FINAL NOTICE

1.
ACTION

1.1.
For the reasons given in this Notice, Financial Conduct Authority (the Authority)

(1)
imposes on Andrew Deeney a financial penalty of £397,400 pursuant to

section 66 of the Act; and

(2)
makes an order prohibiting Mr Deeney from performing any function in

relation to any regulated activities carried on by any authorised or exempt

persons, or exempt professional firm pursuant to section 56 of the Act.

1.2
Mr Deeney agreed to resolve this matter and qualified for a 30% (stage 1)

discount under the Authority’s executive settlement procedures. Were it not for

this discount, the Authority would have imposed a financial penalty of £478,300

on Mr Deeney.

2.
SUMMARY OF REASONS

2.1.
The Authority has found that:

(1)
during his time as an adviser for Active Wealth (UK) Limited (Active Wealth)

between 26 March 2015 and 12 December 2017 (the First Relevant Period),

Mr Deeney breached Principle 1 (Integrity) of the Authority’s Statements of

Principle for Approved Persons by acting dishonestly and recklessly when

performing his CF30 controlled function in relation to Active Wealth’s

pension business; and

(2)
during his time as a director and adviser at Fortuna Wealth Management

Limited (Fortuna) between 16 May 2018 to 29 August 2019 (the Second

Relevant Period) and 13 February 2018 to 5 December 2019 (the Third

Relevant Period), Mr Deeney breached Principle 1 (Integrity) by acting

dishonestly and recklessly when performing his CF1 and CF30 controlled

functions in relation to Fortuna’s business and misleading the Authority with

respect to investments advised on or arranged by Fortuna.

2.2.
Mr Deeney risked causing significant harm to Active Wealth’s customers by

providing them with unsuitable advice so that he could dishonestly receive

commission payments that had been banned by the Authority. Mr Deeney made

personal financial gains exceeding £200,000.

2.3.
Pensions are a traditional and tax-efficient way of saving money for retirement.

The benefits someone obtains from their pension can have a significant impact on

their quality of life during retirement and, in some circumstances, may affect

whether they can afford to retire at all. Customers who engage advisers and

authorised firms to provide them with advice in relation to their pensions place

significant trust in those providing the advice. Where an adviser fails to act with

integrity, it exposes its customers to a significant risk of harm.

2.4.
Mr Deeney was an approved person at Active Wealth, a small financial advice firm

which went into liquidation on 5 February 2018, and which has since been

dissolved. Active Wealth was authorised by the Authority with permission to

conduct regulated activities, including advising on investments, pension transfers

and arranging (bringing about) deals in investments.

2.5.
From 6 February 2015 to 12 December 2017, Mr Deeney held the CF30

(Customer) function at Active Wealth. Mr Deeney was one of two financial advisers

at Active Wealth approved by the Authority to provide its customers with advice

on their pensions.

2.6.
The Authority’s rules prohibited Mr Deeney from receiving commissions,

remunerations or benefits of any kind apart from charging for advice provided. Mr

Deeney contravened this rule by dishonestly accepting prohibited commission

payments for recommending particular investments to Active Wealth’s customers.

These payments were funneled via apparently arm’s length companies in a manner

designed to disguise their true origins and Mr Deeney was aware that he was not

permitted to receive these prohibited payments. When challenged by the Authority

about these payments, Mr Deeney stated that they were bonus or consultancy

payments. Mr Deeney knew this was not true.

2.7.
The Authority’s prohibition on commission payments was to prevent advisers

having a conflict of interest between their own financial gain in recommending that

customers invest their pensions in products that would produce the highest

payment for the adviser as opposed the best outcome for the customer. The

purpose of prohibiting these payments was to protect customers’ pensions from

being placed into investments that were unsuitable.

2.8.
However, when advising customers to transfer or switch their pensions to SIPPs

and invest part of their SIPP funds in high risk, illiquid investments, Mr Deeney

recklessly closed his eyes to the obvious risks that they were not suitable to

recommend. This put customers at serious risk of receiving unsuitable advice and

therefore at serious risk of investing in products that were not suitable for them.

2.9.
Fortuna was a small firm based in Wombourne, Staffordshire. It was authorised

from 1 June 2017 with permissions including advising on investments, pension

transfers and opt outs, and arranging deals in investments.

