Final Notice
FINAL NOTICE
Individual reference:
SXU00004
1.
ACTION
1.1.
The FSA gave Stuart Unwin (“Mr Unwin”) a Decision Notice dated 2 March 2011
which notified Mr Unwin that the FSA had decided to make an order against him,
pursuant to section 56 of the Financial Services and Markets Act 2000 (“the Act”),
prohibiting him from performing any significant influence function in relation to any
regulated activity carried on by any authorised person, exempt person, or exempt
professional firm (“the Prohibition Order”).
1.2.
Mr Unwin referred the matter to the Upper Tribunal (Tax and Chancery Chamber)
(“the Tribunal”) on 30 March 2011 but, following settlement discussions with the
FSA, notified the Tribunal of the withdrawal of the reference on 19 April 2012. The
Tribunal gave its consent on 20 April 2012.
1.3.
Accordingly, for the reasons set out below, the FSA hereby makes an order
prohibiting Mr Unwin from performing any significant influence function in relation
to any regulated activity carried on by any authorised person, exempt person, or
exempt professional firm. This order takes effect from 25 April 2012. Significant
influence functions include those of CF1 (Director), CF2 (Non-executive director),
CF3 (Chief executive), CF4 (Partner), CF8 (Apportionment and oversight), CF10
(Compliance oversight) and CF11 (Money laundering reporting). The prohibition
does not relate to CF30 (Customer function) and therefore an investment adviser role.
1.4.
The FSA would be minded to revoke the Prohibition Order, on Mr Unwin’s
application, in the event that Mr Unwin is able to demonstrate to the satisfaction of
the FSA that he has taken adequate steps to remedy his lack of competence and
capability. When considering whether to grant an application to revoke or vary the
Prohibition Order, the FSA will consider all relevant information available at the time
of the application.
2.
REASONS FOR THE ACTION
2.1.
The FSA is taking this action because while an approved person performing
controlled functions involving the exercise of significant influence at Unwin Financial
Services Limited (“UFSL”) from the period 3 January 2006 to 18 November 2008
(“the relevant period”), Stuart Unwin failed to meet minimum regulatory standards in
terms of competence and capability. Specifically, Mr Unwin:
(1)
failed to ensure:
(a)
that UFSL’s systems and controls were sufficient to ensure all
occupational pension transfers written by UFSL were identified and
signed off by a pension transfer specialist; and
(b)
the suitability of all occupational pension transfer advice given to
UFSL’s customers up to August 2007
despite being made aware by the FSA in August 2007 that there were
deficiencies in UFSL’s systems and controls and of the risk that unsuitable
advice had been given to customers;
(2)
delegated compliance to an individual who Mr Unwin knew lacked
experience, without him having a proper basis for considering that he was
competent. This was in circumstances where that compliance officer would be
responsible for, amongst other things, supervising an adviser who had been
dismissed by a previous employer because of being connected with possible
mortgage fraud, where Mr Unwin failed to retain sufficient oversight of what
he had delegated and when UFSL had either inadequate or no external
compliance support; and
(3)
failed to take reasonable steps to implement adequate and appropriate systems
and controls to ensure the effective monitoring of UFSL’s advisers and in
particular its trainee advisers. As a result, UFSL:
(a)
failed to ensure the suitability of occupational pension transfer advice
to UFSL’s customers; and
(b)
was at an unacceptably high risk of being used for the purposes of
financial crime, including mortgage fraud.
2.2.
The FSA considers that Mr Unwin’s failings were serious because they exposed
UFSL’s customers to a serious risk of receiving unsuitable occupational pension
transfer advice. In addition, Mr Unwin’s actions exposed UFSL to the risk of being
used to facilitate financial crime, specifically mortgage fraud.
2.3.
As a result of the nature and seriousness of the conduct outlined at paragraph 2.1
above, the FSA has concluded that Mr Unwin is not fit and proper to perform any
significant influence functions in relation to regulated activities carried on by
authorised persons, exempt persons and exempt professional firms. Accordingly the
FSA proposes to prohibit Mr Unwin from doing so.
2.4.
This action supports the FSA’s objectives of consumer protection and the reduction of
financial crime.
3.
RELEVANT STATUTORY PROVISIONS, REGULATORY REQUIREMENTS
AND FSA GUIDANCE
3.1.
The relevant statutory provisions, regulatory guidance and policy relied upon are set
out at Annex A.
4.
FACTS AND MATTERS RELIED ON
4.1.
UFSL was a financial services firm which conducted life, pensions, investment and
mortgage business and was authorised by the FSA to carry out these activities from 3
January 2006 until 29 March 2010 (except UFSL’s permission to advise on pension
transfers/opt outs which ran from 3 January 2006 to 6 February 2009.)
4.2.
UFSL was based in March, Cambridgeshire and had advisers in locations across the
UK.
