1

FINAL NOTICE

Individual reference number:
RDL01051


TAKE NOTICE: The Financial Services Authority of 25 The North Colonnade, Canary
Wharf, London E14 5HS (“the FSA”) gives Mr Lindley final notice about a
requirement to pay a financial penalty:

1.
THE ACTION

1.1.
The FSA gave Mr Lindley a Decision Notice on 6 June 2011 which notified Mr
Lindley that pursuant to section 66 of the Financial Services and Markets Act 2000
(“the Act”), the FSA had decided to impose a financial penalty of £14,000 on Mr
Lindley.

1.2.
Mr Lindley confirmed on 24 May 2011 that he will not be referring the matter to the
Upper Tribunal (Tax and Chancery Chamber) and agreed to settle at an early stage of
the FSA’s inquiries and therefore qualified for a 30% (Stage 1) reduction of the
financial penalty under the FSA’s executive settlement procedures. The FSA would
otherwise have sought to impose a financial penalty of £20,000 on Mr Lindley.

1.3.
Accordingly, for the reasons set out below, the FSA imposes a financial penalty on
Mr Lindley in the amount of £14,000.

2.
REASONS FOR THE ACTION

2.1.
The FSA decided to take this action as a result of Mr Lindley’s conduct as a director
of Alpha to Omega (UK) Ltd (“A2O” / “the Firm”) between 1 January 2008 and 21
January 2010 (“the Relevant Period”).

2.2.
During the Relevant Period, Mr Lindley’s conduct fell short of the FSA’s regulatory
standards required by the FSA’s Statements of Principle for Approved Persons
(“Statements of Principle”).

2.3.
Mr Lindley was approved to hold the CF 1 (Director) controlled function at A2O from
26 March 2003. This controlled function is a significant influence function. From 1
January 2008 Mr Lindley was appointed by the Board to the role of ‘Managing
Director’ of the Firm and was one of two executive directors actively involved in the
day-to-day running of the business from January 2008. As a senior executive director
at the Firm, Mr Lindley had the capability and capacity to influence the culture and
processes of A2O.

2.4.
Mr Lindley had a responsibility, as a senior executive director of the Firm and
significant influence function holder, to ensure that A2O, a network of independent
financial advisers, met its regulatory responsibilities but he failed to discharge that
responsibility effectively. Network principals are responsible for the sales their
appointed representatives make, and they need to be satisfied that their appointed
representatives (“ARs”) are offering suitable advice and treating customers fairly. As
a senior executive director and significant influence function holder, Mr Lindley was
responsible for ensuring that A2O established and maintained a culture which would
ensure that customers were treated fairly and that A2O had sufficiently robust systems
and controls to lead to fair outcomes for customers.

2.5.
Mr Lindley was primarily responsible for marketing and recruitment, and marketed
A2O to prospective ARs on the basis of its culture and business model of taking on
knowledgeable and innovative independent financial advisers (“IFAs”) who wished to
offer a wide range of products to their clients and would not want to be restricted to
recommending basic investments.

2.6.
Mr Lindley appreciated that compliance risk was a core risk to A2O’s business and
that A2O needed to exercise sufficient control and oversight of its ARs to mitigate
this risk. However, Mr Lindley relied entirely on the knowledge and competence of
the Firm’s compliance director and compliance department to ensure that the Firm
was complying with the FSA’s regulatory requirements, even where he had notice of
concerns about the effectiveness of the compliance function in monitoring certain
ARs.

2.7.
The FSA has found that Mr Lindley failed to take reasonable steps to ensure that A2O
complied with the relevant requirements and standards of the regulatory system, in
breach of Statement of Principle 7, in that Mr Lindley:

(1)
failed to assess the effectiveness of A2O’s efforts to manage compliance risk
through any evaluation of A2O’s compliance performance, either after his
appointment as Managing Director or when put on notice of FSA concerns
with the compliance function;

(2)
failed to ensure that the Firm collected relevant and accurate management
information to enable him to adequately identify, monitor and mitigate the
compliance risks to which the business was exposed; and

(3)
failed to take appropriate action to both correct and monitor the behaviour of
AR firms when he became aware of potential compliance risks posed by them,
or to ensure that the compliance function had resolved these issues.

