FSA Fines Deloitte & Touche Wealth Management

by Robin Pilgrim, LawAndTax-News.com, London

30 January 2004

The UK's financial regulator, the Financial Services Authority (FSA) announced on Wednesday that it has imposed a fine of £750,000 on Deloitte & Touche Wealth Management Limited (DTWM) for compliance failings which took place between 1997 and 2001, and for failing to take reasonable steps to complete both Phase 1 and 2 of its Pensions Review within set standards and to regulatory deadlines.

According to the FSA:

"DTWM failings may be summarised in the following particular respects:

• Although DTWM implemented a number of compliance arrangements to ensure that its staff complied with the PIA (Personal Investment Authority) Rules, these arrangements failed to ensure that its financial advisers ("advisers") complied with the PIA Rules relating to suitability and record keeping. DTWM also failed to ensure that its advisers, and their supervisors in turn, were supervised properly;
• In addition, the effectiveness of DTWM's compliance structure was seriously affected by the approach to compliance adopted among members of DTWM's senior management up to and including 2000. This approach contributed to the fact that DTWM's compliance structures did not provide a system to ensure compliance with the PIA Rules in all aspects of its business;
• Although a revised compliance structure (which identified a number of deficiencies in DTWM's sales processes) was introduced in February 2000, it was not effective in ensuring that all issues were rectified;
• DTWM failed to take adequate remedial action to address compliance failings highlighted in the PIA's 1999 Supervision Visit report ("the 1999 Supervision Visit report") in relation to documenting information obtained from its clients. This, in turn, contributed to the continuation of these failings;
• DTWM maintained a centralised compliance function and did not implement a robust compliance structure between 1997 and 1999, sufficient to its business, in relation to the branch structure through which it operated;
• DTWM allowed its assistant Compliance Officer to perform the substantive 5 elements of the Compliance Officer role between April 2000 and February 2001, without being registered with the PIA as such, and thereby failed to comply with the PIA Rules in respect of individual registration referred to in 3.7 (iv);
• DTWM put forward as a fit and proper person to become a registered individual with the PIA, a person who had previously expressed an intention to a senior manager with compliance responsibility (who did not inform the Board) to carry out a course of conduct which (had it been proceeded with) might have misled the PIA. By failing to take all necessary steps to satisfy itself of his fitness and propriety DTWM failed to comply with the PIA Rule in relation to individual registration referred to in 3.7 (v); and
• While DTWM operated a Training & Competence (“T&C”) programme, it was not implemented adequately to ensure that all of its advisers complied with the PIA rules relating to the documentary requirements of giving investment advice and keeping relevant records."

However, the Authority went on to explain that new management assumed control of DTWM in August 2002, meaning that the Board of Directors is now entirely different from the Board during the period in question.

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