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Sunday, 26 October 2014

INDEPENDENT FINANCIAL ADVISER APPEALS BAN AND FINE

Paul Reynolds (also known as Paul Brian Reynolds) was an independent financial adviser authorized and regulated by the Financial Conduct Authority (FCA and the FSA before it) for nearly eight years. This week the FCA revealed it had fined him £290,344 and banned him from holding any position in financial services. Mr Reynolds is contesting the findings and appealing the decision to the Upper Tribunal, the equivalent of the High Court. It could clear Mr Reynolds and allow him to pursue his career in finance.

We know these details because the FCA has finally published its December 2013 decision notice setting out the action against Mr Reynolds. It was delayed by Mr Reynolds's request to the Upper Tribunal that the details should be kept secret until the Tribunal had heard his case and decided if the fine and ban are imposed. After a hearing on 15 October the Upper Tribunal refused that privacy request.

The findings against Mr Reynolds are serious. They include reckless recommendations, deliberately misleading the FCA, investing clients' money without asking them, falsifying signatures, inflating the stated value of clients' investments, misleading clients, and submitting false loan applications on behalf of clients.

Eight clients were encouraged to invest a total of £2 million in Unregulated Collective Investment Schemes (UCIS) some of which have now been suspended losing them money. He also advised some of these clients to invest in Geared Traded Endowment Policies (GTEPs) where the invested money is borrowed. That substantially increases the risk of these already risky products. Aside from the eight people cited in the decision, a total of 41 clients invested £8.3m in these products earning his firm, Aspire, more than £600,000 commission.

Generally the FCA says that UCIS and GTEPs are only suitable for high net worth individuals who understand the risk, are happy to take it, and can bear any losses. Among the eight clients specified in the FCA decision notice was a retired woman living on a state pension, a hairdresser earning £3000 a year who remortgaged her home to raise the money to invest, and a chef and his accounts assistant wife, also on low incomes, who borrowed £500,000 against their home to invest.

I asked the FCA why it and its predecessor the FSA had allowed Mr Reynolds to be authorized for nearly eight years before taking action given the serous nature of the findings which stretched back several years "That is a very difficult question to answer. As soon as these issues were discovered we acted quickly" a spokeswoman told me.

The Upper Tribunal will hear the case on 8 and 9 December. The FCA told me that Mr Reynolds will represent himself and it could not put me in touch with him. No contact details for Mr Reynolds could be found. 


The FCA Decision Notice.