2.8.
From the Firm’s “checked files” spreadsheet, 99% of the files reviewed by the Firm
were passed as compliant. In contrast, 98% of the files reviewed by the skilled person
were failed. This failure was particularly serious given the nature of A2O’s network
business and the significant amount of high risk business recommended to retail
clients by certain advisers, particularly recommendations to invest in UCIS.

2.9.
In reaching this conclusion, the FSA has considered the following mitigating factors:

(1)
Mr Lindley did not wilfully or deliberately disregard the compliance risk at
A2O;

(2)
Mr Lindley believed that the compliance function was monitoring 100% of
high risk business; and

(3)
Mr Lindley was aware that the Compliance Director was seeking some
external guidance with regards to certain high risk investment products.

3.
RELEVANT STATUTORY AND REGULATORY PROVISIONS

3.1.
Relevant statutory provisions, regulatory guidance and policy are set out at Annex A
to this Notice.

4.
FACTS AND MATTERS RELIED ON

4.1.
A2O was an IFA network authorised by the FSA on 26 March 2003. The head office
and administrative centre of the Firm was located in Winchester. When the Firm went
into administration on 25 January 2010, the network had 47 ARs, employing around
101 advisers. A2O also had seven directly approved advisers holding the CF30
(Customer) controlled function.

4.2.
From 26 March 2003, Mr Lindley held the Controlled Function 1 (Director). At this
time, he was the Operations Director at the Firm. This role gradually increased to
encompass finance and business development. Mr Lindley had principal
responsibility at the Firm for the recruitment, retention and business development of
ARs. In January 2008, he was appointed as the Managing Director of the Firm. From
this time, the Firm had only two executive directors engaged in the day-to-day
running of the Firm; Mr Lindley and the Compliance Director of the Firm. Mr
Lindley’s role as Managing Director of the Firm required him to have an overview of
key AR relationships and assume overall commercial oversight and leadership
responsibility at the Firm.

4.3.
Mr Lindley had no direct role in carrying out the compliance function at A2O and
relied entirely on the knowledge and expertise of the Firm’s Compliance Director to
oversee effectively the Firm’s compliance function. While Mr Lindley and the

Compliance Director were in charge of discrete areas, both maintained a high level
overview of the business and would seek to cover each other’s role if necessary.

4.4.
In April 2009, as a result of a review of client files of an AR of A2O, the FSA wrote
to A2O setting out concerns about the suitability of recommendations provided by
that AR, the effectiveness of A2O’s controls over its ARs in general and the
effectiveness of its compliance monitoring arrangements. As a result of these
concerns, the Firm voluntarily varied its regulatory permissions to stop its ARs from
recommending five high risk products, four of which were UCIS funds. A2O was also
required to commission a skilled person to establish A2O’s standards of compliance
oversight and controls, sales monitoring processes and corporate governance and
oversight.

4.5.
The skilled person’s report identified a number of concerns and issues in respect of
the compliance systems and controls at A2O and the subsequent effect this had on the
suitability of advice provided by some ARs of the Firm. The skilled person concluded
that 98% of the 41 files reviewed were not compliant; A2O’s compliance department
had passed 99% of these files as compliant. The report also identified a lack of
management information to provide effective oversight of the Firm’s business.

4.6.
A2O decided to focus the Firm’s resources on rectifying the issues identified in the
skilled person’s report by undertaking a ‘root and branch’ review of the compliance
systems in place at the Firm in accordance with the recommendations made by the
skilled person. The FSA were not however satisfied with the scope and extent of the
remedial action proposed by the Firm. Specifically, the FSA was concerned that client
detriment was not being properly investigated by the Firm and that clients had not
received any redress due to them.

4.7.
As a result of the FSA’s concerns stated at 4.6 above the Firm agreed to a voluntary
variation of permission (“VVoP”) with effect from 12 January 2010. Following a
failure to comply with the requirements of the VVoP and as a result of continuing
concerns, the FSA used its own initiative powers to vary A2O’s Part IV permission.
Under the terms of the Supervisory Notice dated 18 January 2010, A2O were required
to cease, with immediate effect, conducting all regulated activities for which it had
permission. A2O entered administration on 25 January 2010.

