douglas joined SMP as self-employed Pension Transfer

Specialists in September 2015 and provided advice to Pension Transfer clients.

Both Mr Martin and Mr Douglas provided advice to SMP’s clients under the Pension

Transfer Model throughout the Relevant Period.

4.4.
Throughout the Relevant Period, Mr Oxberry and Mr Cuthbert were the two CF4s

(Partner) at SMP.

4.5.
Mr Cuthbert as CF10 (Compliance oversight) delegated responsibility for day-to-

day operational compliance oversight to the Compliance Manager. The Compliance

Manager, unlike Mr Cuthbert, Mr Martin and Mr Douglas, was not a qualified

Pension Transfer Specialist, nor did he hold compliance-related controlled

functions.

4.6.
During the Relevant Period, SMP operated out of a small, open plan office with Mr

Martin, Mr Douglas, Mr Oxberry and the Compliance Manager all sitting in close

proximity on the same floor.

Pension transfers

4.7.
Pensions are a traditional and tax-efficient way of saving money for retirement.

The benefits someone obtains from their pension, particularly under a Defined

Benefit Pension Scheme, can have a significant impact on their quality of life

during retirement and, in some circumstances, can affect when an individual is

able to retire. A Defined Benefit Pension Scheme is particularly valuable because

it offers a secure, guaranteed income for life to members, which typically

increases each year in line with inflation.

4.8.
It is possible to “transfer out” of a Defined Benefit Pension Scheme. This involves

the scheme member giving up the guaranteed benefits associated with

membership in exchange for a CETV, which is typically then invested in a defined

contribution pension. Pursuant to section 48 of the 2015 Act, where the value of

the assets in a Defined Benefit Pension Scheme exceeds £30,000, pension

providers must ensure members take “appropriate independent advice” before

allowing a transfer to proceed. Pension Transfer Specialists are suitably qualified

individuals with permission to advise on such Pension Transfers in accordance with

the Authority’s rules.

4.9.
Unlike a Defined Benefit Pension Scheme, a defined contribution pension does not

provide a guaranteed income for its members but sets the payments that are

required to be paid into the fund to provide a pension benefit, and is itself highly

dependent on the performance of the underlying investment. Pursuant to COBS

19.1.6G, the Authority sets out a general starting assumption for an authorised

firm that transferring out of a Defined Benefit Pension Scheme will not be suitable

for a retail client, unless the firm can clearly demonstrate, on contemporaneous

evidence, that the transfer is in the client’s best interests. This is in light of the

valuable guaranteed benefits offered by Defined Benefit Pension Schemes.

4.10.
Authorised firms and Pension Transfer Specialists act as gatekeepers between

clients and the transfer of their pension. Accordingly, clients place significant trust

in them to provide advice on Defined Benefit Pension Scheme transfers. It is the

responsibility of the Pension Transfer Specialist to understand the client’s needs

and account for all the relevant individual circumstances and how these might

affect the advice provided when advising on the suitability of any Pension

Transfer.

FRPS/TRG/ACER/The Overseas Adviser Firm

4.11.
FRPS was a UK firm which was not authorised by the Authority. TRG was the

parent company of FRPS from the start of the Relevant Period until 7 July 2016.

FRPS was dissolved on 12 September 2017.

4.12.
On 8 February 2016, The Pensions Regulator issued a Final Notice, in respect of

an Occupational Pension Scheme which identified Matthew Welsh, a Director of

ACER, a firm not authorised by the Authority, as a former Trustee of that scheme,

in which the underlying investments were found to be high risk and illiquid and

considered by an independent review to be promising implausibly high returns,

including investments in TRG which were described as being in a class of

investments which had been highlighted by Action Fraud as “potentially

fraudulent”. On 11 July 2016, a BBC Panorama programme aired which focused

on FRPS’s close connections to TRG, a property developer based in Gibraltar which

offered investments in hotel developments in Cape Verde, and how FRPS was said

to have solicited pension reviews and encouraged pension transfers into TRG’s

investments.

4.13.
The property investments offered by the TRG were (1) illiquid, as they could only

be sold upon completion and potentially lacked a viable secondary market, and

(2) unlikely to be covered by FOS or FSCS protection. These investments were

high-risk and were unlikely to be suitable for retail clients.

4.14.
According to Mr Martin, FRPS was a business partner of the Overseas Adviser

Firm, a financial advisory group based in Cyprus which was not authorised by the

Authority and which did not have the relevant permissions to advise on Pension

Transfers in the UK.

Design of the Pension Transfer Model

4.15.
In October 2015, Mr Martin was contacted by Mr Welsh. Mr Welsh was seeking a

partner for FRPS, which itself was seeking a firm authorised by the Authority to

assist with providing the transfer advice component of advice under an advisory

model which was similar to a Two-Adviser Model.

4.16.
In October 2015, Mr Martin took part in discussions between SMP, FRPS and ACER,

following which it was agreed that an advice model, the Pension Transfer Model,

would be established at SMP. Mr Oxberry agreed (and Mr Martin understood) that

under the Pension Transfer Model, SMP would provide initial advice on the Pension

Transfer, with the Overseas Adviser Firm providing the risk profiling and

investment advice component of the advice process. Together with Mr Douglas,

Mr Martin then drafted the process documentation, to create what would become

the Pension Transfer Model. Mr Martin and Mr Douglas streamlined SMP’s typical

full pension transfer advice process by removing the requirement to gather the

client’s information or attitude to risk profiler, which was replaced with an advice

model where advice would be provided based solely on a TVAS Report and critical

yield analysis. Further, Mr Martin assisted in designing the template

documentation used in the Pension Transfer Model, including by suggesting that

the analysis of the client’s objectives and any warnings that the client should rely

on a third-party financial adviser to provide the investment advice should be

removed as these were intended to be provided by the other adviser, the Overseas

Adviser Firm. The principal features of the Pension Transfer Model are set out in

more detail at paragraphs 4.31 to 4.66 below.

4.17.
SMP received the ACER Introducers Agreement signed on behalf of ACER and

dated 23 November 2015, to be countersigned by SMP, which provided that ACER

would introduce other third-party introducers to SMP. Mr Douglas negotiated and

drafted the ACER Introducers Agreement with Mr Welsh; however, the Authority

has not seen any evidence that the ACER Introducers Agreement was

countersigned by SMP during the Relevant Period. Rather, the terms of this

agreement remained under discussion during this period (see paragraph 4.20(g)

and (i) below). Mr Welsh introduced to SMP a number of third-party introducers

who then also introduced to SMP clients to be advised using the Pension Transfer

Model which was originally developed for FRPS. All clients advised under the

Pension Transfer Model were brought to SMP via introducers or financial advisers.

The majority of clients were introduced to SMP by FRPS, which introduced 440 of

the at least 547 clients who were advised by SMP under the Pension Transfer

Model. In addition to FRPS, at least 16 other third-party introducers introduced

clients who were advised by SMP under the Pension Transfer Model.

4.18.
SMP signed the FRPS Introducers Agreement on 1 April 2016, which provided that

SMP would receive from FRPS £795 for every client referred which SMP advised.

This was approximately four months after the first client was introduced to SMP

by FRPS and advised under the Pension Transfer Model, and notwithstanding that

FRPS was the principal introducer of clients under the Pension Transfer Model.

4.19.
At or around the time that Mr Welsh approached SMP, Mr Martin knew that Mr

Welsh had been a Trustee of an Occupational Pension Scheme which was subject

to an investigation from The Pensions Regulator (see paragraph 4.12). Mr Martin

did not question whether it was appropriate for SMP to be referred to introducers

via Mr Welsh, who had demonstrated he had a track record of partnering with

introducers who promoted unsuitable investments, on the basis that he

considered it was unnecessary to carry out any due diligence on him or ACER and

that SMP would in due course carry out due diligence on any introducers with

which it proposed to partner. Mr Martin also stated to the Authority that he was

not aware at the time of the Final Notice of The Pensions Regulator.

4.20.
The Authority considers that Mr Martin knew during the Relevant Period that FRPS,

TRG and the Overseas Adviser Firm were connected entities with a shared financial

interest in promoting TRG’s high-risk property investments. In particular:

(a) on 26 October 2015, Mr Douglas emailed the Managing Director of TRG, Mr

Welsh and Mr Martin copying Mr Oxberry, stating, “Good to meet you […]

There’s no rush at all as we’re concentrating on sorting the TVAS advice route

through [the Overseas Adviser Firm], but if you get the chance to send across

some due diligence-style information on TRG then we can read at our leisure!”

The Managing Director of TRG responded the same day, stating, “I will send

this through tomorrow without fail”;

(b) on 9 November 2015, Mr Douglas circulated draft client advice letters he had

prepared to Mr Martin and SMP’s Compliance Manager. These drafts described

TRG as “a property developer of the highest quality” who “specialise in

developing luxurious beach front hotels & resorts in partnership with world-

class hotel operators” and specifically referred to TRG, not FRPS, as the

introducer. These draft letters also explicitly stated: “The Resort Group do not

offer or provide pension advice therefore they outsource the regulated advice

requirements for pension transfer advice to St Martin’s Partners LLP (amongst

other firms).” The Authority considers that this describes the outsourced role

that SMP ultimately performed under the Pension Transfer Model. On 11

November 2015, Mr Douglas deleted in one of the draft letters the reference

to TRG outsourcing advice to SMP, namely that “they outsource the regulated

advice requirements for pension transfer advice to St Martin’s Partners LLP

(amongst other firms)";

(c) on 12 November 2015, the Managing Director of FRPS emailed Mr Douglas,

copying Mr Martin, the Managing Director of TRG and Mr Welsh, requesting

that references to FRPS and TRG be removed from SMP’s template client

advice letter. Subsequently, the information which would have explained to

clients that their funds would be invested into TRG, which had been described

as a “property developer offering overseas investment opportunities to

property owners and investors”, was removed. Mr Martin did not question

why the Managing Director of FRPS had requested the removal of this

information and did not seek to ascertain whether this was because, for

example, FRPS intended to conceal its links with TRG or if it was because only

a small proportion of funds were being invested into TRG. Mr Martin also did

not inform SMP’s compliance function that more effective due diligence should

be carried out on FRPS, TRG or its investments in light of FRPS’s request to

remove this information;

(d) SMP received the ACER Introducers Agreement signed on behalf of ACER and

dated 23 November 2015, to be countersigned by SMP, in which FRPS and

TRG were referred to together as “3rd Party Introducer 1: FRPS / The Resort

Group”. This agreement provided that SMP would pay to ACER £200 or £250

for each client introduced to SMP via these entities. It also provided that ACER

would introduce other third-party introducers to SMP (having already

introduced FRPS to SMP in October 2015). Mr Douglas negotiated and drafted

the ACER Introducers Agreement, and sent a subsequent draft of this

agreement to Mr Oxberry by email, copying Mr Martin, on 18 January 2016;

(e) Mr Martin received meeting invitations for meetings to which the COO of TRG,

the Managing Director of FRPS and Mr Welsh were also invited. These included

a meeting on 8 December 2015, at the time when SMP’s partnership with TRG

and FRPS was still being negotiated;

(f) on 17 February 2016, Mr Welsh emailed Mr Douglas and Mr Oxberry, copying

Mr Martin, requesting that the appendix of the ACER Introducers Agreement

be updated before they signed it to include the wording “following

introductions that [they] have now made”, including TRG, FRPS and the

Overseas Adviser Firm in close proximity with each other (amongst other

entities); and

(g) Mr Martin corresponded with staff directly via TRG’s email addresses, and in

some cases, the same individual employee sent correspondence to Mr Martin

using TRG and FRPS email addresses interchangeably in order to advance the

process of transferring the client’s pension.

4.21.
Further, Mr Martin stated that he understood at the time that FRPS was acting as

an administrator for the Overseas Adviser Firm. Mr Martin also stated that he

understood at the time that the Overseas Adviser Firm would potentially invest

client funds into a portfolio, of which approximately 5% might include investments

in TRG.

4.22.
Notwithstanding that he knew, or must have known, of the connections and

shared financial interest of FRPS and the Overseas Adviser Firm in promoting

TRG’s investments, Mr Martin unreasonably failed to address the risks that the

Pension Transfer Model would be used to bring about investment of SMP clients’

pension funds into investments offered by TRG and that these investments would

be unsuitable for SMP’s clients.

Mr Martin’s compliance responsibilities

4.23.
Mr Douglas told the Authority that the Pension Transfer Model was signed off by

SMP’s Compliance Manager and Mr Cuthbert, who together formed SMP’s

compliance function.