4.3.
Between 3 January 2006 and 20 March 2009 Mr Unwin was approved by the FSA to
perform the controlled functions of Controlled Function (“CF”) 1 (Director), CF8
(Apportionment and Oversight), CF10 (Compliance Oversight), CF11 (Money
Laundering Reporting), and were responsible for insurance mediation. During the
relevant period Mr Unwin was the only individual at the firm with responsibility for
compliance and for apportionment and oversight.
4.4.
Mr Unwin also held CF21 (Investment Adviser) and CF24 (Pension Transfer
Specialist) from 3 January 2006 until 31 October 2007, and subsequently CF30
(Customer) from 1 November 2007 until 22 July 2009.
Mr Unwin’s failure to comply with regulatory requirements in respect of
advising on occupational pension transfers
Regulatory background
4.5.
Defined benefit occupational pension schemes provide guaranteed incomes in
retirement based on an employee’s final salary and length of service. In contrast, the
benefit from a money purchase personal pension is not guaranteed; it is linked to the
performance of the underlying investments. Customers who transfer from a defined
benefit occupational scheme to a money purchase personal pension are therefore
giving up a guaranteed level of income in retirement for an uncertain level of income.
4.6.
Occupational pension transfers are complex, high risk transactions. Until 31 October
2007 the FSA specified the controlled function of pension transfer specialist (CF24).
This required that an individual performing the role of a pension transfer specialist
needed to have passed an appropriate examination. Since 1 November 2007, when
CF24 was removed from the list of Controlled Functions specified by the FSA, if an
individual who is not a pension transfer specialist gives a personal recommendation
about a pension transfer or pension opt-out on a firm's behalf, the firm must ensure
that the recommendation is checked by a pension transfer specialist (an individual
appointed by a firm to check the suitability of a pension transfer or pension opt-out
who has passed an appropriate examination).
4.7.
Firms conducting occupational pension transfers are required to comply with the
Conduct of Business Rules which form part of the FSA Handbook, extracts of which
can be found at Annex A. Specifically, Until 31 October 2007 all defined benefit
occupational pension transfers required a transfer value analysis system (“TVAS”)
report to be carried out. A TVAS report set out the minimum investment yield
required from a new personal pension scheme in order to match the benefits in the
ceding scheme that were being given up. The purpose of the TVAS was to enable an
assessment to be made on whether a pension transfer was likely to be suitable in the
context of a customer’s attitude to risk and other personal and financial
circumstances. Since 1 November 2007 firms have been required to compare the
benefits likely (on reasonable assumptions) to be paid under a defined benefits
pension scheme with the benefits provided by a personal pension scheme or
stakeholder pension scheme, before it advises a retail client to transfer out of a
defined benefits pensions scheme.
Occupational pension transfers
4.8.
As the person responsible at UFSL for occupational pension transfers, Mr Unwin was
responsible for establishing and maintaining effective systems and controls to ensure
UFSL’s occupational pension transfers were conducted in accordance with regulatory
requirements.
4.9.
The FSA reviewed eight of the 14 occupational pension transfers conducted by UFSL
during the relevant period. The FSA found that:
(1)
In two cases no TVAS calculation (or equivalent) was on file;
(2)
Only one of the eight files reviewed had evidence that it had been signed off
by Mr Unwin as UFSL’s pension transfer specialist. The sign off was given at
least two months after the TVAS had been prepared for the customer. In the
remaining seven cases there was no evidence that the advice had been signed
off by Mr Unwin; and
(3)
Two files failed to show customers being informed that benefits associated
with their existing occupational pension, for example death benefits and RPI
increases, would be lost upon the transfer to a personal pension. The loss of
death benefit was particularly important for one of the customers who had
three young children.
4.10. The deficiencies outlined above demonstrate that Mr Unwin has failed to ensure that
UFSL’s occupational pension transfers were conducted in accordance with regulatory
requirements. Mr Unwin failed to ensure that a TVAS (or equivalent) was always
carried out before recommendations were made to customers. Mr Unwin also failed
to ensure that a comparison was always carried out of the benefits likely (on
reasonable assumptions) to be paid under a defined benefits pension scheme with the
benefits afforded by a personal pension scheme, before UFSL’s customers were
advised to transfer out of a defined benefits pension scheme.
Mr Unwin’s failure adequately to act on concerns raised by the FSA
4.11. The FSA visited UFSL in March 2007 (“the March 2007 Visit”). The March 2007
Visit identified a number of concerns, in particular with UFSL’s occupational pension
transfer business. On 3 August 2007, the FSA wrote to Mr Unwin outlining its
concerns and the remedial action required. The FSA’s concerns included that
occupational pension transfers conducted by UFSL had not been properly identified
as such in the new business register, and/or had not been signed off by UFSL’s
pension transfer specialist (who was Mr Unwin) and that two occupational pension
transfers were being transacted on an “insistent customer” basis in circumstances
where the advice to the client that the transaction should not proceed was unclear.