A2O’s business model and culture

4.8.
Mr Lindley was primarily responsible for the Firm’s marketing strategy and the
recruitment of new ARs. In April 2007, he formulated a new strategy to promote A2O
as “a ‘value added’ service provider” and a “flexible, customer-focussed network”.
The customers in this case were the ARs of A2O.

4.9.
Following that strategy, the culture and approach of A2O was to offer a personalised
and ‘bespoke’ service which sought to offer experienced ARs flexibility and freedom
to recommend higher risk products if they wished to do so. Mr Lindley marketed the
network to potential AR firms with an emphasis on this flexibility. The Firm’s
marketing material stated that:

“Overall, the A2O commitment is to choice. We take the simple approach that
independent advisers are our customers and we seek to give maximum choice
and top quality service to each of our customers whilst working within the
regulatory framework of the FSA.”

4.10. A2O’s business proposition as a network was designed to be attractive to experienced
IFAs with an interest in targeting increases in sales, some of whom wished to advise
on and new and innovative products. Mr Lindley told the FSA that the flexibility
offered by A2O meant that ARs would have more freedom to recommend higher risk
products if these were viewed as suitable by the Firm’s Compliance Director. The
network’s model of accepting some IFAs with an interest in promoting higher risk
products posed a higher compliance risk to A2O’s business.

4.11. In his role as Managing Director of the Firm, Mr Lindley conducted business
development meetings with ARs of A2O. He was aware, through these meetings, that
a number of advisers recommended a large volume of high risk products, including
UCIS funds. He was also aware that a number of A2O’s AR firms were members of
an informal marketing network. That network actively promoted UCIS and other
funds to A2O’s ARs.

4.12. As a senior executive director and significant influence function holder at the Firm,
Mr Lindley had a responsibility to ensure that the flexibility offered by A2O’s
business model was underpinned by robust controls in order to ensure that the
advisers recruited by A2O were in fact competent and provided their clients with
suitable investment advice.

Failure to take action when notified of significant risks

4.13. Mr Lindley did not have any involvement in the day-to-day running of A2O’s
compliance systems and was therefore not directly culpable for the failure to identify
and take remedial action in respect of unsuitable sales. He relied entirely on the
competence of the Firm’s Compliance Director and compliance department. He also
believed that the compliance function was ensuring that 100% of high risk business
was being monitored.

4.14. As one of two executive directors, Mr Lindley had a responsibility to ensure that A2O
complied with the relevant requirements and standards of the regulatory system across
all areas of the business, even where this area was not directly within his day-to-day
remit and control.

4.15. A2O did not have a framework in place to check the adequacy of the Firm’s
compliance function other than reliance on the reports of the Compliance Director.
Whilst Mr Lindley was generally supportive of the Compliance Director and any
requests made by the Compliance Director for additional resources and/or additional
staff, Mr Lindley failed to make any assessment after he took on the role of Managing
Director as to whether it was reasonable to rely on the Firm’s existing compliance
staff and compliance processes.

4.16. The FSA has found that Mr Lindley was aware of specific compliance issues that
were brought to his attention by A2O personnel and ARs. Mr Lindley was often

involved in discussions with the compliance department and the AR concerned when
an issue was detected. Mr Lindley continued to rely on assurances from the
Compliance Director that the compliance function was adequately addressing these
issues, even in circumstances where certain compliance issues had been ongoing over
a number of years. This indicated that A2O’s compliance systems and controls were
inadequate to resolve the ongoing compliance issues, but Mr Lindley failed to take
any action, including a failure to question why these compliance issues continued to
occur.

4.17. Mr Lindley was aware that a number of ARs were an ongoing concern to the
compliance team as they failed to report business written or respond to compliance
requests. Some of these advisers were so notorious within A2O that they were given
nicknames such as “the famous five” and “the three amigos” due to their
unwillingness to adhere to A2O’s compliance rules. These individuals, amongst
others, were recognized by A2O employees as posing an ongoing compliance concern
and for recommending a significant amount of high risk products. A2O employees
perceived that Mr Lindley was reluctant to reprimand or confront advisers who posed
a compliance risk to the Firm.