4.24.
SMP’s compliance function was not copied into such discussions concerning TRG,

nor did Mr Martin bring such risks to SMP’s compliance function’s attention. Once

the Pension Transfer Model was signed off by SMP’s compliance function, Mr Martin

did not question the extent to which the advice model fulfilled relevant regulatory

requirements. Mr Martin stated that the extent of his compliance responsibilities

was to ensure his advice was in accordance with the agreed advice model, and to

liaise with clients to ensure that the established processes were followed.

Therefore, Mr Martin (a highly experienced Pension Transfer Specialist) placed full

reliance on SMP’s compliance function (notwithstanding that the Compliance

Manager was not a qualified Pension Transfer Specialist and that Mr Cuthbert was

not working full time in the lead-up to his retirement) to verify the advice model

which, once verified, he followed and did not question.

4.25.
Mr Martin did not take steps to satisfy himself that the risk that the Pension

Transfer Model was not compliant with relevant regulatory requirements had been

adequately addressed. This was despite Mr Martin’s knowledge of the genesis of

the Pension Transfer Model, his greater level of knowledge than SMP’s compliance

function of the risks relating to TRG being the likely onward investment for a

majority of clients advised under the Pension Transfer Model, and his acceptance

and understanding that he had some responsibility for the compliance aspects of

the Pension Transfer Model. This was also despite Mr Martin having a key role in

developing the Pension Transfer Model and being a point of contact with Mr Welsh

and FRPS, with whom the proposals for SMP to develop the Pension Transfer Model

were initiated (see paragraphs 4.15 to 4.20).

SMP’s Pension Transfer Model as compared to the Full Advice and Two-

The Full Advice Model

4.26.
During the Relevant Period, Mr Martin provided advice on Defined Benefit Pension

Scheme transfers to clients using both the Full Advice Model and the Pension

Transfer Model. The Full Advice Model differed from SMP’s Pension Transfer Model

and operated as follows:

(a) a range of information would be gathered from the client by the adviser,

including information about the client’s financial goals and circumstances,

(such as their possession of life cover and information about total assets and

liabilities), attitude to transfer or investment risk and capacity for financial

loss. This was commonly obtained through a face-to-face or direct meeting

with the client;

(b) a letter and report would be sent to the client and a meeting arranged to

discuss its findings. A TVAS Report would set out, amongst other things, a

comparison relating to specific benefits (for example, death benefits) and a

critical yield calculation. The critical yield offers guidance based on set

assumptions (expressed as a percentage) on the level of return the client’s

proposed onward investment will need to achieve, up to the point they start

drawing from the pension, to match the benefits they would receive from their

Defined Benefit Pension Scheme. The timing from the initial client contact

through to the provision of the TVAS Report would usually take three to four

weeks;

(c) the adviser would also advise on the onward investment product into which

the client’s Defined Benefit Pension Scheme funds would be released. The

adviser’s knowledge of the onward investment product was the basis of the

overall Pension Transfer advice, with the adviser comparing the ceding

scheme against the proposed onward investment and assessing the client’s

suitability. This provides the client with a clear understanding of what the

existing benefits which they are entitled to and what they are projected to be

entitled to after transferring their pension; and

(d) if the adviser’s Personal Recommendation was for a client to proceed with a

Pension Transfer, SMP would provide a confirmation of advice letter to the

trustee of the client’s occupational pension scheme, authorising the trustee

to release the client’s funds from their occupational pension.

4.27.
In summary, the Full Advice Model consisted of a single adviser giving two

separate pieces of advice: (1) whether to give up the safeguarded Defined Benefit

Pension Scheme, and (2) where the client’s pension funds should be invested,

should the Pension Transfer proceed. It is critical that the advice given by a single

adviser under the Full Advice Model covers both parts of the Pension Transfer,

which cannot be advised on in isolation. This is because, for the adviser to

determine the suitability of a Pension Transfer, the adviser must assess the

proposed investment against the projected performance of the ceding scheme and

consider whether that proposed investment is suitable in accordance with the

client’s circumstances and attitude to risk.

4.28.
At SMP, each Full Advice Model case took several months from initial contact to

completion with the transfer of funds. Instead of earning a flat fee (as for advice

under the Pension Transfer Model), SMP would charge the client its normal rates

which would be significantly greater. In some cases, clients who were referred for

advice under the Pension Transfer Model were switched to the Full Advice Model.

No criticism of the Full Advice Model as operated by the Firm is made by the

Authority.

The Two-Adviser Model

4.29.
In contrast, a Two-Adviser Model differs from the Full Advice Model in that one

firm provides defined benefit transfer advice (paragraphs 4.26(a), (b) and (d)

above) and another firm provides investment advice on the proposed onward

investment (paragraph 4.26(c) above), if the Pension Transfer were to proceed.

4.30.
It is common for clients who use a Two-Adviser Model to have the process of their

Pension Transfers managed by introducers who manage the client’s end-to-end

journey on the client’s behalf. Using this model, the introducers can organise two

separate advisers to provide advice on the separate parts of the client’s Pension

Transfer.

4.31.
However, the Two-Adviser Model introduces additional risks over the Full Advice

Model because the Pension Transfer advisers may have limited oversight over how

onward investment advice is provided to the client, meaning clients may not

receive complete advice on all the necessary aspects of the transfer. These risks

need to be appropriately managed by the Pension Transfer advisers.

4.32.
SMP’s Pension Transfer Model was more akin to the Two-Adviser Model in that

SMP only advised on the Pension Transfer out of the ceding scheme and did not

advise on aspects relating to the onward investment of the pension funds.

4.33.
SMP advised at least 547 clients under the Pension Transfer Model during the

Relevant Period. The total value of the Defined Benefit Pension Schemes on which

SMP advised under the Pension Transfer Model was just under £60 million, with

an average value of approximately £104,000.

4.34.
The Pension Transfer Model was used by Mr Martin to advise at least 492 clients.

The combined value of the Defined Benefit Pension Schemes on which Mr Martin

advised was just under £54 million, with an average value of approximately

£104,000.

Limited information obtained from clients

4.35.
As a result of the design of SMP’s Pension Transfer Model, Mr Martin received very

limited information from clients. Mr Martin did not gather full information from

clients in order to determine independently the client’s best interests. Instead, he

received from introducers a data capture containing very limited client details,

typically the client’s contact information and general information regarding their

ceding scheme, which did not include the client’s full financial or personal

circumstances (such as their possession of life cover and information regarding

total assets and liabilities), attitude to transfer or investment risk or capacity for

financial loss. Mr Martin did not meet any of the clients advised through the

Pension Transfer Model and the firm’s primary point of contact was introducers,

rather than clients themselves. On the occasions where SMP’s advisers conversed

with clients directly, this was on an ad hoc basis to address client queries and was

not to discuss the client’s full financial or personal circumstances with a view to

providing complete transfer advice.

4.36.
Mr Martin received assurances that the full client information gathering exercise,

and the provision of full advice by a third-party financial adviser such as the

Overseas Adviser Firm, would take place after SMP’s initial involvement of

providing an advice letter based on a TVAS Report (see paragraphs 4.55 to 4.58

below).

4.37.
When the relevant client’s details were required as inputs to generate a TVAS

Report and issue a Personal Recommendation, much of the inputted information

was assumed by Mr Martin (including the client’s employment status and estimated

retirement age).

4.38.
The Authority assessed a sample of 16 advice files of clients who were advised by

Mr Martin under the Pension Transfer Model during the Relevant Period. The

Authority found that all 16 advice files were non-compliant with relevant regulatory

requirements because of material information gaps in the collection of client

information. Due to these material information gaps, the Authority was unable to

assess the suitability of the transfer advice given by Mr Martin. In particular, Mr

Martin failed to gather:

(a) information on the client’s knowledge and experience relevant to the specific

investment, as required by COBS 9.2.1R(2)(a) and 9.2.3R;

(b) information on the client’s financial situation, including information on the

source and extent of their regular income, their assets and regular financial

commitments, as required by COBS 9.2.1R(2)(b) and 9.2.2R(3); and

(c) information about the client’s investment objectives, including their

preferences regarding risk taking and their risk profile, as required by COBS

Use of a model portfolio within the TVAS Report

4.39.
During the Relevant Period, COBS 19.1.2R(1) required that a firm preparing and

providing a transfer analysis had to compare the benefits likely (on reasonable

assumptions) to be paid under a Defined Benefit Pension Scheme with the benefits

afforded by a personal pension scheme, stakeholder pension scheme or other

pension scheme with flexible benefits, before advising a retail client to transfer

out of a Defined Benefit Pension Scheme. COBS 19.1.3G(1) required that this

comparison should take into account all of the client’s relevant circumstances and

COBS 19.1.3G(4) required that this comparison should be illustrated on rates of

return which take into account the likely expected returns of the assets in which

the retail client's funds would be invested.

4.40.
However, since SMP did not receive from the introducer for the purposes of the

TVAS any information regarding the onward investment or the likely expected

returns of the assets into which the client’s funds would be invested, each client’s

TVAS Report had to be generated based on limited information.

4.41.
Instead, when client TVAS Reports were produced, the advisers made

assumptions for each client that they would be investing into a generic personal

pension scheme. The TVAS calculation for all clients advised under the Pension

Transfer Model was therefore entirely unreliable, in failing to, amongst other

things, account for the reality of the proposed investment.

4.42.
In all 16 of Mr Martin’s advice files reviewed by the Authority, there was no

information indicating that Mr Martin took the proposed onward investment into

account when making his Personal Recommendation.

Personal Recommendation to transfer based solely on TVAS calculation

4.43.
COBS 9.2.1R required that when making a Personal Recommendation, an

authorised firm must obtain necessary information regarding the client's

knowledge and experience relevant to the specific investment, financial situation

and investment objectives. Instead, SMP based its client advice solely on a TVAS

Report and a critical yield calculation. This placed its clients at risk because it

issued Personal Recommendations and facilitated Pension Transfers without fully

considering the client’s circumstances or suitability.

4.44.
SMP’s template advice letter included a statement that the recommendation

considered “the critical yield in isolation” and the recommendation “does not take

into account… personal circumstances or attitude to risk and objectives”.

4.45.
Further, if SMP’s TVAS Report generated a critical yield above a certain threshold

(initially 7.5%, and later 6%), Mr Martin would not advise the client to transfer out

of their current scheme. Therefore, this percentage threshold was not a figure

individually applied to each client’s circumstances in accordance with, for example,

their individual attitudes to investment risk.

4.46.
In one of the files of Mr Martin which the Authority assessed, Mr Martin

recommended to the client that she should transfer out her pension from her

Defined Benefit Pension Scheme. Mr Martin’s recommendation was made solely on

the basis of a critical yield value of 5.5% being below the critical yield threshold,

and the client could achieve higher returns outside of the Defined Benefit Pension

Scheme without taking too high an investment risk. However, there was no

mention in Mr Martin’s advice regarding the specific proposed investment and

whether the investment would align with the client’s personal circumstances,

objectives or risk tolerance. Mr Martin’s recommendation failed to demonstrate,

amongst other things, that he had adequately considered the presumption against

defined benefit transfers by proving, based on full contemporaneous evidence,

that such a transfer would be in the client’s best interests.

4.47.
For 74 of the 519 defined benefit schemes which Mr Martin advised on under the

Pension Transfer Model, Mr Martin recommended that a Pension Transfer may be

in the client’s interest on the basis of having critical yields below the threshold

used at SMP at the time. For 445 of the 519 schemes, Mr Martin’s clients were

recorded as being advised not to transfer.

Confirmation of advice letter issued to the ceding scheme trustee

4.48.
Following the generation of a TVAS Report, Mr Martin issued confirmation of advice

letters which were addressed to the ceding scheme trustee. These letters were

provided to the client’s introducers and would be forwarded to the ceding scheme

trustee as the basis of the authority to transfer the client’s pension funds.

