Between January 2009 and February 2012, Pi Financial Limited (Pi), an IFA network firm, advised its clients to invest a total of £6 million in unregulated collective investment schemes (UCIS) and £20 million in structured products. However, following a review of these clients' files, the FSA found that for half of these clients, the investment advice they received was unsuitable.
The Final Notice issued to Pi on 18 September, provides a number of examples of this unsuitable advice. This included one client, receiving an annual income of £18,500 and had two dependant children, who was advised to transfer his entire pension fund of £78,000 to one UCIS. Across the board, the FSA found that there was a significant disparity between the clients' attitudes to risk and the high risk nature of the products that they were being advised to invest in.
Pi failed to exercise adequate supervision over its two main advisers and operated a very poor file review system, that left a lot of client files un-reviewed or they were subject to only a partial review. In fact, there were only four individuals at the firm responsible for checking client files, for a total of 72 financial advisers. The FSA also found that the compliance manual the advisers referred to made no reference of UCIS at all.
Pi received a fine of £58,300 for these "serious" failings.
Since then the Financial Ombudsman Service (FOS) has also issued a Final Notice against Pi, ordering it to pay redress to a couple who had invested in one of the UCIS. The FOS found that Pi had not undertaken a proper investigation of the risk appetite of the couple and in any event the UCIS was not a suitable investment.