2.10.
Mr Deeney was Fortuna’s sole director and shareholder. He was the only person

at Fortuna approved to perform the controlled functions of CF1 (Director), CF10

(Compliance Oversight), CF11 (Money Laundering Reporting) and CF30

(Customer). Mr Deeney had sole responsibility for Fortuna’s day-to-day conduct.

Fortuna purported to take over from Active Wealth when it stopped trading by

buying its goodwill including its client database in February 2018.

2.11.
When asked by the Authority about Fortuna’s involvement in placing customers

into certain high-risk investments, Mr Deeney repeatedly sought to mislead the

Authority about what Fortuna had done. The Authority concludes that Mr Deeney

did so in order to avoid the Authority examining his role in advising customers to

make those high-risk investments, all of which have subsequently defaulted, with

only one out of three defaults having been rectified.

2.12.
Moreover, after Fortuna purchased Active Wealth’s client database, Mr Deeney

allowed Fortuna to receive ongoing service fees and trail commission from about

150 customers that Active Wealth may have previously been entitled to receive.

For 118 of those customers, Fortuna charged the ongoing service fees or received

trail commission without the customers’ knowledge, consent or actually providing

any ongoing service. Fortuna stopped the payments for some customers in

January 2019, but Mr Deeney recklessly took no steps to stop the payments for

most customers. It was only when challenged by the Authority that Mr Deeney

took some steps to refund some customers, however, by the time Fortuna entered

liquidation on 10 November 2020 it still had not repaid over £15,000 in fees and

commission.

2.13.
For the reasons given above, the Authority hereby:

(1)
imposes on Andrew Deeney a financial penalty of £397,400 pursuant to

section 66 of the Act; and

(2)
makes an order prohibiting Mr Deeney from performing any function in

relation to any regulated activities carried on by any authorised or exempt

persons, or exempt professional firm pursuant to section 56 of the Act.

3.
DEFINITIONS

3.1.
The definitions below are used in this Notice:

“the Act” means the Financial Services and Markets Act 2000;

“Active Wealth” means Active Wealth (UK) Limited (FRN 631415), the firm

established and controlled by Darren Reynolds;

“the Active Wealth P6 Agreement” means the Portfolio Six Discretionary Portfolio

Management Agreement between Active Wealth and Greyfriars dated 23 May

2015;

“the Authority” means the body corporate previously known as the Financial

Services Authority and renamed on 1 April 2013 as the Financial Conduct

Authority;

“the close family member” means the director of the Second Company who was

a close family member of Darren Reynolds;

“COBS” means the Authority’s Conduct of Business Sourcebook, part of the FCA

Handbook of Rules and Guidance;

“DEPP” means the Decision Procedure and Penalties Manual, part of the FCA Rules

and Guidance;

“DFM” means a discretionary fund manager, i.e. an authorised firm that provides

investment management services for investment funds;

“the First Company” means the first company used by Darren Reynolds to funnel

the prohibited commission payments;

“the First Relevant Period” means 26 March 2015 to 12 December 2017;

“Fortuna” means Fortuna Wealth Management Limited (FRN 774173), previously

known as AWG Financial Ltd and Fidelis Wealth Management Ltd;

“FSCS” means the Financial Services Compensation Scheme;

“Greyfriars” means Greyfriars Asset Management LLP (FRN 229285), a DFM into

which some Active Wealth customers were advised to invest;

“IFA” means independent financial adviser;;

“illiquid investment” means an investment the value of which cannot be easily

realised through the availability of a secondary market;

“introducer” means any authorised or unauthorised entity or individual that

referred customers to Active Wealth;

“introduction agreements” means agreements means agreements entered into to

facilitate the payment of commission from the issuers to the Second Company;

“marketing agreements” means agreements entered into to facilitate the payment

of commission from the issuers to the First or Second Companies;

“mini-bond” means an illiquid investment that is a debt instrument issued by an

issuer, typically for a fixed interest rate repayable over a period of time;

“Portfolio Six” or “P6” means an investment portfolio created by Greyfriars

consisting of mini-bonds;

“P6 Application Form” means Greyfriars’ application form for investments in P6;

“the Retail Distribution Review” means the review of how investments are

distributed to retail consumers in the UK commenced by the Authority in 2006;

“the Second Company” means the second company used by Darren Reynolds to

funnel prohibited commission payments;

“the Second Relevant Period” means 16 May 2018 to 29 August 2019;