4.49.
The template confirmation of advice letters issued by Mr Martin contained the

following declarations:

(a) SMP was “authorised and regulated by the Financial Conduct Authority, FCA

No 537804 […] to carry on the regulated activity in 53E [sic] of the Regulated

Activities Order” to advise on Pension Transfers;

(b) confirmation that Mr Martin held “the appropriate permission under Part 4A

of the Financial Services and Markets Act 2000 […] to carry on the regulated

activity (advising on conversion or transfer of pension benefits) in Article

53E of the FCA Regulated Activities Order”;

(c) confirmation that Mr Martin had advised the client, with the following

templated statement: “I, Liam Martin (LMP0003) can confirm that I have

given advice solely in relation to a Transfer Valuation Advice Reportt in respect

of [the client’s] benefits in [the client’s Defined Benefit Pension Scheme]”;

and

(d) depending on whether the client’s critical yield lay above or below SMP’s

critical yield threshold (see paragraph 4.45), a recommendation regarding

whether the client should transfer their pension benefits with the statement

of either:

(i)
“Based on the TVAS only we do not recommend that [the client]

transfers their pension benefits away from [the client’s Defined Benefit

Pension Scheme]”; or

(ii)
“Taking the critical yield in isolation… we would normally recommend

that [the client] considers transferring their pension benefits away from

[the client’s Defined Benefit Pension Scheme].”

4.50.
SMP’s template confirmation of advice letters were also issued with a declaration

that the client was advised solely on the basis of a critical yield analysis and that

the Firm’s advice “does not take into account the client’s personal circumstances,

attitude to risk and objectives”. Further, the letters contained a caveat that the

adviser did not give advice regarding the receiving investment scheme. For the

purposes of the trustees’ legal position for releasing members from their schemes,

it was immaterial as to whether SMP had advised the client whether to transfer

out of their Defined Benefit Pension Scheme or not.

4.51.
Despite the caveats in these confirmation of advice letters, these letters from SMP,

an authorised independent adviser, provided the statutory basis upon which ceding

scheme trustees were able to release clients’ funds from their Defined Benefit

Pension Schemes. It was not necessary for the purposes of section 48 of the 2015

Act for trustees to have sight of the underlying advice given by the adviser once

written confirmation of advice was received in the form prescribed by Regulation

7 of the 2015 Regulations, confirming that advice had been provided by an

authorised independent adviser with permission to advise on Pension Transfers.

Trustees were not responsible for verifying the adequacy of the advice obtained

by clients and relied on the adviser to have discharged his responsibilities to advise

on Pension Transfers appropriately.

4.52.
Mr Martin issued confirmation of advice letters to ceding scheme trustees under

the Pension Transfer Model, notwithstanding his awareness that ceding scheme

trustees were not required to verify the completeness of the advice given, and that

they were only required to check that advice had been received from an authorised

firm. SMP provided confirmation of advice letters for the vast majority of clients it

advised under the Pension Transfer Model (at least 484 out of 547 clients),

including those clients whom the Firm had advised should not proceed with a

Pension Transfer. This included clients whom the Compliance Manager described

as being in the category of “definitely never transfer”, such as those with critical

yield values of above 15%.

Mr Martin’s advice constituted a Personal Recommendation

4.53.
Until May 2016, SMP’s client advice letters were only provided to SMP’s partner

introducers, who were trusted to send these letters onto clients and to arrange for

the client to receive full advice from a third-party financial adviser if they were to

proceed with a Pension Transfer. From 13 May 2016, however, because of

concerns at SMP that clients were not always being provided with a copy of their

advice letter by the introducers, SMP’s internal processes were changed to

mandate that clients should receive these advice letters directly from SMP. Mr

Martin stated that he did not believe that SMP was providing Personal

Recommendations to clients because:

(a) SMP was dealing directly with partner introducers (and not the client) and

received all client information via its partner introducers; and

(b) SMP client advice letters contained caveats that SMP’s advice was based

solely on a TVAS report and that clients should first receive full advice and

the necessary Personal Recommendation from a third-party independent

financial adviser before proceeding with a Pension Transfer.

4.54.
Further, SMP was remunerated by its partner introducers per case advised upon

(rather than being paid a fee directly from the client who was being advised).

4.55.
The Authority considers that, notwithstanding the caveats contained within SMP’s

client advice letters, Mr Martin was, in each case, providing Personal

Recommendations to SMP’s clients when issuing advice letters to introducers. The

Authority considers that the giving of advice solely based on a TVAS Report

constituted
the
provision
of
Pension
Transfer
advice
and
a
Personal

Recommendation, an arrangement which did not avoid the regulatory

requirements to consider fully the client’s circumstances and suitability for a

Pension Transfer. The Authority considers that this would have been clear to Mr

Martin in light of his experience as an experienced Pension Transfer Specialist. It

was irrelevant that, prior to May 2016, the client advice letter was directed to

SMP’s partner introducers and not the clients themselves.

Reliance on introducers to perform regulatory obligations with minimal contact

with other financial advisers

4.56.
Authorised financial advisers should not delegate regulated advice to unauthorised

firms and must retain control and responsibility for the advice provided. The

Authority published guidance in November 2015 that “firms that are approached

to delegate their regulated activities, such as providing pension switching advice,

to an unauthorised third party need to be aware of the serious implications that

may arise as a result of entering into this type of arrangement.”

4.57.
Mr Martin’s failure to obtain sufficient client information, and his reliance on SMP’s

introducers or third-party financial advisers to perform those obligations, is

reflected through his template advice letters to clients. These stated:

“Taking the critical yield in isolation, based on the above we would not

recommend that you transfer your FS pension benefits away from [the

relevant pension plan].

This recommendation does not take into account your personal

circumstances, attitude to risk and objectives. If you have a low attitude to

risk the transfer may not be suitable for you… If you still intend to proceed

with the transfer it is recommended that you seek full advice that takes into

account the above areas.”

4.58.
Mr Martin issued confirmation of advice letters to clients on the assumption that

clients would eventually be passed onto a third-party financial adviser to be given

full advice. Mr Martin expected these third-party financial advisers to advise the

client using the Full Advice Model, which would address the shortcomings of SMP’s

Pension Transfer Model, because SMP’s Pension Transfer Model did not aim to

collect the client’s full information or provide a full analysis of the suitability of the

proposed Pension Transfer.

4.59.
Mr Martin told the Authority that he believed that non-regulated financial advisers

would refer clients to regulated independent financial advisers. However, Mr Martin

could not say who those regulated independent financial advisers were. In reality,

Mr Martin was not in a position to know whether his clients did subsequently

receive full advice from authorised financial advisers because Mr Martin’s

confirmation of advice letters were considered by the trustees of ceding schemes

to fulfil the requirements of section 48 of the 2015 Act and were used to release

client funds from their respective Defined Benefit Pension Schemes.

4.60.
Mr Martin also stated that it was sufficient, from a compliance perspective, that a

non-UK advice firm, such as the Overseas Adviser Firm, was being relied upon to

handle the subsequent aspects of the Pension Transfer advice, because the firm

was passported into the UK by the Authority. If this was Mr Martin’s belief, then

the Authority does not consider that it was reasonable for him to hold it, as it

would have been clear to Mr Martin at the time as an experienced financial adviser

and as a person approved by the Authority to perform the CF30 (Customer)

function at an authorised firm that the Overseas Adviser Firm did not hold the

appropriate UK permissions to advise on Pension Transfers.

Misleading ‘Reasons to Transfer’ letters directed to clients who wished to proceed

with a Pension Transfer against Mr Martin’s advice

4.61.
In February 2016, when SMP’s Compliance Manager first realised that confirmation

of advice letters were being sent to ceding scheme trustees for clients on almost

every occasion, he raised this with Mr Martin. This included for clients in the

category of “definitely never transfer”, such as those with critical yield values of

above 15%. The Compliance Manager also recommended to Mr Martin, via a

compliance memorandum, that confirmation of advice letters should not be

provided to trustees in relation to clients, when it was not in their best interests

to transfer.

4.62.
In response, from April 2016, SMP changed its internal processes to require clients

to complete a ‘Reasons to Transfer’ letter, confirming that they had not received

full advice but still wished to proceed with a Pension Transfer based on the TVAS

Report and critical yield. This was a template letter containing an empty box, which

the client was expected to complete in their own words and handwriting, giving

the reason for their transfer.

4.63.
An example of Mr Martin’s failure to place such clients in an informed position is

the case of Ms A, whom Mr Martin advised in June 2016, and whose ’Reasons to

Transfer’ letter provided her reasons for deciding to transfer her fund and included

a signed disclaimer stating:

"I can confirm, that although I have not received full advice, as

recommended in your letter, I still wish to go ahead based on the Transfer

Value Analysis Report and the critical yield required of 6.6%.

Please, therefore confirm to the trustees that I have received the required

level of advice in order for the funds to be released.

I understand that I will be losing all guarantees attached to my transferred

plan."

4.64.
Ms A’s file included no evidence that Mr Martin attempted to explain further the

risks associated with the transfer, such as the loss of all defined benefit

guarantees. The reason for transfer was purely based on the critical yield of 6.6%,

which failed to consider Ms A’s circumstances, financial objectives or attitudes, and

applied an arbitrary critical yield threshold (of 6%) which ignored the client’s

investment risk tolerance.

4.65.
Further, the template ’Reasons to Transfer’ letter used by Mr Martin was also

misleading because of the following statements: ”[…] although I have not received

full advice […] I still wish to go ahead based on the Transfer Value Analysis Report”,

and “[…] I have received the required level of advice in order for the funds to be

released.” Mr Martin stated that the “full advice” was not provided by SMP, but the

“full” and “required level of advice” was received from the relevant financial

adviser, such as the Overseas Adviser Firm. However, the Authority considers that

this communication was misleading and failed to treat the clients fairly because it

assumed that clients understood the difference between SMP’s limited advice and

the complete advice they could have received under a Full Advice Model. The

statements imply that:

(a) Ms A was placed in an informed position to understand that Mr Martin’s critical

yield analysis did not constitute full advice, but was nonetheless sufficient to

facilitate a Pension Transfer; and

(b) Ms A appreciated the difference between the limited advice she received from

Mr Martin, and the more extensive advice she could have received under a

Full Advice Model, but nonetheless confirmed that Mr Martin’s Pension

Transfer Model advice should form the basis of her decision.

4.66.
No steps were taken by Mr Martin to ensure his clients fully understood the

implications of the ‘Reasons to Transfer’ letter which, together with the

confirmation of advice letter, facilitated Pension Transfers from Defined Benefit

Schemes on the basis of limited advice under the Pension Transfer Model.

Therefore, Mr Martin wrote to Ms A and other clients in an unclear and misleading

way. Such conduct placed clients at risk because clients were exposed to SMP’s

seriously flawed advice process but were not given sufficient warning that their

pension funds would be better safeguarded through receiving full and

comprehensive advice.

Example of advice journey under the Pension Transfer Model

4.67.
The main steps in the provision of Mr Martin’s advice under the Pension Transfer

Model to Ms A, a client introduced via FRPS, in June 2016 were as follows:

(a) Ms A was contacted by FRPS regarding her existing pension and was then

introduced to SMP;

(b) the extent of client information regarding Ms A, provided to SMP by FRPS,

and which was present on Ms A’s client file, was that she was (i) single with

two dependent children and (ii) was in possession of a Defined Benefit Pension

Scheme with a CETV of over £380,000 and was projected to receive an annual

pension of above £20,000, or a pension commencement lump sum of over

£94,000 and a reduced annual pension of over £14,300;

(c) based on the limited information received, Mr Martin carried out a TVAS

Report. This TVAS Report was carried out without gathering relevant

information regarding Ms A’s circumstances, investment objectives or risk

profile. Further, Mr Martin did not receive information regarding Ms A’s

intended investment. As set out in paragraphs 4.38 to 4.41, this meant Mr

Martin was unable to generate an accurate TVAS Report which compared the

benefits given up from Ms A’s Defined Benefit Pension Scheme against that

which she would receive under a different scheme;

(d) Mr Martin then advised Ms A not to proceed with a Pension Transfer based on

the critical yield of 6.6% (which was above the 6% threshold which SMP

considered was acceptable). As set out in paragraph 4.44, this meant Mr

Martin provided his analysis by applying an arbitrary threshold without due

consideration of Ms A’s individual circumstances or attitude to risk. Mr Martin’s

advice letter was also caveated to state that his advice did not take into

account Ms A’s circumstances, investment objectives or risk profile and she

was advised to seek full advice from a third-party financial adviser prior to

proceeding with a Pension Transfer. As set out in paragraphs 4.55 to 4.58,

Mr Martin therefore inappropriately relied upon a third-party adviser to advise

Ms A in circumstances, when he was not in a position to know whether or not

she had received full advice;

(e) Mr Martin then provided Ms A with a ‘Reasons to Transfer’ template letter for

her to explain, in her own handwriting, why she wished to proceed with a

Pension Transfer, despite Mr Martin’s advice. Ms A wrote, “I am looking to

transfer to invest in more diverse funds, release tax free cash at 55 y/o and

benefit from drawdown option [sic]. I also wish to benefit from increased

death benefits for my children”. She signed the letter, which contained the

statements: ”[…] although I have not received full advice… I still wish to go

ahead based on the Transfer Value Analysis Report”, (ii) “…I have received

the required level of advice in order for the funds to be released.” As set out

in paragraphs 4.60 to 4.65, Mr Martin thereby failed to ensure his client

understood the difference between the limited advice under the Pension

Transfer Model and the full advice she could have received under a Full Advice

Model;

(f) Mr Martin then issued a confirmation of advice letter addressed to Ms A’s

ceding scheme. This letter stated ““I, Liam Martin (LPM0003) can confirm that

I have given advice solely in relation to a Transfer Valuation Advice Report

(TVAS) in respect of [Ms A’s] benefits” and “Our advice is based solely on

providing the client with a Transfer Analysis Report (TVAS) and does not take

into account the clients personal circumstances, attitude to risk and

objectives”. As set out in paragraphs 4.47 to 4.51, Mr Martin’s confirmation

of advice letter granted sufficient authority to Ms A’s ceding scheme trustee

to effect her Pension Transfer, despite her having only received incomplete

advice under the Pension Transfer Model;

(g) following Mr Martin’s confirmation that regulated advice was provided by an

authorised Pension Transfer Specialist, FRPS could then arrange for the

transfer of Ms A’s pension funds ; and

(h) pursuant to the FRPS Introducers Agreement, FRPS paid a fee to SMP of £795

for preparing Ms A’s TVAS Report, issuing advice and providing the

confirmation of advice letter. FRPS would also receive a fee for its services.