4.18. Mr Lindley was therefore aware, or should have been aware, that these advisers
potentially posed a significant risk to A2O. Despite this, he failed to take appropriate
steps to ensure that these advisers were monitored effectively. The Firm’s compliance
records do not demonstrate that these advisers were subject to more effective
compliance monitoring such as more rigorous file reviews or more challenging
compliance visits.

4.19. In April 2009, the FSA specifically highlighted its concerns with A2O’s compliance
monitoring of higher risk UCIS business to A2O and the Firm took some action in an
attempt to address those concerns. However the FSA considers that those actions were
inadequate and despite the indication by the FSA that the compliance systems and
controls were inadequate in certain areas, Mr Lindley continued to rely entirely on the
Firm’s Compliance Director to ensure the suitability of these systems. Mr Lindley
told the FSA that it was not until October 2009, when the results of the skilled
person’s review into the Firm were made available, that Mr Lindley began to question
the competency of the Firm’s Compliance Director.

Failure to implement and make proper use of management information to

understand the risks associated with business written by advisers

4.20. Prior to Mr Lindley’s business development meetings with ARs he was provided with
information regarding the types of business written by the AR firm. A number of
these information printouts clearly indicated that some advisers were recommending a
significant amount of UCIS funds. Despite this information, Mr Lindley told the FSA
that he understood that A2O ARs did not advise on a lot of high risk investment
products. The FSA considers this an unreasonable assumption for Mr Lindley to
make as this could not be supported by the management information which was
available and used by him.

4.21. The Business Plan of March 2008 states that one of Mr Lindley’s responsibilities as
Managing Director is to have an overview of key member relationships. A2O’s sales

7


proposition suggested that all A2O directors would be familiar with the business
written by its members and as Managing Director, Mr Lindley should have had a good
knowledge of the types of business written by advisers. While the FSA accepts that
that not all of A2O ARs recommended high risk investment products, there was a core
group of advisers who did recommend such products and for whom such products
formed a material part of their business.

4.22. Data obtained from one UCIS product provider shows that A2O sold the greatest
volume of funds for that provider, amounting to investments of £6.9million. Data
obtained from a structured product provider shows that A2O had the second largest
volume of sales, equalling investments of £6.2 million.

4.23. Mr Lindley acknowledged that he only had a high level understanding of UCIS and
the types of consumers to whom these could be promoted and therefore sold. Despite
the risk that such products could pose to A2O’s clients, he relied entirely on the
compliance department of A2O to ensure that ARs were properly promoting and
selling UCIS products, as Mr Lindley did not feel he had the knowledge and
experience to inform himself about these products. The FSA accepts that the Firm
obtained some external technical assistance on UCIS products but consider that the
Firm failed to take sufficient steps to ensure the suitability of its ARs
recommendations to customers to invest in UCIS.

4.24. The FSA have found that there was a lack of accurate and relevant management
information available to the Board. Information obtained from file reviews and
compliance visits to firms was not collated and analysed to produce management
information that would have enable the directors to assess product or commission bias
risks, or the risks and nature of products being sold. The Firm did not have sufficient
management information to enable it to satisfy itself that the risk appetite of
customers and associated risks of products being recommended by the Firm’s advisers
matched.

4.25. As a result of the lack of detail in A2O’s management information, the Board reports
contained insufficient information to enable the directors to properly understand the
risks to which the business was exposed. In particular, compliance reports contained
stock phrases such as “The range and type of products being recommended by
members remains within our tolerance limits..” and “We continue to actively review
circa 10-15% of all business which amounts to 100% of “higher risk” business”
which were repeated on a monthly basis and failed to clearly identify any issues
identified by the compliance function. As a senior executive director of the Firm, it
was Mr Lindley’s responsibility to ensure that he provided sufficient challenge to the
information provided to him during Board meetings. He failed to do this and took at
face value the information provided to him by the Firm’s Compliance Director.