4.12. Consequently, the FSA advised Mr Unwin to:
(1)
review all occupational pension transfers conducted by UFSL since January
2006. The review was to take account of the comments made in the FSA’s
report to Mr Unwin dated 3 August 2007, including the comments on the
insistent client process. The review was to assess the suitability of
transactions, and if necessary, further client communication. The review was
to be completed within two months of the date of the report letter and the
findings reported to the FSA; and
(2)
consider how cases are recorded on UFSL’s new business register, to ensure
that accurate management information was collected.
Review of UFSL’s occupational pension transfers
4.13. In November 2007, Mr Unwin told the FSA that he had “re-reviewed” five
occupational pension transfers and telephoned all occupational pension transfer
customers to confirm their understanding and acceptance of the occupational pension
transfer they had entered into.
4.14. Mr Unwin stated that during the telephone calls he asked customers how they got on
with the advisor, what the advisor did, the customers’ understanding of the transaction
entered into and whether the customer had any issues they wished to discuss.
4.15. In addition, Mr Unwin wrote to customers to confirm that they “were happy with no
issues of understanding.”
4.16. The FSA has seen no evidence that Mr Unwin reviewed the occupational pension
transfers conducted by UFSL to the extent necessary to make an informed assessment
of the suitability of the recommendation; checking whether customers were happy
7
with the service provided is insufficient to determine that the transaction they entered
into was suitable for their needs.
Identification and sign-off of occupational pension transfers
4.17. In November 2007, Mr Unwin told the FSA that he had implemented a new back
office system, which flagged all occupational pension transfers. Mr Unwin explained
that the system was checked to ensure that all occupational pension transfers were
signed off by Mr Unwin, as UFSL’s occupational pension transfer specialist. One
occupational pension transfer was advised on by UFSL after the purported
improvements to the identification and sign off of occupational pension transfers. In
this case there was no comparison on file of the benefits likely (on reasonable
assumptions) to be paid under a defined benefits pension scheme with the benefits
provided by a personal pension scheme or stakeholder pension scheme, the suitability
letter also failed to address loss of benefits and risks of transfer and the advice had not
been signed off by Mr Unwin.
4.18. The amended system required a member of UFSL’s staff to enter the details of all
transactions conducted by UFSL onto a spreadsheet. The transaction should have been
classified according to the details on the application form.
4.19. However, during the March 2008 Visit, SF&CD noted that files were mis-labelled
and that occupational pension transfers were not always correctly classified. In
addition, during the November 2008 visit, the FSA identified another two
occupational pension transfers which had not been signed off by Mr Unwin as
UFSL’s pension transfer specialist.
4.20. From March 2007 Mr Unwin was aware that the FSA’s had concerns about how he
identified and signed off occupational pension transfer business. The FSA
communicated these concerns to Mr Unwin in writing in August 2007. However,
when the FSA went back to visit UFSL in March 2008 and again in November 2008 it
found that occupational pension transfers were still not being identified and signed
off. The FSA considers that Mr Unwin’s conduct with regard to his continuing failure
to ensure that changes made to UFSL’s systems and controls of occupational pension
transfers were effective and his failure adequately to review the occupational pension
transfers conducted by UFSL until August 2007 demonstrate a serious lack of
competence and capability.
Mr Unwin’s failure to ensure the adequacy of UFSL’s compliance function and
monitoring
4.21. The FSA expects firms and their senior managers to ensure that an employee who is
engaging in an activity with or for private customers has been assessed as competent
and is appropriately monitored. Mr Unwin was responsible for ensuring the
competence and supervision of his staff.
4.22. UFSL’s compliance officer (“Individual A”) was UFSL’s compliance officer
throughout the relevant period. When Mr Unwin appointed Individual A he knew he
had no previous experience of either supervising staff or of compliance. Individual A
did, however, attend a number of compliance courses run by a product provider and
three FSA workshops.
4.23. Between January 2006 and March 2008 Individual A spent approximately 25% of his
time on compliance matters, 25% of his time on supervising staff and 50% of his time
on sales. From March 2008 he spent 100% of this time on compliance.
4.24. Mr Unwin delegated all of his responsibility for overseeing compliance at UFSL to
Individual A without having reasonable grounds for believing that he was able to deal
with the matters that had been delegated to him. In addition Mr Unwin did not check
what Individual A was doing to fulfil his role as UFSL’s compliance officer.
External compliance consultants
4.25. Mr Unwin employed external compliance consultants in December 2005, but
terminated their employment in December 2007 because he was dissatisfied with the
service provided. The FSA has seen no evidence to suggest that he employed
alternative external compliance consultants after this date.
