The Upper Tribunal, a court of appeal, has upheld FCA decisions to fine and ban a ‘reckless’ adviser and a fund manager.
Stephen Joseph Burdett and James Paul Goodchild have been banned from working in financial services indefinitely for failings related to pensions and SIPP advice.
Mr Burdett and Mr Goodchild previously held senior roles at Synergy Wealth Limited (Synergy) and Westbury Private Clients LLP (Westbury), respectively. Westbury ran a SIPP operation which managed much of the funds.
The FCA said it had banned the pair from working in regulated financial services for, “recklessly exposing pension holders to unsuitable investments.”
The Tribunal also confirmed the go ahead for FCA fines of £265,071 on Mr Burdett and £47,600 on Mr Goodchild.
The FCA said that because of Mr Burdett 232 personal pension funds worth over £10m were switched into high-risk investment portfolios that were “obviously unsuitable.”
The portfolios were created and managed by Mr Goodchild at Westbury, with around 38% of holdings linked to a single offshore property developer.
The watchdog said that despite his knowledge that the portfolios were high-risk, Mr Burdett allowed Synergy’s customers to receive reports indicating that their money would be placed in low or medium risk portfolios. Mr Goodchild included the misleading terms 'cautious' and 'balanced' in the names of 2 of the 3 high-risk portfolios.
In addition, Mr Burdett acted as a director of Synergy despite knowing he did not have the required FCA approval to perform that function. He also failed to co-operate with the FCA’s investigation.
The FCA intervened in 2016 to protect consumers, halting the pensions business of Synergy and Westbury. Both firms subsequently went into liquidation and were dissolved.
The Financial Services Compensation Scheme (FSCS) has so far paid out over £1.4m to victims of the pair.
Therese Chambers, joint executive director of enforcement and market oversight at the FCA, said: "People trusted Mr Burdett and Mr Goodchild with their hard-earned savings and were badly let down. The pair worked together to switch customers' pensions into obviously unsuitable, high-risk investments"
"They made significant personal profits from their actions. We will not tolerate such conduct and are pleased that the Tribunal agrees."
The Tribunal noted that, "Mr Burdett’s actions have shown little regard for the interests of Synergy’s clients, pension holders whose pensions were transferred to the Westbury SIPP and were invested in ways which Mr Burdett knew were obviously high risk and hopelessly inappropriate."
In addition, the Tribunal found that: "As an experienced and qualified investment manager, Mr Goodchild must have known of the risk of putting together for pension holders of varying risk appetites portfolios with any significant levels of concentration of investment into an obviously high risk project... He completely ignored this risk, without regard to the interests of the pension holders."
The Tribunal was not satisfied that Mr Goodchild's, "cursory due diligence … was even remotely sufficient to constitute reasonable steps to ensure suitability."
• Decision Notice for Stephen Joseph Burdett (PDF) and Decision Notice for James Paul Goodchild (PDF).