“SIPP” means a self-invested personal pension, a trust-based wrapper for an

individual’s pension investment;

“SSAS” means a small self-administered scheme, a type of employer-sponsored

defined contribution workplace pension that can give the employer additional

investment flexibility;

“suitability report” means the document or letter prepared by Active Wealth

purporting to set out its advice a customer;

“the Third Relevant Period” means 13 February 2018 to 5 December 2019;

“the Tribunal” means the Upper Tribunal (Tax and Chancery Chamber);

“the UKFI instant access deposit monthly rate” means the historic average

monthly interest rate of UK monetary financial institutions (excluding the Central

Bank) sterling instant access deposits (excluding unconditional bonuses from

households (in percent) not seasonally adjusted) (with reference IUMB6VK)

published by the Bank of England;

“the Warning Notice” means the warning notice given to Mr Deeney dated 10

August 2022.

4.
FACTS AND MATTERS

4.1.
Active Wealth was a small firm based in Willenhall, West Midlands. It was

authorised on 1 December 2014 with permission to conduct regulated activities,

including advising on pension transfers and opt outs and advising on and

arranging deals in investments. Active Wealth’s primary business was the

provision of pension and investment advice to retail customers. Active Wealth’s

sole director and shareholder was Mr Reynolds.

4.2.
Mr Deeney held the CF30 (Customer) controlled function at Active Wealth from 6

February 2015 to 12 December 2017. Mr Deeney provided pension and

investment advice to Active Wealth’s customers.

4.3.
On 18 July 2017, Mr Reynolds undertook to the Authority that Active Wealth would

not provide advice on investments into non-standard assets.

4.4.
At the request of the Authority, on 24 November 2017 Active Wealth voluntarily

agreed to cease accepting new retail customers in respect of its pensions business

and to refrain from advising any existing customers, except where the advice had

been signed off by an independent third party, until such time as agreed by the

Authority.

4.5.
The requirements were not lifted before Active Wealth entered into liquidation on

5 February 2018. Active Wealth was declared in default by the FSCS in March

2018, meaning that customers were eligible to claim compensation. Active Wealth

was dissolved on 14 May 2019.

4.6.
As at July 2021, the FSCS paid over £14 million in compensation to nearly 400

former Active Wealth customers. Many customers – at least 180 - suffered losses

that exceeded the FSCS compensation cap of £50,000 and remain out of pocket

as a result of the poor advice they received.

Pension switch and transfer advice

4.7.
Pensions are a traditional and tax-efficient way of saving money for retirement.

The benefits someone obtains from their pension can have a significant impact on

their quality of life during retirement and, in some circumstances, may affect

whether they can afford to retire at all. Customers who engage advisers and

authorised firms to provide them with advice in relation to their pensions place

significant trust in those providing the advice. It is therefore of paramount

importance that advisers act with integrity when advising such customers

regarding the switch or transfer of their pensions and ensure that the advice given

to a customer is suitable for them, having regard to their circumstances as a

whole.

4.8.
An adviser may advise a customer to switch or transfer their pensions from their

existing arrangements into a self-invested personal pension (SIPP). A SIPP is a

trust-based wrapper for an individual’s pension investment. It gives tax relief on

the individual’s contributions and tax-free growth and offers much wider

investment powers than are generally available for other types of personal

pensions and group personal pensions. In addition, a SIPP offers a greater degree

of control over where and when funds are invested or moved than is permitted by

traditional pension arrangements run by investment management and life

assurance companies or defined benefit pensions.

4.9.
When a financial adviser is advising on an investment wrapper product, such as a

SIPP, that financial adviser ought to consider the suitability of the overall

proposition i.e. the suitability of both the SIPP wrapper and the underlying

investment, in order to be able to provide suitable advice to the customer. The

recommendation must be suitable for the customer having regard to the

customer’s investment knowledge and experience, financial situation, and

investment objectives.

4.10.
SIPPs are sometimes used to invest in high risk, often highly illiquid unregulated

investments. Such investments are unlikely to be suitable for many clients, and

even for those clients for whom they may be suitable, it is likely only to be suitable

for them to invest a small proportion of their investable assets in such

investments.

4.11.
From about March 2015 to September 2016, Active Wealth recommended that at

least 288 customers invest in – among other things - a portfolio of high risk,

illiquid investments called “Portfolio Six” or “P6” managed by Greyfriars Asset

Management LLP (Greyfriars), a discretionary fund manager (DFM). The Authority

required Greyfriars to cease accepting new fund into P6 in October 2016.