Monitoring of trainee advisers
4.26. UFSL’s advisers were not monitored effectively. In particular, UFSL failed to:
(1)
check all of the mortgage business written by one of UFSL’s mortgage
advisers who was subject to 100% file check due to his dismissal from a
previous employer for involvement in possible mortgage fraud. This resulted
in a mortgage application being submitted to a lender, through UFSL,
containing false information; and
(2)
check all of the business written by one of UFSL’s trainee advisers who was
subject to 100% file check. This resulted in her giving advice on occupational
pension transfers, when she was not qualified to do so.
4.27. The FSA concludes that Mr Unwin’s conduct in delegating UFSL’s compliance
function to an individual who he knew had no experience of supervising advisers or of
compliance, in circumstances where Mr Unwin failed to check the standard of that
individual’s work on an on going basis when UFSL had either inadequate or no
external compliance support and where that individual was responsible for
supervising trainee advisers, including one who had been dismissed by a former
employer because of an apparent connection with mortgage fraud, demonstrates a
serious lack of competence and capability.
5.
REPRESENTATIONS, FINDINGS AND CONCLUSIONS
Representations
5.1.
Mr Unwin made written and oral representations on the contents of the Warning
Notice that had previously been given to him. In addition Mr Unwin provided a
bundle of material in support of his representations.
5.2.
Mr Unwin put forward a variety of distinct submissions in his effort to challenge the
allegations within the Warning Notice. Mr Unwin highlighted the systems and
controls he had put in place at UFSL, whilst he also criticised the FSA for the
standard of supervision of his firm. Additionally Mr Unwin also complained about
his treatment by both the FSA’s Small Firms and Contact Division (in Supervision)
and the Enforcement Division. In the course of his representations Mr Unwin did
accept that he had made errors when discharging his significant influence function at
UFSL. However Mr Unwin sought to diminish the significance of his admitted
failings by stressing the fact that the FSA was also to blame as it should have given
him more assistance.
5.3.
Mr Unwin provided succinct submissions detailing his background in financial
services and his running of UFSL. Mr Unwin explained that following a change in
the arrangements between UFSL and the network that it had been associated with, it
had been necessary for him to purchase an external compliance function from that
network. Mr Unwin noted that having concluded that no real oversight was being
undertaken by the network he had decided to dispense with their services. Mr Unwin
explained that to address the lack of a compliance function at UFSL he had recruited
an individual to act as the compliance officer whilst he also intended to plug the gap
in oversight at UFSL by relying on the FSA. Mr Unwin described how he had gone
“direct to the FSA for supervision” in the anticipation that the FSA was there to “help
you to get to your goal”. Unfortunately in Mr Unwin’s estimation, the FSA had fallen
far short of what he had hoped it would do. He noted, by way of example, that when
looking into the provision of advice concerning occupational pensions the FSA had
demonstrated that it did not know who was permitted provide such advice at UFSL.
That being said Mr Unwin did accept that there had been issues about his own
qualifications in this area as they had apparently lapsed without his having been
aware.
5.4.
Having highlighted what he had done on his own initiative to put in place appropriate
systems and controls at UFSL, Mr Unwin then sought to explain how he had sought to
heed the criticisms of UFSL made by the FSA. Mr Unwin noted that after the FSA
expressed reservations about the compliance officer at UFSL he had then dismissed
this individual. Mr Unwin questioned what more he could have done than to have
followed the advice of the FSA and to have sacked this individual. Furthermore Mr
Unwin also called into doubt the validity of the criticisms made by the FSA of his
erstwhile compliance officer. Mr Unwin noted that the compliance officer had,
subsequent to his dismissal from UFSL, received approval to act in the same function
at another firm. Mr Unwin submitted that this demonstrated the reasonableness of his
reliance upon this individual. Mr Unwin made a similar point by also explaining that
it was his understanding that the mortgage adviser who had submitted the fraudulent
mortgage application was still working within financial services.
5.5.
In addition to asserting that the reasonableness of his actions could be inferred from
the fact that the compliance officer and mortgage adviser still worked in financial
services, Mr Unwin also suggested that this demonstrated how hard it had been for
him to second guess what it was that the FSA required of him. Mr Unwin complained
that he should have received far more explicit and helpful guidance from those who
were supervising him. Mr Unwin criticised the FSA saying that he had not been
provided with sufficient support and guidance and instead he had simply received
unconstructive criticisms about matters such as the inadequacy of his weekly
meetings with managers whilst no remedial suggestions had been proffered.
5.6.
