Member Article

Sesame fined £6.1m for poor practice

Altrincham-based investment firm Sesame Ltd has been fined £6m for giving incorrect advice and system failures.

The Financial Conduct Authority (FCA) said it fined Sesame a total of £6,031,200 after failing to ensure advice given to customers was suitable, while faults were found in the systems and controls that oversaw its appointed representatives (ARs),who sell their products to retail customers.

£245,000 has been demanded after Sesame failed to provide appropriate advice in relation to Keydata life settlement products, while a further £5,786,200 was requested for systems and controls weaknesses.

FCA said all these errors are in relation to the firm’s oversight of its ARs, who are individuals or firms that take their authorisation from Sesame, however the firm is ultimately responsible for poor practice or failings carried out by their ARs.

Tracey McDermott, FCA’s director of enforcement and financial crime, said: “By allowing ARs to use their regulatory permission to operate, Principals [Sesame] are effectively vouching for them.

“Therefore they must keep a close eye on what their ARs do and keep them up to date with the regulator’s expectations.

“Critically, they must also act decisively when things go wrong. Sesame failed on all of these counts.”

Between July 2005 and June 2009, Sesame gave advice to 426 customers to invest more than a total of £6.1m in Keydata life settlement products.

These sales were flawed because the customers’ stated investment intentions did not match the product, while suitability letters provided to customers wrongly stated that capital growth or income was guaranteed.

Customers were also incorrectly told that Keydata life settlement products were low risk, despite Sesame telling ARs that the product provided “a considerable amount of risk”.

FCA accused Sesame of taking inadequate care to advise its ARs, and failing to offer a balanced view of the benefits and disadvantages of the Keydata product.

Further to these faults, FCA said reasonable care was not taken around supervisory work between July 2010 and September 2012.

The firm was accused of not identifying or monitoring of sold products that were not suitable for most customers, while desk-based and record keeping files were problematic and unrobust.

FCA added that Sesame’s internal culture and language used within the business demonstrated a view that its customers were the ARs, rather than the retail customers ARs were dealing with.

These failings all occurred between 2005 and 2009, and then between 2010 and 2012, and FCA warned the systems and controls errors made in the later period could also apply the the earlier section of time.

Ms McDermott said: “Sesame is one of the largest and most well-known financial services networks in the UK responsible for the oversight of some 1,220 ARs.

“It describes itself as ‘perfectly placed to deliver expert guidance and services’ but the failings in this case fall far short of that.

“The weaknesses in Sesame’s systems and controls show that there was an ongoing risk that unsuitable advice could be given by Sesame’s ARs.”

Sesame agreed to settle the case at an early stage of the investigation and qualified for a 30% discount as a result. Without this discount the fine would have been upwards of £8.6m.

This was posted in Bdaily's Members' News section by Miranda Dobson .