Due diligence on introducers

4.68.
According to Mr Douglas, he and Mr Martin had responsibility to ensure due

diligence was performed on introducers (such as FRPS) and to liaise with

introducers for this purpose. The extent of Mr Martin’s due diligence on introducers

was inadequate in light of the clear risks to clients due to the shortcomings of the

Pension Transfer Model. Further, Mr Martin’s due diligence was also inadequate in

light of the fact that SMP was relying on these very introducers to ensure the client

was fully advised by third-party financial advisers, such as the Overseas Adviser

Firm, before proceeding with a Pension Transfer. SMP’s due diligence and

onboarding process of introducers was very limited, and consisted of:

(a) a high level questionnaire which only requested basic information on the

introducer, namely its name and address, in addition to details of the type of

introduction it would be making to SMP, its projected figures for the number

of introductions it would make, and its fees. This questionnaire was not

completed for every introducer, nor was the questionnaire consistently

followed up on and no central record of introducers was kept;

(b) a generic introducer agreement to be entered into between SMP and the

introducer which entitled the introducer to be paid for its services. However,

in certain instances the introducer agreement was signed many months after

Pension Transfers were finalised.

No additional due diligence was undertaken on introducers and no formal process

for carrying out meaningful due diligence was in place. The extent of due diligence

performed on introducers was wholly inadequate for the purposes of safeguarding

clients. SMP’s Compliance Consultant reached the conclusion, in September 2016,

that “it [was] unclear if due diligence has been completed on any of the

introducers.”

4.69.
Mr Martin and Mr Douglas continued to accept further referrals from introducers

via Mr Welsh after SMP was introduced to FRPS, pursuant to the ACER Introducers

Agreement, whereby Mr Welsh would introduce further third-party introducers to

SMP who would provide clients to be advised through the Pension Transfer Model.

Mr Martin facilitated this ongoing relationship despite the clear indications he

received that Mr Welsh was partnering with unsuitable introducers (see paragraph

4.20).

Significant volume of SMP’s Pension Transfer advice

4.70.
Under the Pension Transfer Model, the limited fact-find and accelerated provision

of advice allowed SMP to achieve a significant volume of transfer advice. At least

547 clients were advised in a 9 month period from November 2015 to July 2016,

with at least 149 cases in April 2016, 71 cases in May 2016, and 137 cases in June

2016.

4.71.
As set out in paragraph 4.37, each of Mr Martin’s 16 advice files assessed by the

Authority were non-compliant because of material information gaps in the

collection of client information. Further, as set out in paragraphs 4.43 to 4.47, Mr

Martin based his advice solely on a TVAS Report and a critical yield calculation.

This highly streamlined approach to client information collection and advice

enabled Mr Martin to turn over clients at such a fast rate.

4.72.
The advice model operated on a high-volume basis, using administrative staff to

assist with highly templated work. For example, approximately 42% of TVAS

Reports were provided by SMP’s administrative staff or paraplanners, whose work

was supervised by Mr Martin and Mr Douglas.

4.73.
The significant volume of advice provided under the Pension Transfer Model

occurred in circumstances where Mr Martin was financially incentivised to pursue

higher client volumes (see paragraphs 4.74 to 4.75), which were unprecedented

in SMP’s experience.

Benefit derived by Mr Martin

4.74.
The FRPS Introducers Agreement provided that SMP would be paid £795 for each

client it introduced to SMP. Other introducers paid similar fees to SMP.

4.75.
Mr Martin and Mr Douglas had an arrangement with SMP for 70% of fees generated

under the Pension Transfer Model to be paid to Audley Asset Management, with

the remaining 30% remaining with SMP, and a percentage pay-away being

received by the individual who introduced the relevant introducer to SMP (as

negotiated in the respective introducer agreement). Audley Asset Management

received £324,636 from SMP in connection with the Pension Transfer Model, being

70% of the sum of £463,766 which SMP received from its partner introducers

during the Relevant Period and the Relevant Period. Mr Martin received 50% of

the fees payable to Audley Asset Management. In total, he received £162,318 in

respect of the financial benefit from the fees generated from the Pension Transfer

Model.

5.
FAILINGS

5.1.
The statutory and regulatory provisions relevant to this Notice are referred to in

Annex A.

5.2.
The Authority considers that during the Relevant Period, Mr Martin acted recklessly

in relation to his role in designing the Pension Transfer Model and thereby failed

to act with integrity in carrying out his accountable functions at SMP, in breach of

Statement of Principle 1. Mr Martin must have been aware of the clear risks arising

in designing the Pension Transfer Model but failed to have regard to those risks

and failed to take appropriate action in light of them. In particular, Mr Martin:

(a) failed to address the significant risk that clients introduced to SMP by FRPS

for the purpose of receiving advice under the Pension Transfer Model would

be encouraged to transfer out of their Defined Benefit Pension Schemes and

invest into high-risk, illiquid and unregulated property investments offered by

TRG which were unlikely to be suitable for them. This was notwithstanding

the clear indications he received that FRPS, TRG and the Overseas Adviser

Firm were connected entities with a shared financial interest in promoting

TRG’s high-risk property investments. Mr Martin was aware of this risk when

agreeing to partner with Mr Welsh, FRPS and TRG to design the Pension

Transfer Model, and it was unreasonable for him to take this risk. Mr Martin

failed to investigate the investments promoted by FRPS and, when advising

his clients, failed to consider whether these investments were suitable for

clients who were transferring from their Defined Benefit Pension Schemes. Mr

Martin also did not consider it was necessary to perform due diligence on Mr

Welsh, who introduced a number of introducers to Mr Martin, Mr Douglas and

SMP;

(b) had a key role, along with Mr Douglas, in designing the Pension Transfer

Model which, as designed, had significant and clear deficiencies, and which

would unreasonably expose SMP’s clients to a risk that they would proceed

with a Pension Transfer without receiving complete advice. The clear

deficiencies in the Pension Transfer Model included that:

(i)
it failed to take into account the client’s attitude to risk, meaning SMP

was unable to ascertain whether a Pension Transfer was suitable in

accordance with the client’s risk tolerance;

(ii)
it failed to gather information on the client’s financial situation and

income needs throughout retirement, meaning SMP was unable to

determine whether a client could bear the risks of losing the guaranteed

income they would otherwise receive during their retirement from their

Defined Benefit Pension Scheme;

(iii)
it failed to gather information on the client’s knowledge and experience

of relevant investments, meaning SMP was unable to assess whether

their clients fully understood the financial implications of their advice;

(iv)
Personal Recommendations were provided to clients on the basis of

very limited information gathered from the client and solely on the

basis of a TVAS Report;

(v)
the TVAS Report took no account of the onward investment scheme

and instead used a generic personal pension scheme; and

(vi)
confirmation of advice letters were issued to the trustees of the ceding

schemes at a point when SMP’s clients had received this very limited

advice, thereby enabling Pension Transfers.

5.3.
Mr Martin had a greater understanding of the design of the Pension Transfer Model

than SMP’s compliance function had. These deficiencies must have been clear to

Mr Martin as an experienced Pension Transfer Specialist. In those circumstances

and bearing in mind that the Compliance Manager was not a qualified Pension

Transfer Specialist and that Mr Cuthbert was not working full time in the lead-up

to his retirement, it was inappropriate for Mr Martin to take the position that he

was entitled to place full reliance on SMP’s compliance function to verify the

Pension Transfer Model, which, once approved, he followed and did not question.

Mr Martin was aware of the significant risk that SMP’s clients would proceed with

a Pension Transfer without receiving complete advice, and is failure to assess and

address the clear deficiencies in the Pension Transfer Model was unreasonable in

the circumstances. For the above reasons, it appears to the Authority that Mr

Martin’s actions during the Relevant Period in relation to his role in designing the

Pension Transfer Model amount to a failure to act with integrity, in breach of

Statement of Principle 1; in the alternative, it appears to the Authority that those

same actions amount to a failure by Mr Martin to act with due skill, care and

diligence in carrying out his accountable functions at SMP, in breach of Statement

of Principle 2.

Lack of Fitness and Propriety

5.4.
The Authority also considers that Mr Martin must have been aware of the clear

risks arising in relation to operating the Pension Transfer Model but failed to have

regard to those risks and failed to take appropriate action in light of them. As such

he acted recklessly. In particular, Mr Martin:

(a) failed to gather sufficient information from clients to provide suitable Pension

Transfer advice. In doing so, Mr Martin failed to treat his clients fairly, failed

to adequately consider his clients’ financial situation, income needs,

retirement objectives or attitudes to risk, and failed to properly consider

whether the proposed onward investment was suitable for his clients. In all

five of the advice files of clients advised by Mr Martin under the Pension

Transfer Model which the Authority assessed, there were material information

gaps, including in relation to the client’s financial situation, their investment

objectives and attitude to transfer risk, and their knowledge and experience

of investing;

(b) facilitated Pension Transfers under the Pension Transfer Model by issuing

confirmation of advice letters to the trustees of ceding schemes at a point

when the client had only received his very limited advice, thereby providing

the statutory basis upon which the trustees of the ceding pension schemes

were permitted to authorise the release of that member from their scheme.

Mr Martin stated that clients would receive full advice from another regulated

independent financial adviser, notwithstanding that he had already provided

the statutory basis upon which the trustees of the ceding pension schemes

were permitted to authorise the release of that member from their scheme.

The caveats included in those letters by Mr Martin that the advice was based

solely on a critical yield analysis and that clients should seek full advice from

a third-party financial adviser before proceeding with a Pension Transfer were

ineffective to protect clients, a risk which would have been clear to Mr Martin;

(c) made Personal Recommendations to clients based solely on a TVAS Report

and a critical yield calculation. Mr Martin therefore did not receive or consider

all the relevant circumstances concerning the client, such as the client’s

knowledge and experience relevant to the specific investment and the client’s

financial situation and investment objectives. Following the TVAS Report’s

critical yield calculation, Mr Martin applied a simplistic criterion by advising

clients whose analysis generated a critical yield below 6% (originally 7.5%)

that a Pension Transfer might be in their interests. Mr Martin therefore utilised

a simplistic criterion which was not a threshold individually applied to each

client’s full circumstances in accordance with, for example, their attitude to

investment risk;

(d) prepared the TVAS Report without consideration of the onward investment.

Mr
Martin
performed
TVAS
calculations
and
provided
Personal

Recommendations to his clients without using necessary information

regarding the receiving investment scheme. The details of any proposed

onward investment were not received from introducers to account for the

likely expected returns from which the client’s funds would be invested.

Instead, a model portfolio was used to generate each client’s TVAS Report

using generic assumptions. This meant that it was impossible for Mr Martin to

recommend to clients specific transfers which considered the client’s

investment objectives, attitude to investment risk or financial sophistication.

Therefore, Mr Martin failed to assess whether the risk profile of the intended

transaction matched the risk appetite of his clients; and

(e) failed to place clients who wished to proceed with a Pension Transfer contrary

to his advice in an informed position to understand that they had received

very limited advice, through the process of expecting them to complete a

‘Reasons to Transfer’ letter.