Mr Unwin complained that the FSA had compounded this unhelpful approach by the
intermittent nature of its supervision of UFSL. Mr Unwin noted that between the
contacts in March 2007 and August 2007 he had heard nothing from the FSA. Mr
Unwin submitted that this had left him with the mistaken impression that there was
little of concern to the FSA at UFSL. Mr Unwin also indicated that after the FSA’s
visit in November 2008, having dismissed his compliance officer, he had then awaited
further details about a ‘scoping document’ which were not forthcoming. Mr Unwin
suggested that the delay between the visit and the next contact he had with the FSA,
in April 2009, had a catastrophic impact on his firm. In the course of discussions with
Mr Unwin it was established that he had misunderstood the nature of the ‘scoping
document’. Mr Unwin had gained the impression that this ‘scoping document’ would
identify problems at his firm and provide him with advice about how these could be
rectified. In fact the ‘scoping document’ which had been discussed with him was
actually the scope of a proposed skilled persons report as provided for in section 166
of the Act. Nonetheless, despite his misunderstanding, Mr Unwin maintained that had
the FSA supervisors done that which he understood they had said they were going to
do then his “company would still be intact”. Mr Unwin’s frustration at the delay
between November 2008 and April 2009 was exacerbated by the change in the FSA’s
approach to UFSL in this period. Mr Unwin had been left, in November 2008, with
the impression that the FSA was both content with most aspects of the running of the
firm and it was happy with his proposed next steps as it had not demurred from what
he had suggested he was going to do. Mr Unwin had then heard nothing further in
connection with the November visit until he had received a letter informing him that
the FSA had decided to appoint investigators to look into UFSL. Mr Unwin
questioned whether it was fair to impugn his conduct, despite his admitted failings,
when the standard of UFSL’s supervision by the FSA was so poor. Mr Unwin
submitted that his conduct should be judged against the FSA which he characterised
as having been unhelpful, misleading and dilatory. Indeed Mr Unwin speculated that
the FSA had only been spurred into action in April 2009 because an application had
been submitted for his approval as a CF30 at another firm.
5.7.
In addition to criticising the supervision of UFSL by the FSA Mr Unwin also
complained about the treatment he had received from the Enforcement team who
investigated his case. Mr Unwin was particularly concerned with the conduct of the
Enforcement staff at his interview. Mr Unwin stated that the team had interviewed
him over a considerable period of time and that they had been bullying towards him.
He added that he had not been given access to a copy of the Enforcement Guide and
he felt that had he been permitted to see this guide it may have helped him to assert
his rights in the interview. However though he had highlighted the conduct of the
Enforcement staff at his interview Mr Unwin deprecated the conduct of the team
throughout the investigation process. By way of example Mr Unwin submitted that
he had been unfairly cajoled into voluntarily varying the permission (‘VVOP’) of his
firm. Mr Unwin explained that as a result of the VVOP he had made his staff
redundant and he had then had to liquidate his company with outstanding liabilities,
which had in turn impacted upon his ability to find work. Mr Unwin felt that he had
been misled about the powers that the FSA had to require him to VVOP and that had
he not been given a false impression he may have sought to challenge any attempt by
the FSA to vary the permissions held by UFSL. Mr Unwin submitted that the unfair
treatment he had received from the Enforcement team was a factor that should be
taken into account when assessing the appropriateness of the action proposed in the
Warning Notice.
5.8.
Mr Unwin submitted that whilst he had made errors when undertaking his significant
influence function at UFSL he felt that he had learnt a number of lessons from his
experiences. Mr Unwin commented that he put his “hands up” as he accepted that he
had been “relying on other people” this he accepted was a failing as he should have
had “tighter control”. Mr Unwin highlighted how with hindsight he realised how
these problems had developed and how he may well deal differently in the future were
he ever to be faced with the issues which arose at UFSL. Mr Unwin explained that he
would engage an external compliance function in the future, if he held a significant
influence function role at a firm similar to UFSL. Indeed he noted that whilst he
would supervise the sales staff every other aspect of the systems and controls in a
putative future firm would be contracted in.
5.9.
In the light of the insight he had gained into the failings of UFSL Mr Unwin urged the
FSA to reconsider the action proposed in the Warning Notice. Mr Unwin submitted
that the FSA not only shared in the blame for the failures in the systems and controls
at UFSL but also the FSA’s unfair treatment of him should be taken into account
when assessing the appropriateness of the action. Furthermore Mr Unwin highlighted
his continued attempts to co-operate with the FSA as evidence of his fitness and
propriety.