4.26. From January 2007, A2O utilised a back office system to process commission due to
ARs and advisers. The Firm relied on this software to produce information about the
type and volume of business written. The software system used by the Firm had a
number of functions which could be used to automate and improve the Firm’s
compliance processing systems.

4.27. Mr Lindley was aware of this functionality from March 2007 but failed to ensure that
it was implemented by the compliance team in a timely manner, which as Managing
Director from January 2008 he could have done. A2O began to implement these
functions as part of its action plan following the skilled person’s report. They were
never fully used by the Firm prior to it entering administration in January 2010.

4.28. The FSA has found that there were a number of risks posed by reliance on A2O’s
back office commission processing system for data about the type and volume of
business written, namely:

(1)
The way in which advisers defined product types on their new business
submission sheets was not always consistent. As a result, a UCIS could
be categorised interchangeably as offshore bonds, investment bonds and
UCIS. This meant that Mr Lindley could not know with any degree of
accuracy what types of business were being written by advisers and
relied entirely on the Firm’s ARs to accurately inform A2O of the
business they had written.

(2)
The commissions system did not record, in relation to investments held
within a wrapper product, what were the underlying investments. As a
result, there may have been an unknown number of cases where a UCIS
recommendation was made as part of a wrapper product without A2O
being able to identify that a UCIS product had been sold. It was not until
late 2008 that the Firm appreciated this risk and began to contact
platform providers in order to ascertain what funds or products were
contained within the wrapper.

(3)
Some advisers failed to report business written to A2O in a timely
manner. Mr Lindley was aware who these advisers were, as they were
routinely discussed at the management meetings which he attended, but
despite the Firm issuing some general warnings to the network’s ARs
about this issue, Mr Lindley failed to take adequate action to ensure that
advisers were monitored with sufficient robustness to remedy the issue.
Given that A2O’s compliance team relied on the accuracy of new
business submissions to choose files for review, late reporting meant that
there was a risk that files may not be reviewed in a timely fashion, to the
potential detriment of the consumer.

(4)
In some instances certain advisers failed to report business written to
A2O at all, and liaised directly with product providers to obtain
commission payments. Again, Mr Lindley was aware who these advisers
were as they were regularly discussed at management meetings over the
relevant period. This issue was a particular concern with advisers who
recommended investments in UCIS or a significant amount of high risk
business. As a result, there was an unquantifiable amount of business
being written by ARs which the Firm were not aware of until it found
out about such business on an ad hoc basis when issues with payment of
commission arose.

4.29. Mr Lindley was aware of this problem over a two year period but failed to take
appropriate action to mitigate the risk posed by these issues. There is no evidence to
suggest that he took any specific action against advisers who continued to provide
incomplete or inaccurate information or ensure that A2O had a system for collecting
accurate and timely information about the business written by advisers. Instead, and in
spite of the evidence that he was aware of these issues and the risks posed by them,
Mr Lindley continued to rely only on regular reports from the Compliance Director
indicating that any compliance issues were being adequately addressed.

5.
ANALYSIS OF BREACHES AND SANCTION

5.1.
Mr Lindley had a responsibility as a senior executive director and significant
influence function holder to ensure that A2O met its regulatory responsibilities but he
failed to discharge that responsibility effectively. The culture and business strategy of
A2O’s network offered advisers flexibility to recommend high risk and innovative
investments products. This flexibility should only have been offered to ARs of the
Firm if there were sufficiently stringent controls in place to ensure that advice given
to customers was suitable.

5.2.
In failing to ensure that he took reasonable steps to ensure that A2O complied with
the relevant requirements and standards of the regulatory system, Mr Lindley
breached Statement of Principle 7 as he:

(1)
failed to take reasonable steps to ensure that the Firm collected relevant
and accurate management information to enable him to identify, monitor
and mitigate the compliance risks to which the business was exposed;

(2)
failed to take reasonable steps to measure the effectiveness of A2O’s
efforts to manage compliance risk through any evaluation of A2O’s
compliance performance at any point after his appointment as Managing
Director or after being given specific notice of FSA’s concerns with the
adequacy of the compliance function in monitoring higher risk products
in April 2009; and

(3)
failed to take appropriate action to correct and monitor the behaviour of
AR firms when he became aware of potential compliance risks posed by
them, or to track progress in correcting issues which did not appear to
have been adequately addressed by the compliance function at the Firm.