5.5.
The Authority has concluded that based on the matters set out at paragraphs 5.2

to 5.4 that Mr Martin lacks integrity and is not fit and proper.

6.
SANCTION

Financial penalty

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

DEPP. 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.
Mr Martin derived direct financial benefit from the fees generated by the Pension

Transfer Model. SMP received £463,766 from its partner introducers during the

Relevant Period. Audley Asset Management received 70% of the fees which SMP

received for the Pension Transfer Model during and after the Relevant Period;

accordingly, it received £324,636 from SMP in connection with the Pension

Transfer Model. The Authority considers that Mr Martin received the benefit of half

of this sum, namely £162,318, by virtue of his 50% ownership of that company.

Of this sum of £162,318, the Authority considers that £21,577 is directly

attributable to Mr Martin’s reckless actions in relation to his role in designing the

Pension Transfer Model during the Relevant Period, and therefore derives directly

from his breach of Statement of Principle 1.

6.4.
The Authority has charged interest on Mr Martin’s financial benefit at 8% per year

from the end of the Relevant Period to the date of this Notice, amounting to

£13,179.

6.5.
Step 1 is therefore £34,756.

Step 2: the seriousness of the breach

6.6.
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.

6.7.
The period of Mr Martin’s breach of Statement of Principle 1 in relation to his role

in designing the Pension Transfer Model was from 1 October 2015 to 31 July 2016.

The Authority considers Mr Martin’s relevant income for this 10 month period to

be £236,550. This figure should be pro-rated to represent a 12 month period

rather than the 10 month period to £283,860 (DEPP 6.5B.2G(2)).

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 selects 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 impact and nature of the breach, and whether it was committed

deliberately or recklessly. 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.

Impact of the breach

6.10.
DEPP 6.5B.2.2G(8) lists factors relating to the impact of a breach committed by

an individual.

6.11.
Mr Martin substantially benefitted from his breach of Statement of Principle 1

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

6.12.
Mr Martin’s breach also caused a significant risk of loss to a very large number of

consumers who received advice from SMO under the Pension Transfer Model

(DEPP 6.5B.2G(8)(c)).

6.13.
Mr Martin’s breach caused inconvenience and potential distress to pension holders

who transferred out of their Defined Benefit Pension Schemes (DEPP

Nature of the breach

6.14.
DEPP 6.5B.2.2G(9) lists factors relating to the nature of a breach committed by an

individual.

6.15.
Mr Martin’s failings in relation to his role in designing the Pension Transfer Model

occurred over a sustained period (ten months) (DEPP 6.5B.2G(9)(b)).

6.16.
Mr Martin failed to act with integrity because he acted recklessly throughout the

Relevant Period (6.5B.2G(9)(e)).

6.17.
Mr Martin had substantial experience in Pension Transfer work, and yet he still had

a key role in designing a seriously flawed advice process for advising Pension

Transfer clients (DEPP 6.5B.2G(9)(j)).

6.18.
Mr Martin had a key role in designing the Pension Transfer Model (DEPP

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

Whether the breach was deliberate and/or reckless

6.19.
DEPP 6.5B.2G(10) and (11) list factors tending to show whether the breach was

deliberate or reckless. The Authority considers that a factor tending to show the

breach was reckless is present in this case, namely, that Mr Martin appreciated

there was a risk that his actions or inaction could result in a breach and failed

adequately to mitigate that risk (DEPP 6.5B.2G(11)(a)).

Level of seriousness

6.20.
DEPP 6.5B.2G(12) lists factors lists factors likely to be considered ‘level 4 or 5

factors’. Of these, the Authority considers the following factors to be relevant:

(1)
Mr Martin caused a significant loss or risk of loss to individual consumers,

investors or other market users (DEPP 6.5B.2G(12)(a));

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

(3)
Mr Martin committed the breach recklessly (DEPP 6.5B.2G(12)(g)).

6.21.
DEPP 6.5B.2G(13) lists factors likely to be considered ‘level 1, 2 or 3 factors’. The

Authority considers that none of these apply.

6.22.
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 £283,860.

6.23.
Step 2 is therefore £85,158.

Step 3: mitigating and aggravating factors

6.24.
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.

6.25.
The Authority considers that the following factors aggravate the breach:

(1)
on 18 January 2013 and 28 April 2014 the Authority issued alerts to firms

advising on Pension Transfers with a view to investing pension monies into

unregulated products through investment wrappers. These clearly related to

the advice Mr Martin was providing and were intended to prevent precisely

the type of consumer detriment which occurred in this case. Mr Martin’s

conduct took place after the publication of the two Authority alerts (DEPP

6.5B.3G(2)(k)); and

(2)
in September 2015, a SIPP provider sent copies of the alerts referred to

above to Mr Martin. Notwithstanding that the Authority had publicly called

for an improvement in standards in relation to the behaviour constituting

the breach or similar behaviour, and that these alerts were brought to the

attention of Mr Martin prior to the Relevant Period, Mr Martin played a key

role in the design of the Pension Transfer Model (DEPP 6.5B.3G(2)(a)).

6.26.
The Authority considers that there are no factors that mitigate the breach.

6.27.
Having taken into consideration these aggravating factors, the Authority considers

that the Step 2 figure should be increased by 10%.

6.28.
Step 3 is therefore £93,674.

Step 4: adjustment for deterrence

6.29.
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.

6.30.
The Authority considers that the Step 3 figure of £93,674 represents a sufficient

deterrent to Mr Martin and others, and so has not increased the penalty at Step 4.

6.31.
Step 4 is therefore £93,674.

Step 5: settlement discount

6.32.
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.

6.33.
No settlement discount applies. Step 5 is therefore £93,674. In accordance with

the Authority’s usual practice this is to be rounded down to £93,600.

6.34.
The Authority has therefore decided to impose a total financial penalty of £128,356

(the Step 1 and Step 5 figures added together) on Mr Martin for breaching

Statement of Principle 1 in relation to his role in designing the Pension Transfer

Model during the Relevant Period.

6.35.
The Authority has the power to prohibit individuals under section 56 of the 2000

Act and to withdraw an approval given by the Authority in relation to the

performance by a person of a function under section 63 of the 2000 Act. The

Authority has had regard to the guidance in Chapter 9 of EG and FIT 2 of the

Handbook, including the criteria at EG 9.3.2, FIT 2.1.3 and FIT 2.2.1, in

considering whether to impose a prohibition order on Mr Martin.

6.36.
In considering whether to impose a prohibition order, the Authority has had regard

to all relevant circumstances of the case. In particular, in relation to EG 9.3.2 and

FIT 2.1.3, the Authority has considered Mr Martin’s fitness and propriety, his

reckless actions displaying a lack of integrity and disregard for customers’ interests

and the regulatory system, and the severity of the risk which Mr Martin poses to

consumers and to confidence in the financial system.

6.37.
The Authority considers that it is appropriate and proportionate in all the

circumstances to prohibit Mr Martin from performing any function in relation to

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

exempt professional firm, on the grounds that his conduct during the Relevant

Period demonstrates a reckless lack of integrity.

7.
REPRESENTATIONS

7.1.
Annex B contains a brief summary of the key representations made by Mr Martin,

and by the third parties, The Resort Group Plc and Matthew Welsh, in response to

the Warning Notice and how they have been dealt with. In making the decision

which gave rise to the obligation to give this Notice, the Authority has taken into

account all of the representations made by Mr Martin and by the third parties, The

Resort Group and Mr Welsh, whether or not set out in Annex B.

8.
PROCEDURAL MATTERS

8.1.
This Notice is given to Mr Martin under section 57 and 67 and in accordance with

section 388 of the 2000 Act.

8.2.
The following statutory rights are important.

Decision maker

8.3.
The decision which gave rise to the obligation to give this Notice was made by the

RDC. The RDC is a committee of the Authority which takes certain decisions on

behalf of the Authority. The members of the RDC are separate to the Authority

staff involved in conducting investigations and recommending action against firms

and individuals. Further information about the RDC can be found on the Authority’s

committee

The Tribunal

8.4.
Mr Martin has the right to refer the matter to which this Notice relates to the

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

Tribunal) Rules 2008, Mr Martin has 28 days from the date on which this Notice is

given to him to refer the matter to the Tribunal. A reference to the Tribunal is

made by way of a signed reference notice (Form FTC3) filed with a copy of this

Notice. The Tribunal’s contact details are: Upper Tribunal, Tax and Chancery

9730; email: fs@hmcts.gsi.gov.uk).

8.5.
Further information on the Tribunal, including guidance and the relevant forms to

complete, can be found on the HM Courts and Tribunal Service website:

8.6.
Once any such referral is determined by the Tribunal and subject to that

determination, or if the matter has not been referred to the Tribunal, the Authority

will issue a Final Notice about the implementation of that decision.

Access to evidence

8.7.
Section 394 of the 2000 Act applies to this Notice.

8.8.
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.

Third party rights

8.9.
A copy of this Notice is being given to the following person as third parties

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

matter to which those reasons relate is prejudicial. Each of these parties has

similar rights of representation and access to material in relation to the matter

which identifies them:

(1) Audley Asset Management Ltd;

(2) The Resort Group Plc.

(3) St Martin’s Partners LLP;

(4) Alec Cuthbert;

(5) Matthew Welsh;

(6) The Chief Operating Officer of The Resort Group Plc;

(7) The Managing Director of The Resort Group Plc; and

(8) The Managing Director of First Review Pension Services Ltd.

Confidentiality and publicity

8.10.
This Notice may contain confidential information and should not be disclosed to a

third party (except for the purpose of obtaining advice on its contents). In

accordance with section 391 of the 2000 Act, a person to whom this 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.

8.11.
However, the Authority must publish such information about the matter to which

a Decision Notice or Final Notice relates as it considers appropriate. The persons

to whom this Notice is given or copied should therefore be aware that the facts

and matters contained in this Notice may be made public.

Authority contacts

8.12.
For more information concerning this matter generally, contact William Byrne

(direct line: 020 7066 9821/email: william.byrne@fca.org.uk) at the Authority.

Chairman, Regulatory Decisions Committee

ANNEX A

RELEVANT STATUTORY AND REGULATORY PROVISIONS

1.
RELEVANT STATUTORY PROVISIONS

The 2000 Act

1.1.
The Authority’s operational objectives, set out in section 1B(3) of the 2000 Act,

include the consumer protection objective of securing an appropriate degree of

protection for consumers (section 1C) and the integrity objective of protecting and

enhancing the integrity of the UK financial system (section 1D).

1.2.
Section 56 of the 2000 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 activities.

1.3.
Section 66 of the 2000 Act1 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.

1.4.
During the Relevant Period, under section 66(2) of the 2000 Act (in force until 6

March 2016) misconduct included failure, while an approved person, to comply with

a Statement of Principle issued under section 64 of the 2000 Act or to have been

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

requirement imposed on that approved person by or under the 2000 Act.

1.5.
During the Relevant Period, under section 66A of the 2000 Act (in force from 7

March 2016) a person was guilty of misconduct if, inter alia, he at any time failed

to comply with rules made by the Authority under section 64A of the 2000 Act and

1 Section 66 was amended and section 66A added during the Relevant Period, but those changes are not

material to the manner in which the Authority has exercised its powers as set out in this Notice.

at that time was an approved person, or had been knowingly concerned in a

contravention of relevant requirement by an authorised person and at that time the

person was an approved person in relation to the authorised person.

The 2015 Act and the 2015 Regulations

1.6.
Section 48(1) of the 2015 Act provides that trustees or managers of a defined

benefit pension scheme are, and were during the Relevant Period, required to check

that a member of the scheme had received appropriate independent advice before,

amongst other things, making a transfer payment in respect of any of the benefit

with a view to acquiring a right or entitlement to flexible benefits for the member

under another pension scheme.

1.7.
Section 48(8) of the 2015 Act provides that “appropriate independent advice”

means advice that is given by an authorised independent adviser and meets any

other requirement specified in regulations made by the Secretary of State.

Regulation 3 of the 2015 Regulations provides that the advice must be specific to

the type of relevant transaction proposed by the member.

1.8.
Section 48(8) of the 2015 Act provides that “authorised independent adviser”

means a person who has permission under Part 4A of the 2000 Act, or resulting

from any other provision of the 2000 Act, to carry on a regulated activity specified

in regulations made by the Secretary of State and meets such other requirements

as may be specified in regulations made by the Secretary of State for the purpose

of ensuring that the person is independent. Regulation 4 of the 2015 Regulations

provides that the specified regulated activity is the activity described in article 53E

of the 2001 Order, which is the activity of advising on the conversion or transfer of

pension benefits.

