Integrity is in voluntary liquidation, so the FSA has instructed the liquidator to write to the GTEP customers of the firm’s IFA practice informing them they may have received unsuitable advice and could be entitled to make a claim. The FSA has also waived the £350,000 fine it would have imposed so that any remaining money can be used to meet customer claims.
Integrity was a provider of GTEPs but also advised on the sale of them through its IFA practice; an investigation by the FSA found serious failings in both areas.
In relation to sales to customers of its IFA practice, the FSA found that Integrity failed to communicate adequately why a GTEP was suitable for a customer and the risks associated with it. Integrity also failed to gather or record adequate ‘Know Your Customer’ information, document evidence of having researched other products that could have met a particular client’s needs, or demonstrate that their clients’ attitudes to risk were in line with the risk profile of the product.
In relation to Integrity’s role as a product provider, the firm failed to ensure that promotional material explained the product clearly. The FSA also found that IFAs selling the product were not given balanced information about the risks associated with the product, contributing to IFAs advising customers to purchase a product that may have been unsuitable.
Margaret Cole, the FSA’s director of enforcement and financial crime, said:
“Geared traded endowment policies are complex products with significant risks attached to them. Integrity should have made these risks clear to investors, but it did not; neither did it ensure that the promotional material given to IFAs selling its product described the risks sufficiently. As a result, customers may have received unsuitable advice to invest in GTEPs and the FSA has been left with no choice but to censure the firm.
“As Integrity is in liquidation we have not imposed the £350,000 fine that we would otherwise have recommended as we believe any money left should be used to meet customer claims. However, the size of the fine we would have given is very significant indeed and financial advisers and providers alike must take notice of Integrity’s failings and ensure they learn from them.”
The FSA’s investigation follows a thematic review of GTEPs that began in 2007. Following a visit from the FSA, Integrity carried out a past business review of GTEP sales to customers of its own IFA practice, but did not accept the findings. The FSA subsequently carried out its own review of the firm’s files and commenced Enforcement proceedings based upon the findings.