5.3.
The compliance function was not Mr Lindley’s direct and primary responsibility and
he was not therefore directly culpable for the widespread failings which the FSA
identified in A2O’s compliance systems and procedures. Mr Lindley relied on
assurances from the Compliance Director that the compliance function was checking
100% of high risk business written by the Firm’s ARs.

5.4.
The board reports relating to compliance did not indicate that there were any systemic
issues with the Firm’s compliance function. However, these reports contained limited
information from which that inference could be drawn independently and the lack of
detail in the information was not challenged either.

5.5.
However, Mr Lindley had a responsibility to ensure that A2O met its regulatory
responsibilities, which included a responsibility for the control and monitoring of the
activities of ARs. Mr Lindley needed to be satisfied that the Firm’s ARs were
offering suitable advice to retail customers. This was particularly important having
regard to the nature of A2O’s network business and the significant amount of higher
risk investment products recommended by certain ARs of the Firm.

5.6.
Mr Lindley’s failure to exercise sufficient challenge of the compliance function when
he was aware of specific compliance issues posed by ARs led him to assume,
wrongly, that A2O’s compliance function was operating effectively until the delivery
of the skilled person’s report. As a result, A2O’s customers were exposed to the risk
of receiving potentially unsuitable investment advice. In some cases, this risk has now
crystallised, causing significant consumer detriment.

Imposition of a financial penalty

5.7.
The FSA’s policy on the imposition of financial penalties relevant to the misconduct
as detailed in this Notice is set out in Chapter 6 of the version of the Decision
Procedure and Penalties Manual (“DEPP”) in force prior to 6 March 2010, which
formed part of the FSA Handbook. All references to DEPP in this section are
references to that version of DEPP.

5.8.
In determining whether a financial penalty is appropriate the FSA is required to
consider all the relevant circumstances of a case. DEPP 6.5.2G sets out a non-
exhaustive list of factors that may be of relevance in determining the level of a
financial penalty. The FSA considered that the following factors are particularly
relevant in this case.

Deterrence (DEPP 6.5.2(1))

5.9.
In determining the level of the financial penalty, the FSA had regard to the need to
ensure those who are approved persons exercising management functions act in
accordance with regulatory requirements and standards. The principal purpose of the
imposition of this penalty is to promote high standards of regulatory conduct by
deterring persons who have committed breaches from committing further breaches,
helping to deter other persons from committing similar breaches and demonstrating
generally the benefits of compliant behaviour.

The nature, serious and impact of the breaches (DEPP 6.5.2(2))

5.10. The FSA has also had regard to the seriousness of the breaches. The FSA has
concluded that Mr Lindley exercised inadequate management and control over the
running of the business which resulted in his failure to comply with the regulatory
requirements.

5.11. It is not clear the exact extent to which clients may have suffered actual loss as a
result of the potential breaches given the lack of adequate management information at
the Firm. However, the FSA has considered the significant amount of high risk
business advice given by some of the Firm’s ARs.

5.12. Of the 14 files reviewed by the skilled person in which the client had been sold a
UCIS, seven files suggest that the client had been incorrectly classified as a high net
worth or sophisticated investor where this conclusion could not have been supported
by facts on the file. In all these cases, the skilled person concluded that this could lead
to consumer detriment. Of the 39 files reviewed by the skilled person in total, 30 were
deemed to have caused consumer detriment.

The extent to which the breach was deliberate or reckless (DEPP 6.5.2(3))

5.13. The FSA considers that Mr Lindley did not act in a deliberate or reckless manner.

Whether the person on whom the penalty is to be imposed is an individual (DEPP

6.5.2(4))

5.14. When determining the appropriate level of financial penalty, the FSA will take into
account that individuals will not always have the same resources as a body corporate,
that enforcement action may have a greater impact on an individual, and further, that
it may be possible to achieve effective deterrence by imposing a smaller penalty on an
individual than a body corporate. The FSA will also consider whether the status,
position and/or responsibilities of the individuals are such as to make a breach
committed by the individual more serious and whether the penalty should therefore be
set at a higher level.