1.9.
Section 48(3) of the 2015 Act provides that the Secretary of State may by

regulations create an exception to section 48(1) in the case of a member or survivor

whose subsisting rights in respect of safeguarded benefits under the scheme, or

safeguarded benefits under the scheme and any other schemes, are worth less

than a specified amount. Regulation 5 of the 2015 Regulations provides that the

trustee or members are not required to carry out the check required under section

48(1) of the 2015 Act if the total value of the member or survivor’s benefits under

a defined benefit pension scheme is £30,000 or less on the valuation date.

1.10. Regulation 7 of the 2015 Regulations provides that confirmation from the member

that appropriate independent advice has been received must be in the form of a

statement in writing from the authorised independent adviser providing the advice

confirming:

(a) that advice has been provided which is specific to the type of transaction

proposed by the member;

(b) that the adviser has permission under Part 4A of the 2000 Act to carry on the

regulated activity in article 53E of the 2001 Order;

(c) the firm reference number of the company or business in which the adviser

works for the purposes of authorisation from the Authority to carry on the

regulated activity in article 53E of the 2001 Order; and

(d) the member’s name, and the name of the scheme in which the member has

subsisting rights in respect of safeguarded benefits to which the advice given

applies.

2.
RELEVANT REGULATORY PROVISIONS

Statements of Principle and Code of Practice for Approval Persons

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

have been issued under section 64 of the 2000 Act2. The Code of Practice for

Approved Persons 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.

2.2.
During the Relevant Period, APER 1.1A.2P (in place until 7 March 2016) and APER

1.1A.2R (in place from 7 March 2016) stated that APER applies to: (1) the

performance by an approved person of an Authority controlled function (whether

or not approval has been sought and granted) in relation to the authorised persons

in relation to which that person is an approved person; and (2) the performance

by an approved person of any other functions in relation to the carrying on of a

regulated activity by the authorised persons referred to in (1).

2 Section 64A of the 2000 Act from 7 March 2016.

2.3.
During the Relevant Period, Statement of Principle 1 stated:

“An approved person must act with integrity in carrying out his accountable

functions.”

2.4.
During the Relevant Period, Statement of Principle 2 stated:

“An approved person must act with due skill, are and diligence in carrying out his

accountable functions”.

2.5.
During the Relevant Period, accountable functions are in summary: the Authority’s

controlled functions; the Prudential Regulatory Authority’s controlled functions;

and any other functions in relation to the carrying on a regulated activity; in

relation to the authorised persons in relation to which that person is an approved

person.

Conduct of Business Sourcebook

2.6.
The following rules and guidance in COBS (as were in place during the Relevant

Period) are relevant to assessing suitability of Pension Transfer advice given to

clients.

2.7.
COBS 2.1.1R stated that a firm must act honestly, fairly and professionally in

accordance with the best interests of its client.

2.8.
COBS 4.2.1R(1) stated that a firm must ensure that a communication or a financial

promotion is fair, clear and not misleading.

2.9.
COBS 9.2.1R stated that:

(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.

2.10. COBS 9.2.2R (1) stated that a firm must obtain from the client such information as

is necessary for the firm to understand the essential facts about him and have a

reasonable basis for believing, giving due consideration to the nature and extent of

the service provided, that the specific transaction to be recommended, or entered

into in the course of managing:

(a) meets his investment objectives;

(b) is such that he is able financially to bear any related investment risks consistent

with his investment objectives; and

(c) is such that he has the necessary experience and knowledge in order to

understand the risks involved in the transaction or in the management of his

portfolio.

2.11. COBS 9.2.2R(2) stated that the information regarding the investment objectives of

a client must include, where relevant, information on the length of time for which

he wishes to hold the investment, his preferences regarding risk taking, his risk

profile, and the purposes of the investment.

2.12. COBS 9.2.2R(3) stated that the information regarding the financial situation of a

client must include, where relevant, information on the source and extent of his

regular income, his assets, including liquid assets, investments and real property,

and his regular financial commitments.

2.13. COBS 9.2.3R stated that the information regarding a client’s knowledge and

experience in the investment field includes, to the extent appropriate to the nature

of the client, the nature and extent of the service to be provided and the type of

product or transaction envisaged, including their complexity and the risks involved,

information on:

(1) the types of service, transaction and designated investment with which the

client is familiar;

(2) the nature, volume, frequency of the client’s transactions in designated

investments and the period over which they have been carried out;

(3) the level of education, profession or relevant former profession of the client.

2.14. COBS 9.2.6R stated that if a firm does not obtain the necessary information to

assess suitability, it must not make a personal recommendation to the client or

take a decision to trade for him.

2.15. COBS 9.4.1R(4) stated that a firm must provide a suitability report to a retail client

if the firm makes a personal recommendation to the client and the client enters

into a pension transfer, pension conversion or pension opt-out.

2.16. COBS 9.4.7R stated that the suitability report must, at least:

(1) specify the client's demands and needs;

(2) explain why the firm has concluded that the recommended transaction is

suitable for the client having regard to the information provided by the client;

and

(3) explain any possible disadvantages of the transaction for the client.

2.17. COBS 19.1.1R stated that if an individual who is not a Pension Transfer Specialist

gives advice or a personal recommendation about a pension transfer, a pension

conversion or pension opt-out on a firm's behalf, the firm must ensure that the

recommendation or advice is checked by a Pension Transfer Specialist.

2.18. COBS 19.1.2R stated that a firm must:

(1) compare the benefits likely (on reasonable assumptions) to be paid under a

defined benefits pension scheme or other pension scheme with safeguarded

benefits with the benefits afforded by a personal pension scheme, stakeholder

pension scheme or other pension scheme with flexible benefits, before it

advises a retail client to transfer out of a defined benefits pension scheme or

other pension scheme with safeguarded benefits;

(2) ensure that that comparison includes enough information for the client to be

able to make an informed decision;

(3) give the client a copy of the comparison, drawing the client's attention to the

factors that do and do not support the firm's advice, in good time, and in any

case no later than when the key features document is provided; and

(4) take reasonable steps to ensure that the client understands the firm's

comparison and its advice.

2.19. COBS 19.1.3G explained the information that should be contained within a

comparison. In particular, the comparison should:

(1) take into account all of the retail client's relevant circumstances;

(2) have regard to the benefits and options available under the ceding scheme and

the effect of replacing them with the benefits and options under the proposed

scheme;

(3) explain the assumptions on which it is based and the rates of return that would

have to be achieved to replicate the benefits being given up;

(4) be illustrated on rates of return which take into account the likely expected

returns of the assets in which the retail client's funds will be invested; and

(5) where an immediate crystallisation of benefits is sought by the retail client prior

to the ceding scheme’s normal retirement age, compare the benefits available

from crystallisation at normal retirement age under that scheme.

2.20. COBS 19.1.6G stated that when advising a client who is, or is eligible to be, a

member of a defined benefit pension scheme (as defined in the Handbook) or other

scheme with safeguarded benefits whether to transfer, convert or opt-out, a firm

should start by assuming that a transfer, conversion or opt-out will not be suitable.

A firm should only consider a transfer, conversion or opt out to be suitable if it can

clearly demonstrate, on contemporary evidence, that the transfer, conversion or

opt-out is in the client’s best interests.

2.21. COBS 19.1.7G stated that when a firm advises a retail client on a pension transfer,

pension conversion or pension opt-out, it should consider the client’s attitude to

risk including, where relevant, in relation to the rate of investment growth that

would have to be achieved to replicate the benefits being given up.

The Fit and Proper Test for Approved Persons

2.22.
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.

2.23.
FIT 1.3.1G states that the Authority will have regard to a number of factors when

assessing the fitness and propriety of a person. The most important considerations

will be the person’s honesty, integrity and reputation, competence and capability,

and financial soundness.

2.24.
The Authority’s policy in relation to prohibition orders is set out in Chapter 9 of the

Enforcement Guide (“EG”).

2.25.
EG 9.1 states that the Authority may exercise this power where it considers that,

to achieve any of its regulatory 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.

2.26.
EG 9.3.1 provides that when the FCA has concerns about the fitness and propriety

of an approved person, it may consider whether it should prohibit that person from

performing functions in relation to regulated activities, withdraw its approval, or

both.

2.27.
EG 9.3.2 provides that when the Authority decides whether to make a prohibition

order against an approved person and/or withdraw their approval 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.

2.28. The Authority’s approach to financial penalties is set out in Chapter 7 of EG, which

can be accessed here:

Decision Procedures and Penalties Manual

2.29. Chapter 6 of Decision Procedures and Penalties Manual (“DEPP”) which forms part

of the Authority’s Handbook, sets out the Authority’s policy for imposing a financial

penalty. 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 to financial penalties imposed on individuals in non-market abuse

cases, which can be accessed here:

ANNEX B

Liam Martin’s Representations

1. A summary of the key representations made by Mr Martin and of the Authority’s
conclusions in respect of them (in bold type) is set out below.

Limitation

2. The limitation period for the Authority being able to take disciplinary action against
Mr Martin, pursuant to section 66 of the 2000 Act, is six years from the point at
which the Authority either had knowledge of Mr Martin’s misconduct or had
information from which the misconduct can reasonably be inferred3. Proceedings
against a person are to be treated as begun when a warning notice is given to him;
the Warning Notice was issued to Mr Martin on 13 July 2023. Mr Martin’s disciplinary
case, in its entirety (namely, both the “design”4 and “operation”5 of the Pension
Transfer Model), is time-barred, as the Authority had information from which all of
his alleged misconduct could be reasonably inferred before 13 July 2017, and
accordingly a financial penalty cannot now be imposed by the Authority on any part
of the alleged misconduct. The Authority has accepted that the “operation” of the
Pension Transfer Model is time barred from the imposition of a financial penalty.

3. Mr Martin considers that it is fanciful and artificial for the Authority to seek to split
its knowledge of Mr Martin’s alleged misconduct within the Notice between the
design and the implementation (or operation) of the Pension Transfer Model. The
Authority should not be permitted to creatively argue that there is a distinction
between the design and operation of the Pension Transfer Model to surmount the
statutory time limit which it missed due to its own delay. One cannot logically be
held responsible for the operation of this model without also being held responsible
for its design. The Pension Transfer Model operated as it was designed to.

4. The Authority became aware of all of the alleged misconduct within the Notice (or
had information from which all of the alleged misconduct can reasonably be
inferred), at some point in 2016 (and therefore well before 13 July 2017); the
Authority started corresponding with the Firm in March 2016 and began to make
enquiries of the Firm about the Pension Transfer Model. The Authority received
information about the Pension Transfer Model from SMP, and on 26 July 2016 the
Authority wrote to SMP setting out the Authority’s concerns about the Pension
Transfer Model, requesting further information from the Firm. SMP provided such
further information about the Pension Transfer Model to the Authority, to enable it
to have a better understanding of the Pension Transfer Model.

5. This was then followed by the Authority’s meeting with Mr Cuthbert, Mr Oxberry
and Mr Douglas on 3 October 2016 (“the October 2016 Meeting”). At this meeting,
the Pension Transfer Model and its operation were explained in detail to the
Authority, and the Firm was asked by the Authority to vary its permissions. Mr
Martin considers that the Authority would only have made this request at this point,
if it had a sufficient understanding as to the Pension Transfer Model and serious
concerns about it. This is because a refusal of the request was likely to have

3 Section 66(5) of the 2000 Act.
4 See paragraph 5.2 of this Notice.
5 See paragraph 5.4 of this Notice.

resulted in the Authority using its statutory powers6 to impose requirements, so as
to achieve the same result. Accordingly, Mr Martin considers that the Authority was
aware of the design and operation of the Pension Transfer Model as at the October
2016 Meeting and must have identified the involvement of all the relevant
individuals in the Pension Transfer Model by this date.

6. SMP subsequently agreed to vary its permissions on 2 November 2016, and this
prevented SMP from utilising the Pension Transfer Model. The Firm was fully co-
operative with the Authority. The Authority followed this up issuing a requirement
notice on 24 November 2017, pursuant to section 166 of the 2000 Act, for the
appointment of a skilled person (“the Skilled Person’s Notice”). The Authority would
not have issued the Skilled Person’s Notice, unless it had a detailed understanding
of the Pension Transfer Model and had knowledge of the Firm’s alleged misconduct
or had information from which the alleged misconduct could reasonably be inferred,
including all of the alleged misconduct of Mr Martin.

