Company directors disqualified following regulatory breaches
Two financial advisers at a firm that went into administration after mis-selling investment products have been disqualified from acting as company directors.
The court heard they were responsible for regulatory breaches and keeping inadequate records.
The two men were directors of a regulated investment services company which sold structured capital at risk products know as SCARPS. The Financial Services Authority had investigated the company and the Financial Services Ombudsman had upheld four complaints against it.
The company then went into administration. Its liabilities were much greater than its assets and the Financial Services Compensation Scheme had to deal with thousands of substantial claims for compensation.
The High Court held that the advisers had under-rated the risk of the SCARPS they sold. While this by itself did not mean that they were so obviously incompetent that they should be disqualified, there were other reasons why they should be barred from acting as directors.
They had used direct marketing to sell SCARPS without any regard to the suitability of the product for the client. They had failed to comply with regulatory requirements that their marketing should be clear, fair and not misleading.
They did not properly explain to clients the risks involved or differentiate between fact and opinion. It meant consumers could not make an informed decision about whether or not to invest. Their record keeping had also been woefully inadequate.
The court held they were unfit to be directors and should be disqualified.
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