FCA bans and fines financial adviser £68,300 for lacking in competence and integrity

The Financial Conduct Authority (“FCA”) has prohibited Simon John Varley (“Mr Varley”) from working in the financial sector and imposed a financial penalty of £68,300 for knowingly providing investment advice to retail customers, when he was not registered as a qualified person or an approved person to do so. The FCA found that Mr Varley failed to act with integrity as a Director (CF1) and Compliance Oversight (CF10) in his capacity as a financial advisor and is therefore not a fit and proper person.

MISCONDUCT AND ABUSE OF TRUST

Mr Varley worked at a small financial advisory firm, Dickinsons Financial Management Limited (“Dickinsons”) since 2005 where he held a customer adviser function (CF30) until January 2013.  Following new rules introduced by the FCA as a result of the Retail Distribution Review (“RDR”), all new retail investment advisers were to hold a minimum level of qualification to be approved for a CF30 function.  Mr Varley did not have the approved level of qualification and therefore notified the FCA who removed his CF30 approval. Despite this, Mr Varley continued to provide advice to retail customers between January 2013 and September 2017 on an unauthorised basis.

Mr Varley repeatedly provided false information in board meetings to his fellow directors at Dickinsons in relation to passing the relevant exams which would allow him to continue in his advisory capacity. In fact, Mr Varley had falsely claimed that he had applied to the FCA for approval as a CF30 but the FCA had not updated the Financial Services Register. It later transpired, that no application had ever been submitted to the FCA for approval. In addition, Mr Varley had knowingly provided false information regarding the qualifications he held to Dickinsons professional indemnity insurance (“PII”) providers, which enabled him to be insured to provide advice to retail investors after 2013.

Mr Varley was also required to provide regulatory information to the FCA in Dickinsons Retail Mediation Activities Returns as part of his CF10 responsibilities. However, Mr Varley knowingly misled the FCA that only one person was providing retail investment advice to customers when in fact it was two persons, one of which included Mr Varley. He further provided explanations to the FCA which were knowingly false to conceal his own misconduct. In 2017, following an internal investigation, Dickinsons identified that these statements were false and promptly suspended Mr Varley from his position and notified the FCA.

The false information provided by Mr Varley to the FCA and to Dickinsons PII providers created a potential risk of loss to customers as he was not qualified or insured to provide retail investment advice to customers. This had a significant impact on Dickinsons where in 2019, Dickinsons had to file for voluntary liquidation and the company was dissolved.

Mark Steward, Executive Director of Enforcement and Market Oversight stated: ‘Mr Varley deliberately lied about his position and his misconduct continued for a number of years, potentially creating a risk of loss to customers. He continued to abuse his position of trust as a Director, proving that he lacks both honesty and integrity and poses a serious risk to consumers and to confidence in the financial system. Today’s ban should act as a deterrent to other senior individuals who abuse a position of trust.’

CONCLUSION

In 2021, the FCA concluded that Mr Varley had sought to mislead the regulatory body, the board of directors at Dickinsons, its PII providers and its clients. The FCA further determined that Mr Varley lacked fitness and propriety by virtue of failures of honesty and integrity, which amounted to Mr Varley abusing his position of trust and posed a risk to consumers and the UK financial system. Due to the seriousness of the breaches, the FCA moved to impose a full prohibition and a financial penalty of £68,300 based on the assessment of Mr Varley’s misconduct.

NEXT STEPS

The fiduciary responsibilities of an individual to provide a duty of good faith and trust to all clients within the business is one that should always be upheld by the business. Any organisation which fails to put in place the appropriate oversight over senior and/or customer facing employees will be perceived to be a risk which firms are expected to mitigate. Failure to do so, risks further consequences on them as a firm even if the enforcement action is against the individual itself as a result of reputational damage, compensation to clients, etc. Any failure by a senior manager to undertake the necessary due diligence in ensuring employees are “fit and proper” under the recent introduction of the Senior Managers and Certification Regime (including an assessment of training, qualifications and competence) may (in principle at least), lead to further investigations within the business which may result in enforcement action against the firm and the relevant senior manager.

To review the Final Notice published by the FCA, please click here.

For more information, and any guidance or advice on FCA enforcement on misconduct, and your obligations under SMCR, Cleveland & Co External in-house counsel™, your specialist outsourced legal team, are here to help.

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