Enforcement actions dominate this week’s roundup, and include the first fine levied on an audit firm by the FCA, in a case currently being investigated by the Serious Fraud Office.
Enforcement
Forex TB Limited, a Cypriot-based firm offering contracts for difference, has been fined £276,100 ($356,435) for failing to treat customers fairly and providing unauthorized investment advice.
The firm pressured customers to carry out risky CFD trades, in some cases encouraging them to borrow from friends and family. It also encouraged customers to provide false information in order to become “Professional Clients”, which meant they lost the protection accorded to retail clients.
Therese Chambers, joint Executive Director of Enforcement and Market Oversight at the FCA said: “FXTB’s misconduct was particularly egregious since it relied on the exploitation of customers who, because of their inexperience, were particularly vulnerable. By intervening early in April 2021, we helped prevent further consumer losses.”
A fine of £1.215m ($1.6m) would have been imposed, but the firm argued this would cause it serious financial hardship.
Martin Sarl, a director at Perry Prowse Insurance Consultants Ltd has been banned from working in financial services and fined £5,021 ($6,482) for acting without honesty and integrity.
Between November 7 2017 and October 24 2019 Sarl, the sole director at the firm, failed to pass clients’ premiums to insurers, leaving them uninsured without their knowledge. Sarl also used money from the firm’s client account to pay of his personal debts, and that of the firm. And he falsely claimed an IT glitch prevented him from responding to customer questions about their accounts.
Therese Chambers, Joint head of Enforcement and Market oversight at the FCA said: “Mr Sarl’s customers trusted him to keep their money safe and to secure the insurance cover they needed. Instead he helped himself to prop up his business and personal finances. He compounded this by lying to his customers.
“This left many people at risk of being unable to make a claim should they have needed to. It is right that Mr Sarl should be banned from the industry.”
Central Markets Investment Management Limited (CMIM) entered creditors’ voluntary liquidation on July 2. Dominik Thiel-Czerwinke and Louise Donna Baxter of Begbies Traynor (Central) LLP were appointed as joint liquidators.
Macintyre Hudson LLP (MHA) has been censured for failing to prepare client asset reports to the required standard. It failed to notify the FCA of rule breaches by firms, putting customer money at risk.
Between 2015 and 2019, MHA failed to prepare four client assets reports relating to two firms to the standard required. And it failed to report 25 rule breaches by firms it had audited. The breaches included client assets being held alongside the firm’s assets and failing ion documentation.
Therese Chambers, joint executive director of enforcement and market oversight at the FCA, said: “In a first of its kind, this censure underscores the important role that auditors play in providing accurate reports on whether firms are complying with our rules.
“This information helps us to safeguard customer funds and reduce the harm caused by firm failures. We expect all firms to ensure that they’re providing full and accurate reports.”
A fine of £15m ($19.3m) has been imposed on PwC for a failure to alert the regulator to suspected fraudulent activity at London Capital & Finance plc (LCF). It’s the first time an audit firm has been fined by the FCA.
During the 2016 audit of LCF, PwC encountered what the regulator describes as “significant issues”. A senior member of staff acted aggressively towards auditors, and the firm provided inaccurate and misleading information.
The complex audit took much longer than anticipated, and PwC began to suspect LCF might be involved in fraudulent activity. But it failed to report those suspicions to the FCA, as it was obliged to do.
In January 2019, LCF went into administration following an FCA order to withdraw misleading promotional material for the sale of mini-bonds, and the Serious Fraud Office has an open criminal investigation into the failure of the firm.
Therese Chambers, Joint Executive Director of Enforcement and Market Oversight at the FCA, said: “Auditors have a central role to play in keeping our markets clean. They have privileged access to information and they are required by law to report suspicions of fraud to the FCA.
“There were a number of red flags that led PwC to suspect fraud. They should have acted on them immediately. Their failure to do so deprived the FCA of potentially vital information.”