7. The skilled person issued its interim report to the Authority on 8 August 2017 (“the
Skilled Person’s Report”). This is the date the Authority has adopted for when it
first had knowledge of the “design” of the Pension Transfer Model and Mr Martin’s
alleged misconduct in respect thereof and is based on the Authority’s view that it
was not aware that Mr Martin (and Mr Douglas) were the “principal architects” of
the advice process in the Pension Transfer Model before then. The Skilled Person’s
Report states that Mr Martin (and Mr Douglas) presented the process to SMP and
that the Firm took the decision to streamline the process (as referenced in
paragraph 4.16 of this Notice).

8. The skilled person’s work included interviewing five members of staff, notably Mr
Martin and Mr Douglas, on 17/18 January 2017, and Mr Martin considers that the
Authority must have discussed progress with the skilled person between the date
of the Skilled Person’s Notice on 24 November 2017 and the issue of the Skilled
Person’s Report on 8 August 2017. The Skilled Person’s Report refers to: “the
Production of the draft interim report as defined in the Requirement Notice and,
following feedback from both St Martin’s Partners and the FCA, issuing of the
interim report”. Communications between the Authority and the skilled person have
not been disclosed.

9. Accordingly, Mr Martin considers that the Authority must have realised the nature
of the entirety of his alleged misconduct before 13 July 2017 and that the Authority
is therefore time barred from issuing a financial penalty in relation to the design
aspect of the alleged misconduct.

10. In Andrew Jeffery v Financial Conduct Authority7 8 the Tribunal held9 that:
“It is not sufficient that the Authority has information in its hands that
would give rise to a mere suspicion. Nor is it enough that the information
might suggest that there was misconduct, but that the person in question
has not been identified as the apparently guilty party. The Authority must
either know or be treated, by reasonable inference, as knowing of the
misconduct by a particular person. The reference in s[ection] 66(4) to “the

6 Section 55L, imposition of requirements by the Authority, of the 2000 Act.
7 FS/2010/0039.
8 https://assets.publishing.service.gov.uk/media/5752d271ed915d3c89000024/Andrew_Jeffery.pdf
9 paragraph 334: Andrew Jeffery v FCA.

misconduct” (our emphasis) clearly refers to the particular misconduct in
respect of which action is to be taken against a particular person, and not
to conduct of a similar nature in respect of which information may have
been obtained earlier.”

11. The Tribunal also held that:10 “The Authority must, however, have
sufficient knowledge of the particular misconduct, or such knowledge
must be capable of being reasonably inferred, to justify an investigation.
Mere suspicion is not enough, nor is any general impression that
misconduct may have taken place”. The Tribunal further stated that:
“where the Authority becomes aware of more than one act of misconduct
of which a particular person appears to be guilty, the time limit operates
separately in respect of each”11.

12. In relation to the culpability of individuals, DEPP 6.2.7G states that: “[…]
disciplinary action will not be taken against an approved person
performing a significant influence function or a senior conduct rules staff
member simply because a regulatory failure has occurred in an area of
business for which he is responsible.” Regarding a breach of the
Statements of Principle, APER 3.1.4G provides that: “An approved person
will only be in breach of a Statement of Principle where he is personally
culpable”.

13. The Authority’s view is that Mr Martin’s conduct relating to (i) the design
and (ii) the operation of the Pension Transfer Model represents in each
case separate acts of misconduct with separate time limit dates for the
purpose of section 66 of the 2000 Act. The Authority considers that it was
reasonable to proceed initially on the basis that the design and operational
aspects could have been, and more typically would have been, carried out
by different individuals in an advice firm, whereby the design of a new
advice model would typically be conducted by one or more senior
managers rather than by customer advisers, who would have been
responsible for operating the model.

14. The Authority has accepted that before 13 July 201712 it had sufficient
knowledge of Mr Martin’s personal culpability13 in relation to the
“particular misconduct” of his operation of the Pension Transfer Model.
Accordingly, the Authority accepts that it cannot impose a financial penalty
with respect to this misconduct. However, the Authority does not accept
that it is fanciful or artificial to separate the “operation” from the “design”
of the Pension Transfer Model, and to assess personal culpability for each
individually.

15. It is necessary to determine when the Authority first had sufficient
knowledge of Mr Martin’s “particular misconduct” with respect to the
design of the Pension Transfer Model at SMP. Mr Martin’s references to
the Authority receiving information about the Pension Transfer Model prior
to 8 August 2017 all relate to the operation of the Pension Transfer Model

10 paragraph 337: Andrew Jeffery v FCA [FS/2010/0039].
11 paragraph 337: Andrew Jeffery v FCA.
12 Six years before the issue of the Warning Notice on 13 July 2023.
13 For the purpose of section 66(5) of the 2000 Act.

by SMP and not to its design. In addition, this information did not identify
the individuals (including Mr Martin) who played a key role in designing
the Pension Transfer Model. The focus of the October 2016 Meeting was
how the Pension Transfer Model operated and did not cover who had
responsibility for, or played a key role in, designing it. There is no evidence
of any discussion at this meeting of the role of Mr Martin (and Mr Douglas)
in designing the Pension Transfer Model.

16. The Authority relies on evidence from a staff member who attended the
October 2016 Meeting and who recalls no discussion of the background to
the Pension Transfer Model with SMP either: (i) at that meeting, other than
connections to other adviser firms and introducers brought in by Mr Martin
(and Mr Douglas); or (ii) following that meeting. Further, the staff
member does not recall any discussion with the skilled person about Mr
Martin’s role or who had responsibility for designing the Pension Transfer
Model, before the Authority received the Skilled Person’s Report on 8
August 2017. Furthermore, the RDC is not aware of any other documents
which should have been disclosed to Mr Martin pursuant to the Authority’s
statutory obligations but which have not. Accordingly, the Authority
considers that there is no evidence which indicates that it knew (by
reasonable inference or otherwise) of Mr Martin’s role in designing the
Pension Transfer Model.

17. The requirements agreed to by SMP varying its permissions are not
evidence of the Authority’s date of knowledge of Mr Martin’s role in
designing the Pension Transfer Model; they relate to measures imposed on
SMP as a firm, arising out of the Authority’s concerns about the operation
of the Pension Transfer Model, following the October 2016 Meeting.

The Pension Transfer Model and the regulatory environment

18. The Pension Transfer Model was, during the Relevant Period, permissible. The
Authority’s case is based on the premise that all clients referred to SMP should have
received full advice on their proposed Pension Transfer. The Pension Transfer Model
was not the only model being run in the same way in the market during the
Relevant Period. SMP provided advice as part of a two-adviser model, based on the
critical yield derived from the TVAS. The Pension Transfer Model was not initially
designed by Mr Martin (and Mr Douglas); it was copied from another firm, and this
other firm’s model was known to the Authority in 2016. The Pension Transfer Model
was not designed to take into account the full circumstances of the underlying
clients, as this was designed to be carried out by the second, regulated financial
adviser. The Pension Transfer Model was intended to be limited to one element of
the Pension Transfer process. The remainder was intended to be carried out by
firms other than SMP.

19. The purpose of the Pension Transfer Model was to filter our patently unsuitable
cases and highlight cases where a transfer could potentially be justified. During the
Relevant Period it was not unusual for firms to undertake such a preliminary
assessment. This practice became so widespread that in June 2017 the Authority
issued a Consultation Paper14 (“CP 17/16”). The statements set out in CP 17/16
suggested that the rules in place, during the Relevant Period, were not clear

enough15. In March 201816 (“PS 18/06”) the Authority brought in new financial
guidance effectively ending this model. Mr Martin’s conduct is being assessed on
the standards following the introduction of PS 18/06, rather than the rules and
guidance in place during the Relevant Period.

20. It was permissible for a firm to operate a two-adviser advice model when providing
Pension Transfer advice, and this was also possible if the second firm advising on
the investments was based overseas in the EEA, and passported into the United
Kingdom (which the Overseas Firm was). This was confirmed in PS 18/06 which
confirmed that “a model involving two advisers can be adopted for overseas
transfers while recognising that there are additional complexities”17. Mr Martin had
a genuinely held belief that the Pension Transfer Model sat within the two-adviser
model, and that SMP could operate it within the Authority’s rules. The Pension
Transfer Model was not intended to be a full advice model – it did not seek to
overlay the full advice model with a simplified format. It is noteworthy that SMP,
with Mr Martin as one of the Pension Transfer advisers, was running a full advice
service and there has been no criticism by the Authority of this. After the TVAS had
been completed, the involvement of Mr Martin and SMP ended; they had no role in
the provision of the investment advice from the Overseas Firm.

21. The Authority has not sufficiently evidenced the alleged consumer harm apparently
caused by Mr Martin and SMP; it has not reviewed any of the client files from the
Overseas Firm which provided the investment advice to the clients. If the Authority
seeks to assert that Mr Martin was reckless, in being aware of the risk of
investments being unsuitable and it being unreasonable to have exposed clients to
this risk, then it needs to have carried out file checks with the Overseas Firm.

22. It appears to Mr Martin that the Authority’s real complaint relates to the investment
advice provided by the Overseas Firm, rather than the work carried out by Mr Martin
and SMP, since it was this investment advice which led to the clients investing into
TRG. There was no requirement on SMP, or Mr Martin, to review the client’s
investment advice from the Overseas Firm.

23. Mr Martin understood, that at the time, a nominal amount of a customer’s
investment was to be invested into TRG, and during the Relevant Period SMP had
not received any warnings about TRG. Whilst Mr Martin acknowledges it was a high-
risk investment, TRG did not miss making an income payment to its investors until
after the Relevant Period in 2019. Following the BBC Panorama programme
(referred to in paragraph 4.12 of this Notice) SMP immediately ceased the operation
of the Pension Transfer Model without an intervention or a request from the
Authority. It did the right thing. The Firm’s pro activity was not the action of a
reckless firm towards its clients.

24. There is, therefore, insufficient evidence for a finding of recklessness to be made
against Mr Martin.


15 Paragraph 2.2 of CP 17/16: “we are aware that advice has become focused on the transfer value analysis
(TVA) output rather than making a rounded assessment of suitability”.
16 https://www.fca.org.uk/publication/policy/ps18-06.pdf
17 Paragraph 4.12 ibid.

25. The Pension Transfer Model, which involved focussing on the TVAS
outcome and included a Personal Recommendation, was not a model
widespread within the industry.

26. The Authority considers that the relevant rules and guidance in place
during the Relevant Period relating to Pension Transfers were clear in their
requirements, and that the departures from those requirements by Mr
Martin (and Mr Douglas) in the design of the Pension Transfer Model were
significant. The TVAS Report produced under the Pension Transfer Model
did not comply with the requirement in COBS 19.1.2R (see paragraph 4.39
of this Notice) to compare the benefits of the ceding scheme with the
benefits afforded by the onward scheme, and instead was based on the
assumption that clients would be investing into a generic pension scheme.
Mr Martin (and Mr Douglas) gave no consideration to the likely expected
returns of the assets into which the client’s funds would be invested, and
so the TVAS Report was entirely unreliable. As a result, the Pension
Transfer Model was flawed. The Authority considers that subsequent rule
changes, following PS 18/06 in March 2018, are not relevant when
assessing Mr Martin’s misconduct during the Relevant Period, as this
conduct has been assessed by the standards in place at the time.

27. It is not the case that the Authority’s real complaint relates to the
investment advice provided by the Overseas Firm, rather than the work
carried out by Mr Martin and SMP. The Pension Transfer Model exposed
SMP’s clients to a high risk of consumer harm because it involved issuing
confirmation of advice letters which provided the statutory basis, under
section 48 of the 2015 Act, upon which the trustees of the ceding pension
schemes authorised the release of members from their schemes and lead
to the surrender of their defined benefits, at a time when suitable Pension
Transfer advice had not been given. The harm to consumers occurred
before the investment advice was given by the Overseas Firm. In order to
take into account the risk of harm to consumers, and its seriousness, it is
not necessary for the Authority to have reviewed the client files and the
investment advice from the Overseas Firm. SMP’s decision to cease the
operation of the Pension Transfer Model after the BBC Panorama
programme does not impact Mr Martin’s culpability prior to that date.

28. The failure by an individual to act on serious risks of which the individual
was aware may constitute reckless conduct. In determining whether an
individual’s conduct was reckless, it is necessary to take into account the
individual’s level of experience and their position in determining how
obvious the risks were. In this regard Mr Martin was an experienced
Pension Transfer Specialist with 25 years of industry experience.