5.10. Having considered Mr Unwin’s representations and finding that there was no valid
challenge to the allegations contained within the Warning Notice the FSA finds that
Mr Unwin is not a fit and proper person to carry out any significant influence function
due to his lack of competence and capability. The FSA notes that Mr Unwin made
clear that he was prepared to “hold [his] hands up” to the allegations within the
Warning Notice because he now appreciated that he should have “had tighter control”
and “done things differently”. Furthermore the FSA considers that though Mr Unwin
had admitted his failings the FSA did not consider that he had demonstrated any real
insight into the role of the regulator and what had gone wrong and nor had he
demonstrated that he understood what a significant influence function entailed. The
FSA considers that Mr Unwin’s criticisms of the FSA’s supervision of UFSL and the
subsequent Enforcement investigation have no bearing on the FSA’s assessment of his
fitness and propriety. To the extent that Mr Unwin was attempting to excuse his
conduct by highlighting the interaction he had with the FSA’s Small Firms and
Contact Division (in Supervision) and the Enforcement Division, the FSA rejects his
submissions. As the FSA finds that these matters were not relevant to a determination
of Mr Unwin’s competence and capability the FSA makes no findings about the
validity, or otherwise, of the criticisms he has made.
5.11. As Mr Unwin did not refute the FSA’s case, the FSA finds that Mr Unwin accepts that
he failed to take steps sufficient to effectively address the risks and deficiencies in
UFSL’s systems and controls, which had been pointed out to Mr Unwin by the FSA.
The FSA finds that this demonstrates a serious lack of competence and capability for
someone who was performing CF1, CF8 and CF10 functions in his capacity as the
director of UFSL. The FSA expects approved persons carrying out significant
influence functions to address areas of concern brought to their attention in a timely
and appropriate manner and the FSA finds that Mr Unwin failed to do this. The FSA
notes that Mr Unwin criticised the FSA for failing to be more explicit about the risks
and deficiencies which were identified at UFSL. However, and notwithstanding the
fact that no findings were made about the conduct of the supervisors of UFSL or the
enforcement investigation, the FSA rejects the implication that this might excuse Mr
Unwin’s conduct. The FSA considers that regardless of the strengths or weaknesses
of the complaints which Mr Unwin has made of the supervisors of UFSL, he had
responsibility to ensure the good running of UFSL. The FSA finds that he was alerted
to the problems at the firm however he did not take adequate steps to address these
concerns. The FSA finds that this demonstrates a lack of competence and capability.
5.12. Taking into account his admissions concerning his failings at UFSL the FSA also
finds that Mr Unwin’s conduct, when delegating UFSL’s compliance function,
demonstrates a serious lack of competence and capability, in his capacity as director
of UFSL performing CF1, CF8 and CF10. Mr Unwin delegated the compliance
function at UFSL to an individual who he knew lacked experience, and without Mr
Unwin having sufficient grounds for believing that he was competent. This failing
was compounded by the fact that Mr Unwin delegated UFSL’s compliance function to
this individual at a time when UFSL had either inadequate or no external compliance
support.
5.13. As with Mr Unwin’s criticisms of the guidance about risks and deficiencies given to
UFSL by the supervisors, the FSA also finds that Mr Unwin’s complaint about the
FSA’s oversight of his compliance function to be of no bearing to an assessment of
his competence and capability. The FSA considers that responsibility for the
compliance function at UFSL rested with Mr Unwin and that his criticisms of the FSA
do not affect this assessment. The FSA finds that it is of no bearing that Mr Unwin’s
former compliance officer has been approved elsewhere to undertake a compliance
function. The FSA finds that there were clear failures at UFSL and that Mr Unwin
was ultimately responsible for them.
5.14. Taking into account his representations, including his admissions, the FSA also finds
that in his capacity as the director performing significant influence functions, Mr
Unwin failed to ensure the effective monitoring of UFSL’s advisers, and in particular
its trainee advisers. As a consequence of these failings UFSL both failed to ensure the
suitability of occupational pension transfer advice given to its customers; and was at
an unacceptably high risk of being used for the purposes of financial crime. The FSA
considers both of these failings to be serious. A failure to ensure the suitability of
occupational pension transfer advice could have resulted in UFSL’s customers
suffering substantial financial loss as a result of these complex and high risk
transactions. The FSA finds that as the responsibility, to ensure that UFSL’s advisers
and trainee advisers were appropriately monitored, rested with Mr Unwin he can not
seek to rely on the perceived failings of the FSA, or the fact that one particular adviser
is working in financial services elsewhere, to excuse his conduct.
5.15. The FSA also does not consider that Mr Unwin’s criticisms of the Enforcement team
are relevant. Mr Unwin highlighted concerns he had around his treatment at stages
throughout the investigative process including at interview and when he applied for a
VVOP which resulted in UFSL having to close. The FSA makes no findings as to the
validity of these complaints but instead notes that this has no bearing on the
assessment to be undertaken of Mr Unwin’s competence and capability particularly in
the light of his admitted failings. The FSA notes that Mr Unwin is entitled, regardless
of the findings contained within this notice, to pursue his grievances through the
FSA’s complaints scheme.
