Financial advisers have been put on notice that failure to pay Financial Ombudsman Service (FOS) awards could lead to them being put out of business.  A Kent-based financial advice firm has shut down after the Financial Conduct Authority (FCA) cancelled its permissions for repeated failures to pay an FOS award.  The FCA says the firm’s principal failed the ‘fit and proper person’ test.

Foreman Financial Services had recommended that a client use a Self-Invested Personal Pension (SIPP) to invest in a Harlequin property scheme.  The client complained to the FOS after the notorious Caribbean hotel scheme collapsed, losing clients their entire investments.

The FOS ruled in favour of the client.  It ordered Foreman to pay sufficient money into the SIPP to put the client back into the position he would have been in, had he not invested in Harlequin.  Foreman disputed the ruling, but did not seek a judicial review, meaning that it was binding.

Foreman did not pay the award despite repeated requests from the FOS and FCA, leading the FCA to cancel the firm’s permissions. “Foreman Financial Services has failed to satisfy the Authority that it is conducting its affairs in an appropriate manner, having regard in particular to the interests of consumers,” the FCA said.

A statement on the firm’s website says “It is with great sadness that we would like to inform our past and present clients that Foreman Financial Services Ltd (trading as Grainger Co Financial Services) has permanently ceased trading. We would like to thank you for your business and wish you every success in the future.”

The ruling shows the importance of treating regulator decisions seriously, according to James Burgoyne, Director – Claims & Technical, Brunel Professions. “Advisers need to respond promptly and tactically to complaints if they are to avoid them escalating to the point where they risk the firm’s viability,” he said.

Reports on the decision have been published by FT Adviser, New Model Adviser and International Adviser.

Brunel secures competitive professional indemnity insurance cover for financial advisers.  To find out more call Mark Sommariva on 0203 475 6663.