29. The Authority considers that Mr Martin was aware that SMP’s clients would
be giving up their defined benefits without receipt of the advice required
by COBS because of the deficiencies in the Pension Transfer Model (as set
out in paragraphs 5.2 – 5.4 of this Notice). The risk of detriment to SMP’s
clients must have been clear to him in the light of his experience, and he
designed a process by which they crystallised. This was reckless.

Sanctions and financial penalty


30. Mr Martin considers that, for the reasons set out at paragraphs 2-9 above, the
Authority is time barred from imposing any financial penalty in relation to the
alleged misconduct set out in this Notice.

31. Mr Martin understands that the financial penalty is based upon the “added value”
gained by operating the Pension Transfer Model over SMP’s standard business
model. This “added value” calculation is entirely artificial and is not an official
calculation by the Authority. In any event, Mr Martin considers that there was no
“added value” in the design of the Pension Transfer Model. Accordingly, the
disgorgement figure at Step 1 should be zero.

32. Mr Martin has continued to be approved by the Authority to provide advice to clients
including Pension Transfers and is highly rated by clients on a number of websites
for financial professionals. Furthermore, Mr Martin has not had any upheld
complaints for advice provided since the Pension Transfer Model, nor has he been
subject to any complaints. The imposition of a prohibition order is not merited; it
would be disproportionate and an overreaction by the Authority.

33. Mr Martin’s co-operation with the Authority, his good conduct since the end of the
Relevant Period, and the length of time this investigation has taken should be
mitigating factors at Step 3 of the penalty calculation and with respect to the
proposed prohibition.

34. As the Authority has concluded that it is not time barred with respect to
Mr Martin’s misconduct concerning the design of the Pension Transfer
Model, it is permitted to impose a financial penalty in relation to this
misconduct. The Authority has considered with respect to Mr Martin and
for the purposes of disgorgement the amount of the financial benefit
derived directly from his misconduct. In so doing the Authority has
considered what would be a reasonable and proportionate division of the
revenue received by Audley Asset Management and paid to Mr Martin as
between: (i) the design element; and (ii) the operation element of the
Pension Transfer Model. Audley Asset Management’s bank transactions
record that it received £562,963 from SMP. The Authority considers that
Audley Asset Management received £238,327 in respect of full pension
advice given by Mr Martin and Mr Douglas and £324,636 in respect of
advice given by them under the Pension Transfer Model. The Authority
considers that Mr Martin received the benefit of half of this latter sum,
namely £162,318, by virtue of his 50% ownership of that company. Of
this sum of £162,318, the Authority considers that £21,577 is directly
attributable to Mr Martin’s reckless actions in relation to his role in
designing the Pension Transfer Model during the Relevant Period, and
therefore derives directly from his breach of Statement of Principle 1.

35. Co-operation with an investigation is the minimum the Authority expects
from investigation subjects, and whilst the Authority has taken into
account Mr Martin’s co-operation, together with his conduct since the end
of the Relevant Period, it does not consider they constitute mitigating
factors at Step 3. In addition, the Authority does not consider that the
length of time the investigation took in this case constitutes a mitigating
factor at Step 3.


36. As indicated in this Notice, the Authority considers that Mr Martin is not fit
and proper to perform functions in relation to any regulated activity, since
he acted recklessly and with a lack of integrity as to the design and
operation of the Pension Transfer Model. The Authority considers that a
prohibition, in the form as set out in this Notice, is appropriate and
proportionate in all the circumstances.

Enforcement’s unfair approach to the case

37. Mr Martin has a number of concerns with the conduct and the approach to the
investigation of the Authority’s Enforcement case team. The Authority has,
amongst other things, failed to pursue the investigation with appropriate speed.
Accordingly, this has been unfair to Mr Martin.

38. The decision to give Mr Martin this Notice was made on behalf of the
Authority by the RDC. As is explained in paragraph 8.3 of this Notice, the
RDC is a committee of the Authority which takes certain decisions on
behalf of the Authority, and its members are separate from the Authority’s
staff involved in conducting investigations and recommending action
against firms and individuals. The RDC has decided to give this Notice on
the basis of the materials before it regarding the conduct of Mr Martin.

39. The submissions made by Mr Martin, as to the nature and conduct of the
investigation, have been duly considered by the RDC but it considers that
they do not undermine the evidence on which the decision is based.






The Resort Group Plc’s Representations

1. A summary of the key representations made by TRG and of the Authority’s
conclusions in respect of them (in bold type) is set out below.

2. The starting point should be for the Authority to seek to avoid causing prejudice to
TRG, save to the extent that it considers any matters within the Notice which are
prejudicial to TRG are necessary to support the reasons for its action against Mr
Martin. It is not necessary for the Authority’s findings against Mr Martin to identify
TRG by name rather than anonymising it, consistent with its usual practice.

3. The Notice contains certain passages that refer to TRG in terms that are highly
prejudicial to TRG, repeating allegations of potential criminality made more than
seven years ago that are denied and have not been proven. These references are
unnecessary to support the action against Mr Martin and should be removed. The
effect of the allegations set out in paragraph 4.12 insinuate that TRG’s activities
and investments are potentially fraudulent. This is denied. It repeats a reference
by The Pensions Regulator to what appears to be a previous statement made by
Action Fraud. Public repetition of a damaging allegation will inevitably increase the
harm caused by the initial allegation.

4. None of Mr Martin’s failings set out in the Notice rely on the allegations of fraud
against TRG. The factual background for these findings is established without any
need to reference the allegations of fraud against TRG. The high-risk nature of the
TRG investments, as both unregulated and illiquid, is very clearly articulated in the
Notice. It is inaccurate to conflate the separate and distinct concepts of an
investment being high-risk with an investment being fraudulent.

5. There is no evidence that Mr Martin was aware of the determination by the Pensions
Regulator. Accordingly, it is unnecessary to refer to it, as there is no evidence this
would have had any bearing on Mr Martin’s judgement and decision-making in
respect of the Pension Transfer Model or how Mr Martin should have assessed Mr
Welsh and/or TRG’s investments.

6. There is, therefore, no need to include prejudicial allegations of fraud against TRG
and these should be removed in the interests of fairness.

7. The reference in paragraph 4.12 to the BBC Panorama documentary in July 2016,
two weeks before the end of the Relevant Period, is also irrelevant to the findings
against Mr Martin and should be removed. The statement refers to matters that are
prejudicial to TRG but have not been tested by the Authority. The Authority should
not reference unsubstantiated reports of journalists in circumstances where the
fact of publication of those reports is not relevant to the facts or circumstances of
the breach. By including reference to the Panorama documentary, the Notice
suggests that the matters presented in that documentary form part of the
background and circumstances of the Authority’s case.

8. Prejudice alone is not a proper basis upon which to decide to anonymise
and/or remove reference to TRG’s involvement. The appropriate basis, for
anonymising and/or removing reference to TRG’s involvement arises

where including such references would amount to unfairness to TRG18. No
such unfairness arises as, whilst the matters within this Notice may be
prejudicial to TRG, they are nevertheless relevant, qualified (for example
“potentially fraudulent”), proportionate and accurate.

9. The Authority considers that the nature of the relationship between TRG,
FRPS, SMP and Mr Martin is accurately described in this Notice.

10. The information in paragraph 4.12 is consistent with information that is
already in the public domain and attributed to two highly reputable
sources, namely a statutory notice of another regulator and Action Fraud
(which is run by the City of London Police), and the Authority considers
that it is appropriate for this information to be included in this Notice.

11. There was publicly available material during the Relevant Period which
ought to have raised concerns with SMP, and Mr Martin, in respect of it
partnering with ACER and TRG, had it conducted sufficient due diligence
on ACER/TRG. The Notice draws a link between Mr Martin’s failures of due
diligence with respect to matters in the public domain and the investments
which TRG promoted to clients.

12. The Authority considers that any prejudice caused to TRG by paragraph
4.12 of this Notice is outweighed by the fact that these passages
demonstrate that this business relationship may have been prevented or
curtailed, if appropriate due diligence had been undertaken by Mr Martin.

13. With regard to the reference to the Panorama documentary, the Notice
contains a brief, factual description of publicly available material. The
Panorama documentary forms part of the background and circumstances
of the Authority’s case, as regards SMP’s stated reasons for bringing its
relationship with FRPS to an end. The Authority notes that Mr Oxberry
stated in interview with the Authority: “when we all see [sic] … Panorama
about [the Pension Transfer Model] and we all went 'No, we've got to stop
it”. Accordingly, the Authority considers that it is appropriate to refer to
the Panorama documentary in the Notice.



18 Section 393 of the Act envisages that a “third party” could be identified in a statutory notice even if, in the
opinion of the Authority, the third party is prejudiced; and the third party will then receive a copy of the notice.

Matthew Welsh’s Representations

1. A summary of the key representations made by Mr Welsh and of the Authority’s
conclusions in respect of them (in bold type) is set out below.

2. ACER acted as the proposer to SMP of potential third-party introducers (not
individual investors), such as FRPS. Mr Welsh had no part to play in the advice
given by SMP to its clients nor indeed had any direct involvement in relation to the
matters complained of in the Notice. The Notice suggests Mr Welsh, and ACER,
were extensively involved in Mr Martin’s dealings with investors and invites criticism
and adverse inferences to be drawn against Mr Welsh in a manner that suggests
that Mr Welsh and ACER were involved in wrongful acts. In addition, the reference
to Mr Welsh being subject to a Determination and Final Notice by The Pensions
Regulator (paragraphs 4.12 and 4.19) should be removed, as Mr Welsh merely
acted as a proposer and performed no other function.

3. ACER should not be named in the Notice and instead referred to as “the
Introducer”; this will be consistent in the Notice with the reference to the “Overseas
Adviser Firm”.

4. Mr Welsh should not be referenced in the Notice; all business conducted with Mr
Martin by Mr Welsh was on behalf of ACER. The Notice incorrectly implies that he
was conducting personal business with SMP.

5. Prejudice alone is not a basis upon which to decide to remove reference to
the involvement of Mr Welsh and/or to anonymise ACER. The appropriate
basis for removing reference to Mr Welsh’s involvement arises where
including such reference would amount to unfairness to him19. No such
unfairness arises as, whilst the matters within the Notice may be
prejudicial to Mr Welsh, they are nevertheless relevant, qualified,
proportionate and accurate. In addition, no such unfairness arises from
naming ACER; it was dissolved on 29 January 2019.

6. Mr Welsh’s role, as set out in the Notice, is limited to his involvement
(acting on behalf of ACER) in proposing introducers such as FRPS to SMP.
Mr Welsh is not attributed with a role in the advice provided by SMP or in
the operation of the Pension Transfer Model; his role is explained in the
section of the Notice entitled “Design of the Pension Transfer Model”
(paragraphs 4.15 to 4.19).

7. The Authority considers that the information set out in relation to Mr
Welsh’s involvement with the Occupational Pension Scheme (paragraph
4.19) is relevant to the Authority’s case in respect of Mr Martin. At the time
of his introduction to SMP in October 2015, Mr Welsh was aware that he
was the subject of a Determination Notice given by The Pensions Regulator
in June 2015 which might have become known to SMP, if it had undertaken
appropriate due diligence by questioning Mr Welsh as to whether he had
been subject to any regulatory investigation/action, before embarking
upon a business relationship with ACER.


19 Section 393 of the Act envisages that a “third party” could be identified in a statutory notice even if, in the
opinion of the Authority, the third party is prejudiced; and the third party will then receive a copy of the notice.

8. In addition, the Final Notice, dated 8 February 2016, was published on The
Pensions Regulator’s website and would have been publicly available
during the Relevant Period. The Final Notice sets out the Panel’s findings
that, inter alia, the investments in the Occupational Pension Scheme,
which included TRG, were all high-risk and highly illiquid and described in
the Final Notice in submissions made by the new trustee to the scheme as
“in a class of investments which had been recently been highlighted by
Action Fraud as potentially fraudulent”. Accordingly, there was publicly
available material during the Relevant Period which would have raised
concerns with a reasonable and prudent individual in Mr Martin’s position
in respect of SMP partnering with ACER and TRG/FRPS, had SMP conducted
appropriate due diligence on Mr Welsh and TRG. The Notice, at paragraph
4.19, links Mr Martin’s failures in due diligence to the matters of concern
expressed by The Pension Regulator and accordingly, the Authority
considers that the inclusion of the information contained in this paragraph
is relevant in order to set out the key facts and matters in Mr Martin’s case.