FTAdviser.com

Advertising

The City watchdog issued the fine, which surpasses the £900,000 penalty handed out to Thinc Group Limited in May for record keeping problems relating to sub-prime mortgages, on Tuesday morning.

AWD Chase de Vere was penalised for serious failings in the intermediary's pension transfer, pension annuity and income withdrawal business that resulted in mis-selling but the intermediary's bosses insisted that despite the size of the fine it was still well funded and capable of continuing to pursue its plans to build up the business.

Mike Kirsch, chief executive officer of AWD Group, said: "It is clearly a very significant fine. We will have to pay it by the end of the year but our shareholder has been fully aware of this for a while and is fully behind the UK business and that includes paying fines and compensating any clients affected.

"Our ambition is to be the UK's leading independent financial advisory firm. I think we are very well positioned for this. We have used this to make sure all clients can be confident of the high standard of advice they will get in the future."

The FSA found the firm - based in Paternoster Square in London - mis-sold some pension transfers and pension annuities by recommending products to customers who already had adequate existing pension provisions or whose attitude to risk did not match the products recommended to them, for example.

The City watchdog first uncovered problems at AWD Chase de Vere in late 2006 and went on to raise concerns with that as many as 800 of its customers may have received unsuitable advice in relation to 1200 sales between February 2006 and October 2007.

AWD Chase de Vere, which has more than 200 wealth management advisers, made about 4300 sales of pension transfers, pension annuities and income withdrawals to roughly 2800 customers between February 2006 and October 2007.

The FSA also found the firm sometimes failed to properly disclose the risks and costs of the products it recommended and was also unable to demonstrate the suitability of its advice from its own records in 39 per cent of the transactions that were reviewed.

Based on a sample of recommendations, the FSA found 28 per cent of transactions resulted in mis-sales.

Margaret Cole, director of enforcement for the FSA, said: "Firms must treat their customers fairly by making every effort to provide them with suitable advice.

"This fine of £1.12m reflects that AWD Chase de Vere failed to establish its customers' needs and did not provide them with complete and accurate information, which resulted in a large number of mis-sales.

"The FSA will report on its thematic work into the pensions transfer industry shortly to identify good and bad practice and demonstrate further to firms what we expect of them. Firms must take note of this work and amend their own processes where necessary."

Mr Kirsch, who joined the intermediary in March 2007, said the regulatory lapses were regrettable but the mis-selling that occurred in the past and the intermediary's new management team had worked closely with the FSA to correct matters.

He said: "We regard any lapse in our standards as unacceptable, however fewer than 1 per cent of our clients have been affected and we are in the process of identifying all the cases and taking steps to address and compensate clients for any potential loss. I would like to apologise to all our clients who have been affected.

"The FSA has acknowledged the strong, effective action taken by the company to address the issue. We have treated the resolution of this issue and the introduction of effective management controls as our number one priority.

"We have restructured our senior management and sales management and completely overhauled our compliance and advisory processes to ensure that our standards are now among the best in the industry.

"We take our responsibility to provide the highest standards of personal financial advice extremely seriously and can reassure all our clients that they can have confidence in our advice and procedures both now and in the future.

"In this we have the full support and resources of our parent AWD Holding AG, the largest independent advisory business in Europe and its majority shareholder Swiss Life."

In determining the level of the penalty, the FSA stated it had recognised AWD Chase de Vere reviewed past business so as to compensate customers where appropriate, and provided significant co-operation with the conduct of the investigation.

Without this action, the FSA noted it would have imposed a significantly greater penalty.

In addition, the firm qualified for a 30 per cent reduction in its penalty by settling at an early stage of the FSA's investigation.

Mr Kirsch said the firm, which has about £5bn assets under management, had contacted clients affected and had been set a deadline of August 2009 to have handled all affected cases.

He said he expected to have a clearer idea about how much AWD Chase de Vere might have to cough up for compensation by the end of the year.