5.15. The FSA recognises that the financial penalty imposed on Mr Lindley is likely to have
a significant impact on him as an individual but is considered to be proportionate
given his position as an approved person performing a significant influence function
at A2O.

The size, financial resources and other circumstances of the person on whom the

penalty is to be imposed (DEPP 6.5.2(5))

5.16. The FSA considers that a financial penalty of the level proposed is appropriate,
having taken account of all relevant factors, including Mr Lindley’s income from
A2O during the relevant period. Mr Lindley earned £66,000 per annum over the
relevant period.

Previous action taken by the FSA (DEPP 6.5.2G (9))

5.17. In determining the appropriate sanction, the FSA has taken into account sanctions
imposed by the FSA on other approved persons for similar behaviour. This was
considered alongside the deterrent purpose for which the FSA imposes sanctions.

5.18. Mr Lindley has co-operated with the investigation, and the FSA has also taken into
account the fact that the period between April 2009 and January 2010 was atypical for
the Firm, as the Firm was working with the skilled person and had experienced a
sharp increase in complaints.

5.19. This had an impact on the compliance department’s ability to carry out “business as
usual” compliance tasks that was further exacerbated when the compliance director
was absent from September 2009, at which point Mr Lindley was the only remaining
director with responsibility for the day to day running of the case.

5.20. However, the senior management of a firm should be aware that the activities of
appointed representatives are an integral part of the business that they manage. As a
result of the breaches set out above in paragraphs 5.1 and 5.2 above, Mr Lindley
failed to demonstrate that he managed effectively the business for which he was
responsible as Managing Director and a significant influence function holder so that
A2O met its regulatory obligations under the FSA’s Principles for Business. The FSA,
having regard to all the circumstances, consider the appropriate level of financial
penalty to be £20,000 before any settlement discount.

6.
DECISION MAKERS

6.1.
The decision which gave rise to the obligation to give this Final Notice was made by
the Settlement Decision Makers on behalf of the FSA.

7.
IMPORTANT

7.1.
This Final Notice is given to Mr Lindley under section 67 of the Act in accordance
with section 390 of the Act.

Manner and time for payment

7.2.
The financial penalty must be paid in full by Mr Lindley to the FSA by no later than
14 days from the date of the Final Notice.

7.3.
If all or any of the financial penalty is outstanding on 22 July 2011 the FSA may
recover the outstanding amount as a debt owed by Mr Lindley to the FSA.

7.4.
Sections 391(4), 391(6) and 391(7) of the Act apply to the publication of information
about the matter to which this notice relates. Under those provisions, the FSA must
publish such information about the matter to which this notice relates as the FSA
considers appropriate. The information may be published in such manner as the FSA
considers appropriate. However, the FSA may not publish information if such
information would, in the opinion of the FSA, be unfair to Mr Lindley or prejudicial
to the interests of consumers.

7.5.
The FSA intends to publish such information about the matter to which this Final
Notice relates as it considers appropriate.

FSA contacts

7.6.
For more information concerning this matter generally contact Stephen Robinson of
the Enforcement and Financial Crime Division of the FSA (direct line: 020 7066 1338
/ fax: 020 7066 1339).

Georgina Philippou
FSA Enforcement and Financial Crime Division

Annex A

STATUTORY PROVISIONS, REGULATORY GUIDANCE AND POLICY

1.
Statutory Provisions

1.1.
The FSA’s statutory objectives are set out in section 2(2) of FSMA, maintaining
confidence in the financial system, the protection of consumers and the reduction of
financial crime.

1.2.
Under section 66 of the Act, the FSA has the power to impose a financial penalty of
such an amount as it considers appropriate where the FSA considers an approved
person has failed to comply with a Statement of Principle issued under section 64 of
the Act.