5.16. The FSA finds that Mr Unwin failed to demonstrate that he understood the regulatory
requirements placed upon someone in a significant influence function. Indeed the
FSA finds that Mr Unwin demonstrated a complete lack of insight into the regulatory
system. The FSA notes that its supervision of firms such as UFSL is not designed to
replace an effective compliance function and nor is it intended that a firm should rely
on the FSA to provide oversight of the work of a firm’s advisers. Furthermore the
FSA finds that Mr Unwin had failed to understand how the difficulties had arisen at
the firm and how he should have tackled these problems. The FSA finds that far from
demonstrating that he had benefitted from hindsight Mr Unwin had instead betrayed
in his representations his inability to undertake a significant influence function and his
lack of competence and capability. Though the FSA does not dispute that Mr Unwin
had attempted to co-operate with the FSA, he had still failed to comprehend what was
required of him. The FSA finds that UFSL’s many serious failings required more
than a reactive response from Mr Unwin as it was he who bore responsibility for the
firm. The FSA notes that Mr Unwin commented both that he would in the future rely
on external compliance providers whilst he also agreed that he had not retained a tight
enough control on the systems and control at UFSL.
5.17. The FSA concludes that Mr Unwin’s failure to ensure that UFSL complied with the
relevant requirements and standards of the regulatory system demonstrates a serious
lack of competence and capability in his capacity as director of UFSL performing
CF1, CF8 and CF10.
5.18. The FSA therefore concludes that as Mr Unwin poses a serious risk to consumers and
to the FSA’s statutory objectives of protecting consumers and the reduction of
financial crime he should be prohibited from performing any significant influence
function in relation to any regulated activity carried on by any authorised person,
exempt person, or exempt professional firm.
5.19. The FSA would be minded to revoke the Prohibition Order, on Mr Unwin’s
application, in the event that Mr Unwin is able to demonstrate to the satisfaction of
the FSA that he has taken adequate steps to remedy his lack of competence and
capability. When considering whether to grant an application to revoke or vary the
order, the FSA will consider all relevant information available at the time of the
application.
5.20. An analysis of this sanction is provided below.
6.
SANCTION
6.1.
Having regard to the facts and matters described above, the FSA has considered
whether Mr Unwin is a fit and proper person to perform functions in relation to
regulated activities. In doing so, the FSA has considered the relevant statutory
provisions, regulatory requirements and guidance set out in Annex A.
6.2.
By virtue of Mr Unwin’s misconduct the FSA has concluded that he lacks fitness and
propriety because he lacks the requisite competence and capability for individuals
performing controlled functions involving the exercise of significant influence, and
that, if he performed any such functions he would pose a risk to consumers. The FSA
therefore considers that he should be prohibited from carrying out any significant
influence function in relation to any regulated activity carried on by any authorised
person, exempt person, or exempt professional firm.
6.3.
For the avoidance of doubt significant influence functions comprise any of the
controlled functions 1 to 12B and 28 and 29 in the table of controlled functions, which
is at SUP 10.4.5R.
7.
DECISION MAKER
7.1.
The decision that gave rise to the obligation to give this Final Notice was made by the
Settlement Decision Makers on behalf of the FSA.
8.
IMPORTANT
8.1.
This Final Notice is given to Mr Unwin under, and in accordance with section 390 of
the Act.
8.2.
Sections 391(4), 391(6) and 391(7) of the Act apply to the publication of information
about the matter to which this notice relates. Under those provisions, the FSA must
publish such information about the matter to which this notice relates as the FSA
considers appropriate. The information may be published in such manner as the FSA
considers appropriate. However, the FSA may not publish information if such
publication would, in the opinion of the FSA, be unfair to Mr Unwin or prejudicial to
the interests of consumers.
8.3.
The FSA intends to publish such information about the matter to which this Final
Notice relates as it considers appropriate.
FSA contacts
8.4.
For more information concerning this matter generally, contact Kate Tuckley (direct
telephone line: 020 7066 7086/fax: 020 7066 7087) of the Enforcement and Financial
Crime Division of the FSA.
Tom Spender
FSA Enforcement and Financial Crime Division
Annex A
STATUTORY PROVISIONS, REGULATORY GUIDANCE AND POLICY
1.
Introduction
1.1.
The FSA's statutory objectives, set out in section 2(2) of the Act, are: market
confidence; financial stability; public awareness; the protection of consumers; and the
reduction of financial crime.
1.2.
Under section 56 of the Act, if it appears to the FSA that an individual is not a fit and
proper person to perform functions in relation to a regulated activity carried on by an
authorised person, exempt person or exempt professional firm, the FSA may make a
prohibition order.
1.3.
The effect of making a prohibition order is to prohibit an individual from performing
functions within authorised firms and to prohibit authorised firms from employing the
individual to perform specific functions. Such an order may relate to:
(1)
a specified function, any function falling within a specified description, or any
function (section 56(2)); and
(2)
a specified regulated activity, any regulated activity falling within a specified
description, or all regulated activities (section 56(3)(a)).
