On February 25, the UK Financial Services Authority (FSA) published the Final Notice it has issued to RSM Tenon Financial Services (Tenon), fining it £700,000 (approximately $1,070,000) for significant failings in its advice and sales processes relating to Lehman-backed structured products and for having poor systems and controls to prevent unsuitable advice in its structured product and pension switching business. The fine was discounted by 30% because Tenon cooperated fully with the FSA and agreed to settle at an early stage in the investigation. Without the discount, the fine would have been £1,000,000 (approximately $1,500,000).
The FSA concluded that, in relation to its sales of Lehman-backed structured products, Tenon failed to treat some of its customers fairly. Tenon had breached two of the FSA’s Principles for Businesses by failing to take reasonable care to organize and control its affairs responsibly and effectively and by failing to take reasonable care to ensure the suitability of its advice to its customers. In addition, in relation to Tenon’s structured products and pension switching business more generally, the FSA found that the firm failed to have effective risk management systems in place to manage and control its affairs, and it ultimately failed to minimize or prevent the risk of unsuitable sales.
In addition to the fine, the FSA has required Tenon to:
- Conduct a past business review of all sales of Lehman-backed structured products. Customers who received unsuitable advice will be able to sell their investment back to Tenon and to receive reimbursement of their money invested plus interest.
- Review sales of other structured products between November 2007 and December 2009 and pay appropriate redress where unsuitable advice was given
- Conduct a review of pension switching business it transacted between April 2006 and December 2009 to assess the suitability of recommendations made to customers and, if appropriate, implement a customer redress program
- Commission a “skilled person review” of its current sales and compliance processes to assess their appropriateness and the suitability of recommendations made to customers.
- The FSA will oversee the business reviews and the redress process that it has ordered, and an independent third party will also review the work undertaken by Tenon. This is the first enforcement action resulting from the FSA’s review of the marketing and distribution of structured products, particularly those backed by Lehman Brothers entities, which was concluded in October 2009.
To read the Final Notice in full, click here.