2.
Regulatory Requirements

APER

2.1.
APER is issued pursuant to section 64 of the Act. It sets out Statements of Principle
with which approved persons are required to comply when performing a controlled
function for which approval has been sought and granted. They are general
statements of the fundamental obligations of approved persons under the regulatory
system. APER also contains descriptions of conduct which, in the opinion of the
FSA, constitutes a failure to comply with a particular Statement of Principle and
describes factors which the FSA will take into account in determining whether an
approved person’s conduct complies with it.

2.2.
APER 3.1.3G stipulates that when establishing compliance with, or a breach of, a
Statement of Principle, account will be taken of the context in which a course of
conduct was undertaken including the precise circumstances of the individual case,
the characteristics of the particular controlled function and the behaviour to be
expected in that function/

2.3.
APER 3.1.4G states that an approved person will only be in breach of a Statement of
Principle if they are personally culpable, that is, where their conduct was deliberate or
where their standard of conduct was below that which would be reasonable in all the
circumstances.

2.4.
In this case, the FSA considers that the most relevant Statements of Principle to
Statement are Principle 7 (“APER 7”) under which an approved person must take
reasonable steps to ensure that the business of the firm for which he is responsible
complies with the relevant requirements and standards of the regulatory system.

2.5.
APER 4.7 gives examples of conduct which does not comply with Statement of
Principle 7. This includes but is not limited to:

(1)
failing to take reasonable steps to implement (either personally or
through a compliance department or other departments) adequate and
appropriate systems of control (APER 4.7.3E);

(2)
failing to take steps to monitor (either personally or through a
compliance department) compliance with the relevant requirements and
standards of the regulatory system (4.7.4E); and

(3)
failing to take reasonable steps to adequately inform himself about the
reason why significant breaches (whether suspected or actual) of the
relevant requirements and standards of the regulatory system may have
arisen.

3.
FSA’s policy on exercising its power to impose a financial penalty

3.1.
The FSA's statement of policy with respect to the imposition and amount of penalties
under the Act, as required by sections 69(1), 93(1), 124(1) and 210(1) of the Act, and
guidance on those matters is provided in Chapter 6 of the FSA’s Decision Procedure
and Penalties Manual (“DEPP”), entitled “Penalties”, which is part of the FSA’s
Handbook. In summary, chapter 6 of DEPP states that the FSA will consider the full
circumstances of each case when determining whether or not to take action for a
financial penalty, and sets out a non-exhaustive list of factors that may be relevant for
this purpose.

3.2.
The principal purpose of imposing a financial penalty is to promote high standards of
regulatory conduct by deterring persons who have committed breaches from
committing further breaches, helping to deter other persons from committing similar
breaches and demonstrating generally the benefits of compliant behaviour.

3.3.
The FSA will consider the full circumstances of each case when determining whether
or not to take action for a financial penalty. DEPP6.2.1G sets out guidance on a non-
exhaustive list of factors that may be of relevance in determining whether to take
action for a financial penalty, which include the following.

(1)
DEPP 6.2.1G (1): The nature, seriousness and impact of the suspected
breach.

(2)
DEPP 6.2.1G (2): The conduct of the person after the breach.

(3)
DEPP 6.2.1G (3): The previous disciplinary record and compliance
history of the person.

(4)
DEPP 6.2.1G (4): FSA guidance and other published materials.

(5)
DEPP 6.2.1G (5): Action taken by the FSA in previous similar cases.

3.4.
The FSA will consider all the relevant circumstances of a case when it determines the
level of financial penalty. DEPP 6.5.2G sets out guidance on a non exhaustive list of
factors that may be of relevance when determining the amount of a financial penalty.

3.5.
Factors that may be relevant to determining the appropriate level of financial penalty
include:

(1)
whether the breach revealed serious or systematic weaknesses in the
person's procedures or of the management systems or internal controls
relating to all or part of a person's business (DEPP 6.5.2G (2) (b)); and

(2)
the general compliance history of the person, including whether the FSA
has previously brought to the person's attention, issues similar or related
to the conduct that constitutes the breach in respect of which the penalty
is imposed (DEPP 6.5.2(9)(d)).