Prohibited commission payments


4.12.
COBS 6.1A.4R required firms to ensure that its advisers such as Mr Deeney did

not receive commissions, remunerations or benefits of any kind apart from

charging for advice provided. The purpose of this rule, introduced in 2012 as a

result of the Authority’s Retail Distribution Review (RDR), was to ensure that

advisers act in customers’ best interests and not simply recommend product

providers that pay the highest commission.

4.13.
During his time at Active Wealth, Mr Deeney received total income from Active

Wealth of £94,773. In addition, Mr Deeney received total payments of £123,326

from the First Company and £83,023 from the Second Company.

4.14.
As set out in paragraphs 4.15 to 4.17 below, Mr Reynolds set up the First Company

purportedly to provide administration services for small self-administered pension

schemes (SSASs), and a close family member set up the Second Company

purportedly to provide administration services for IFA firms. However, in respect

of both companies, the vast majority of their income derived from commission

payments from issuers of investments into which Active Wealth’s customers

invested on Active Wealth’s personal recommendations. Those payments reflected

a percentage of the amounts invested. The First Company and the Second

Company subsequently made payments to Mr Deeney in respect of the

investments that clients he had advised had made, which was prohibited by COBS

6.1A.4R.

The First Company

4.15.
During Mr Deeney’s time at Active Wealth, Mr Reynolds controlled the First

Company that purported to carry out administration services for SSASs. However,

only a small percentage of the First Company’s income was derived from

administration services. Mr Reynolds primarily used the First Company as a

mechanism to receive commission for investments that Active Wealth

recommended that its customers invested in, namely investments in P6 and one

other investment. Once received, the First Company distributed the commission

to bank accounts held by Mr Reynolds, Mr Deeney and other firms and individuals.

4.16.
The First Company received commission pursuant to marketing agreements that

it entered into with the issuers of the investments. Of the agreements obtained

by the Authority, the commission ranged between 7% and 17% of the sums

invested in the investments, and in one instance the percentage was not specified

in the agreement. In addition, the First Company also received commission from

firms that had their own marketing agreements with issuers for selling

investments.

4.17.
Mr Deeney gave the Authority contradictory explanations for the payments he

received from the First Company. He told the Authority that Mr Reynolds told him

that he would receive “bonus payments” from the First Company to cover his

expenses in relation to Active Wealth including his time and his mileage. Mr

Deeney also told the Authority that Mr Reynolds said that the payments were

related to P6 and “connected to the profitability of the portfolios and […] he would

share some of that with me”. In direct contradiction of this statement, Mr Deeney

also told the Authority that in 2016 he determined on his own through observation

that the payments were derived from investments through P6.

4.18.
Mr Deeney told the Authority that once he understood that the payments he

received were commission, he thought that he was permitted to receive them and

that the Authority’s rules did not prohibit the receipt of commission from

unregulated products such as the investments in P6. This was an incorrect

interpretation of the Authority’s rules. He said that he did not turn his mind to

consider whether his receipt of the commission presented a conflict of interest

because he was just following Active Wealth’s business model.

4.19.
The Authority rejects Mr Deeney’s explanations. In the Authority’s view, Mr

Deeney must have appreciated and did appreciate at all material times that the

payments of £123,326 he received from the First Company were prohibited

commission payments that were derived from investments made by Active

Wealth’s
customers
on
Active
Wealth’s,
and
Mr
Deeney’s,
personal

recommendation.

The Second Company

4.20.
In June 2016, Mr Reynolds’ close family member established the Second

Company. The Second Company purported to provide administration services to

IFA firms and provided administration services to Mr Deeney’s firm, Fortuna, in

2018. However, like the First Company only a small percentage of the Second

Company’s income was derived from administration services. In reality, it was

another mechanism used by Mr Reynolds to receive commission from investments

made by Active Wealth’s customers on Active Wealth’s personal recommendation,

namely investments through P6 and four other investments. Once received, the

Second Company distributed the commission to bank accounts held by Mr

Reynolds, Mr Deeney and other firms and individuals.

4.21.
The Second Company received commission payments pursuant to marketing and

introduction agreements it entered into with issuers and intermediaries, in which

the Second Company agreed to sell investments to prospective investors.

