"Both demonstrated a complete disregard for customers’ needs through retirement, and the suitability of pension transfers, so it is right we ban them from the industry."
- Therese Chambers, joint executive director of enforcement and market oversight at the FCA
The FCA has decided to ban a director and financial adviser from working in financial services and fined them £270,646 and £399,817 respectively.
The regulator found that Richard Fenech and Heather Dunne operated a "flawed advice model that put customers’ guaranteed pension benefits at significant risk", and that Dunne failed to act with due skill, care and diligence when providing pension transfer advice.
Fenech was the sole director of Financial Solutions Midhurst Limited (FSML) and responsible for overseeing Dunne, who was FSML's appointed representative (trading as HDIFA).
The FCA says Dunne failed to take into account the destination of the customers’ investments when advising whether defined benefit pension transfers were suitable. This was due to the use of a "flawed two-adviser advice model" in which Dunne provided the pension transfer advice while another firm provided investment advice on the proposed onward investment after the pension transfer had concluded. As a result, Dunne did not know where her clients’ money was going when advising on the transfer, leaving customers exposed to the risk of unsuitable pension transfers.
Dunne advised approximately 92% of her clients to transfer out of their defined benefit (DB) pension schemes, resulting in over £126m of funds being transferred, often against her clients' best interests.
Fenech was responsible for the oversight of HDIFA’s business. However, despite being made aware by FSML’s external compliance consultant of the risk arising from HDIFA’s use of the two-adviser advice model, he did not stop HDIFA from operating it. He also failed to ensure that Dunne’s pension transfer advice complied with regulatory standards.
The FCA said Fenech and Dunne "also failed to act with integrity because of their involvement in the dishonest provision of a backdated appointed representative agreement to the FCA".
FSML and HDIFA are both now in liquidation. To date, the Financial Services Compensation Scheme (FSCS) has paid over £770,490 in compensation to FSML clients, with potential total losses estimated at nearly £2m, because of losses suffered by those clients following advice they received.
Fenech and Dunne have each referred their Decision Notice to the Upper Tribunal. The Tribunal will determine, in the case of the decision to impose a financial penalty, what (if any) the appropriate action is for the FCA to take.
Therese Chambers, joint executive director of enforcement and market oversight at the FCA, said: "People must be able to trust the advice they receive about their pension. The actions of these individuals are wholly unacceptable, as they exposed customers to significant financial risk.
"Ms Dunne provided advice which was fundamentally flawed and Mr Fenech failed in his responsibilities to oversee her work. In doing so, both demonstrated a complete disregard for customers’ needs through retirement, and the suitability of pension transfers, so it is right we ban them from the industry."