2.
FSA’s policy for exercising its power to make a prohibition order
2.1.
The FSA will consider making a prohibition order where it appears that an individual
is not fit and proper to carry out functions in relation to regulated activities. The FSA
may exercise this power where it considers that to achieve any of its statutory
objectives it is necessary to prevent an individual from carrying out any function in
relation to regulated activities. The FSA policy in relation to the decision to make a
prohibition order is set out in Chapter 9 of the Enforcement Guide (“EG”).
2.2.
EG 9.4 sets out the general scope of the FSA’s powers in this respect, which include
the power to make a range of prohibition orders depending on the circumstances of
each case and the range of regulated activities to which the individual’s lack of fitness
and propriety is relevant. EG 9.5 provides that the scope of a prohibition order will
vary according to the range of functions which the individual concerned performs in
relation to regulated activities, the reasons why he is not fit and proper and the
severity of risk which he poses to consumers or the market generally.
2.3.
EG 9.9 provides that when deciding whether to make a prohibition order against an
approved person, the FSA will consider all the relevant circumstances of the case,
which may include (but are not limited to):
(1)
whether the individual is fit and proper to perform functions in relation to
regulated activities. The criteria for assessing the fitness and propriety are set
out in FIT 2.1 (Honesty, integrity and reputation), FIT 2.2 (Competence and
capability) and FIT 2.3 (Financial soundness);
(2)
the relevance and materiality of any matters indicating unfitness;
(3)
the length of time since the occurrence of any matters indicating unfitness;
(4)
the particular controlled function the approved person is (or was) performing,
the nature and activities of the firm concerned and the markets in which he
operates; and
(5)
the severity of the risk which the individual poses to consumers and to
confidence in the financial system.
2.4.
EG 9.12 gives examples of types of behaviour which have previously resulted in the
FSA deciding to issue a prohibition order, including serious lack of competence.
3.
Fit and Proper Test for Approved Persons
3.1.
The section of the FSA handbook entitled “FIT” sets out the Fit and Proper test for
Approved Persons. The purpose of FIT is to outline the main criteria for assessing the
fitness and propriety of a candidate for a controlled function and FIT is also relevant
in assessing the continuing fitness and propriety of an approved person.
3.2.
In this instance the criteria set out in FIT are relevant in considering whether the FSA
may exercise its powers to prohibit an individual in accordance with EG 9.8.
3.3.
FIT 1.3 provides that the FSA will have regard to a number of factors when assessing
a person’s fitness and propriety. The most important considerations include the
person’s competence and capability.
3.4.
In determining a person’s competence and capability FIT 2.2.1 provides that the FSA
will have regard to matters including, but not limited to:
(1)
whether the person satisfies the relevant FSA training and competence
requirements in relation to the controlled function the person performs or is
intended to perform (FIT 2.2.1G(1)); and
(2)
whether the person has demonstrated by experience and training that the
person is able, or will be able if approved, to perform the controlled function
(FIT 2.2.1G(2)).
4.
Conduct of Business rules
4.1.
From 3 January 2006 until 31 October 2007 Rule 5.3.21R of the Conduct of Business
Sourcebook (“COB”), which formed part of the FSA Handbook, stated that:
if a personal recommendation about a pension transfer or pension opt-out is to be
made on a firm's behalf by an individual who is not one of its pension transfer
specialists, the firm must have established procedures for checking:
(1)
the individual's compliance with the firm's procedures;
(2)
the correctness of the application of the transfer value analysis system, where
applicable; and
(3)
the merits of the proposed transaction and the suitability of the
recommendation;
and any such recommendation must be assessed by one of the firm's designated
pension transfer specialists to ensure the procedures have been followed.
4.2.
Since 1 November 2007 Rule 19.1.1R of the Conduct of Business Sourcebook
(“COBS”), which forms part of the FSA Handbook, states that:
if an individual who is not a pension transfer specialist gives a personal
recommendation about a pension transfer or pension opt-out on a firm's behalf, the
firm must ensure that the recommendation is checked by a pension transfer specialist.
4.3.
Between 3 January 2006 and 31 October 2007 Rule 5.3.22 R of COB stated that:
(1)
a firm must ensure that a transfer value analysis is carried out in accordance
with COB 6.6.87 R - COB 6.6.93 R (Projections) before it makes any
recommendation to a customer to transfer out of a defined benefits pension
scheme.
4.4.
From 1 November 2007 Rule 19.1.2 R of COBS states that a firm must:
(1)
compare the benefits likely (on reasonable assumptions) to be paid under a
defined benefits pension scheme with the benefits afforded by a personal
pension scheme or stakeholder pension scheme, before it advises a retail client
to transfer out of a defined benefits pension scheme.
(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, 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.