According to the agreements obtained by the Authority, the commission ranged

between 4% and 17% of the total amount invested and in several instances the

percentage was not specified in the agreement.

4.22.
Mr Deeney told the Authority that the payments he received from the Second

Company related to “consultancy” he provided to Active Wealth to oversee the

work of Active Wealth employees, including oversight of the processing of

applications and answering questions regarding paperwork. Mr Deeney submitted

invoices to the Second Company that specified that the payments were for

“business support and consultancy work”. However, Mr Deeney knew at all

material times that the payments of £83,023 he received from the Second

Company represented prohibited commission payments derived from investments

made by Active Wealth’s customers on Active Wealth’s and Mr Deeney’s personal

recommendation. Mr Deeney’s explanation to the Authority was untrue and the

invoices were created as a sham to conceal the true nature of the payments.

4.23.
Mr Deeney therefore financially benefited from the commission paid by issuers to

the First and Second Company for Active Wealth’s part, including his part, in the

facilitation of the sale of investments to Active Wealth customers, contrary to

COBS 6.1A.4R. This created a conflict of interest between Mr Deeney and the

customers who trusted him to provide sound advice. Mr Deeney was aware of the

conflict of interest and that the arrangements breached the Authority’s Rules. Mr

Deeney therefore acted without integrity in accepting the commission.

4.24.
As set out below, Mr Deeney had a fundamentally flawed approach to providing

pension advice and put customers at significant risk of receiving unsuitable advice.

The Authority considers that Mr Deeney financially benefitted from the flawed

approach by receiving the prohibited Commission payments.

Failures in Greyfriars P6 investment advice


4.25.
During his time at Active Wealth, Mr Deeney advised about 65 customers to switch

or transfer their existing pension arrangements to SIPPs and subsequently

advised them to invest part of their SIPP funds in P6. For the reasons set out

below, Mr Deeney failed to provide proper advice to these customers.

Active Wealth’s relationship with Greyfriars and P6

4.26.
The Greyfriars DFM service operated a range of risk rated portfolios aimed at

financial advisers. One of these portfolios was Portfolio Six (P6), which was made

up of mini-bonds including overseas investments in real estate, car parks,

renewable energy and holiday resorts. The bonds were not listed on a regulated

market and promised returns of between 6% and 15% per annum. P6 investments

were high risk and illiquid which were unlikely to be suitable for retail customers.

Following intervention by the Authority, P6 closed to new investment in October

2016.

4.27.
On 23 May 2015, Active Wealth entered into the Active Wealth P6 Agreement with

Greyfriars. Under the agreement, Active Wealth was responsible for selecting and

assessing the suitability of P6 when advising the customer to invest in the

portfolio.

4.28.
A firm is required to take reasonable steps to ensure that the investments that

are recommended to its customers are suitable for those customers (COBS

9.2.1R). In order to determine whether an investment is suitable for a customer,

a firm needs to undertake due diligence on the investment to understand how it

works. This is the process a firm carries out to assess, among other things, the

nature of the investment and its risks and benefits. Mr Reynolds was responsible

for determining that P6 was potentially a suitable investment for Active Wealth’s

customers and did so based on due diligence conducted for Active Wealth by a

third party.

4.29.
However, as an approved person holding the CF 30 (Customer) function at Active

Wealth, Mr Deeney was required, among other things, to act with integrity and to

use due skill, care and diligence in discharging his function. In the circumstances,

while he was entitled to place a degree of reliance on the due diligence and

assessment of P6 for which Mr Reynolds was responsible, he was not entitled to

close his eyes to, or to be reckless as to, the obvious risks that recommending P6

would not be compatible with his customers’ objectives and would expose them

to losses that they could not bear.

4.30.
Mr Deeney admitted to the Authority that he had limited knowledge of P6 and its

underlying products and this knowledge was largely based on what Mr Reynolds

told him about them. However, Mr Deeney knew that the underlying products in

P6 were unregulated investments, including overseas property investments, and

that those products relied on alternative funding because they could not receive

funding from mainstream banks. Mr Deeney knew that the underlying products

carried a higher risk that customers might lose some or all of their pension funds

and were not protected by the FSCS.

