FCA and FOS continue to dismay and disgust; CWM criminal case set to change offshore financial services; Forged dealing instructions epidemic; Offshore advisory firms without an investment license.
It now emerges that on top of a failed “City Watchdog” (the Federated Consolidation of Apathy) we also have not just one, but two failed ombudsmen.
The FCA has had a light bulb moment as it announces a “temporary ban” on the promotion of unregulated mini bonds. This so-called “nuclear” option is due to start in January 2020 and is scheduled to last for just one year. Presumably, the FCA will have lost interest by then. Or perhaps the huge effort required to teach FCA staff how to use a toilet will have exhausted them anyway. Maybe the new parliament will close the whole thing down and set up a proper regulator – ideally run by a mixture of proper professionals and also some victims (who are the real experts on regulatory failures).
In an “FFS!” moment, the FCA is now rivaled by the FOS as it too is exposed as a failure by the Glassdoor employees review site. One FOS employee reviewer stated: “Management has been hauled up in front of the Treasury on more than one occasion; it has received and continues to receive negative comments on Glassdoor; it has been subject of investigation by Dispatches but nothing has changed.” Sounds just like the FCA – at least the two organisations are consistent in a unified manner. Perhaps Amerdeep Somal (Head of the FOS) and Andrew Bailey (would-be Head of the Bank of England) consider this to be a good achievement?
Sadly, the Pensions Ombudsman is no better either. Complaints where negligent, lazy, apathetic ceding providers – such as Standard Life, Aviva, Prudential and Scottish Widows – have handed over £ millions to pension scams, are not upheld. The Ombudsman’s excuse is that the “Scorpion” campaign which warned the public and the industry about the dangers of pension liberation fraud was not published until February 14th 2013. The Ombudsman conveniently forgets to mention that there had been a very clear and loud warning back in 2010 – by OPRA (the forerunner of the Pensions Ombudsman). But it would seem that no British regulators or ombudsmen ever let the truth get in the way of defending big, toxic institutions which are “too big to fail”.
In Spain, the Criminal Justice System has, at long last, decided that the CWM (Continental Wealth Management) scam run by Jody Smart, Darren Kirby and an assortment of silver-tongued scammers must be brought to justice. This follows a year-long initiative to document the £100 million scam operated by the Costa Blanca based firm and facilitated by life (death) offices Old Mutual International, SEB and Generali. It is hoped that Smart, Kirby and the rest of the motley crew of advisers such as Dean Stogsdill, Anthony Downs, Neil Hathaway, Richard Peasley, Phill Pennick and Dennis Radford will serve long prison sentences.
The Spanish criminal court has made an order that the life offices (OMI, SEB, Generali) and all those connected to Continental Wealth Management – and who facilitated their crimes in the years up to 2017 when the firm collapsed – will be called to give evidence. In particular, the risk profiles and forged signatures on dealing instructions will be brought into evidence. https://www.youtube.com/watch?v=lYlxu8YOaAM&t=12s
Part of the Continental Wealth Management scam was the repeated use of forged signatures on dealing instructions. This practice became accepted by life offices such as OMI from 2010 onwards as the volume of business coming in from scammers became extremely lucrative. Scammers such as Darren Kirby and his team of bogus “advisers” (who went on to work for firms such as Spectrum IFA Group and Pennick Blackwell) would use a blank dealing instruction bearing the victim’s signature to “churn” the fund and maximise the commissions earned. The favourite investments were structured notes from rogue providers such as Commerzbank, Royal Bank of Canada, Nomura and Leonteq.
Old Mutual International, SEB and Generali accepted thousands of dealing instructions from scammers such as Continental Wealth Management. On top of knowing full well that such firms had no investment license (in fact, CWM had no license of any kind) and no qualifications to give investment advice, OMI and the other rogue death offices repeatedly accepted these dealing instructions with obviously forged signatures.
CWM and a number of other firms would trick victims into signing a blank dealing instruction. Then they would countersign it with an illegible signature. These blank investment forms would then be photocopied repeatedly – sometimes for many years – as the victims’ funds were churned and repeatedly invested in high-risk investments such as toxic structured notes.
Old Mutual International actively encouraged this financial crime by paying unlicensed scammers like CWM 8% commissions to flog expensive, unnecessary life bonds – and then flog the risky, toxic investments offered on the life office platform.
One of the structured note providers – Leonteq – is now being sued by OMI for the £94 million worth of especially toxic notes sold to hundreds of victims to destroy their funds and pay the scammers an extra 2% commission “under the table”. However, OMI put these structured notes on their platform in the first place, and accepted the forged dealing instructions in the second place. Difficult to see how this was anyone’s fault other than Old Mutual’s.
Part of the syndrome of offshore financial crime being routinely accepted by life offices, is the proliferation of “advisory” firms operating without being fully licensed. There is a cheesy urban myth that a firm can give investment advice if it flogs victims an insurance bond and then picks from the selection of toxic, high-risk investments being offered by the bond provider. This isn’t deemed to be “investment advice” as the so-called adviser is merely assisting the investor to make his own decisions (i.e. give himself advice). This practice has gone on for years – and is still going on with firms such as Spectrum IFA Group which openly advertises the fact that it gives investment advice, even though it has no investment license.
While the FCA wouldn’t have the slightest interest in what goes on offshore (after all, it doesn’t give a toss what happens in the UK either), the Malta FSA has at least made sure that only licensed advisers give investment advice on Malta’s watch. An advisory firm with an insurance license can still flog insurance bonds that few people need and even fewer can afford, but Malta will no longer accept investment advice from such “Chiringuitos” (Spanish for financial scammer). This has, of course, resulted in an exodus to Gibraltar where the scammers can pretty much do what they like. The Gibraltar Financial Services Commission actively encourages scams. STM Fidecs – bogus QROPS trustees for the Trafalgar Multi Asset Fund scam (under investigation by the Serious Fraud Office) – and the Blackmore Global investment scam perpetrated by serial scammers Phillip Nunn and Patrick McCreesh – are still flourishing happily on the Gib rock. The Gib FSC stands idly by and does nothing. Obviously, the Gib lot are trying to emulate the FCA – and succeeding happily.