4.31.
Notwithstanding Mr Deeney’s awareness of the significant risks of these

underlying products, he usually recommended that customers, including those

that he assessed as having a cautious attitude to risk or who were not

sophisticated investors, invest in P6. He told the Authority that he did so because

it was Active Wealth’s “preferred” investment and that it was “part of Active

Wealth’s investment process” to recommend P6. He also believed that the product

was liquid because it allowed clients to withdraw or move their investment, which

meant he had no concern about recommending it. In taking that view, Mr Deeney

ignored the risk warnings in the P6 documentation which made it clear that, in

stressed market conditions, investors may find it very difficult or impossible to

realise their investment.

4.32.
As set out above, Mr Deeney was aware of the higher risk that the P6 investment

carried. In these circumstances, it was wrong for Mr Deeney to ignore the obvious

risk that the underlying investments were unsuitable.

Consequences of failure

4.33.
Mr Deeney’s failure put customers at serious risk of receiving unsuitable advice

and therefore at serious risk of investing in products that were not suitable for

them. Although Mr Deeney denied being aware that the substantial payments he

received from the First Company and the Second Company were commission for

putting customers into particular investments, the Authority does not believe this

to be credible. It is not credible that Mr Deeney could have failed to appreciate

the real nature of these payments, or that he did not take an interest in

understanding what they represented. Mr Deeney admitted that he was at some

point aware that payments he received from Simple Pension related to

investments in P6 but continued to accept the payments. Mr Deeney denied being

incentivised to recommend those products as a result of the commission

payments. Again, the Authority does not find this to be credible. The scale and

frequency of the payments indicate that they were a powerful incentive.

Background – Fortuna

4.34.
Prior to leaving Active Wealth in December 2017, Mr Deeney established Fortuna.

Fortuna was a small firm based in Wombourne, Staffordshire. It was authorised

from 1 June 2017 with permission to conduct regulated activities, including

advising on investments, pension transfers and opt outs, and arranging deals in

investments.

4.35.
Mr Deeney was Fortuna’s sole director and shareholder. He was the only person

at Fortuna approved to perform the controlled functions of CF1 (Director), CF10

(Compliance Oversight), CF11 (Money Laundering Reporting) and CF30

(Customer). Mr Deeney had sole responsibility for Fortuna’s day-to-day conduct.

4.36.
In February 2018, after Active Wealth entered into liquidation, Fortuna purchased

Active Wealth’s goodwill, including its client database containing the personal

information of over 900 customers. Fortuna took on some of these clients.

Misleading the Authority with respect to the High-Risk Bonds

Fortuna customers’ investments in the High-Risk Bonds


4.37.
Between February 2018 and August 2018, Fortuna arranged for 22 customers

(most of whom were former Active Wealth customers) to invest in the High-Risk

Bonds. In total, Fortuna’s customers invested around £1.6m in the High-Risk

Bonds. Mr Deeney ultimately accepted that Fortuna advised two of those

customers on the investments, although Fortuna had, at the time, submitted

papers confirming to the investment broker that Fortuna had advised almost all

of them. The investments were made after Active Wealth had undertaken to the

Authority not to provide advice to investors on non-standard assets and the

majority were made after Active Wealth had been placed into liquidation. The

High-Risk Bonds were high-risk investments. All three of the series of the High-

Risk Bonds in which Fortuna’s customers investors were invested have since

defaulted, with the default for only one of the series having been subsequently

rectified.

The New Business Registers

4.38.
At regular intervals from December 2017, the Authority required Fortuna to

provide it with New Business Registers (NBRs) setting out the investments it had

arranged. None of the NBRs provided by Fortuna included the investments in the

High-Risk Bonds. The first NBR that should have contained reference to the

investments in the High-Risk Bonds was provided by Fortuna on 16 May 2018.

4.39.
On 10 January 2019, Mr Deeney was informed that he was being investigated by

the Authority in respect of his conduct whilst an adviser at Active Wealth. He was

specifically informed that the investigation would examine whether Mr Deeney

provided customers unsuitable advice and misleading information about the risks

of the investments he recommended.

4.40.
On 14 March 2019, the Authority asked Fortuna to provide it with an NBR with,

amongst other things, details of underlying investments of all business, including

the full name of the investments, and whether they were standard or non-

standard, which Fortuna had arranged over the previous two years. On 28 March

2019, Mr Deeney provided an NBR to the Authority. Like all the other NBRs that

Mr Deeney had provided, that NBR did not make any reference to the High-Risk

Bonds.

4.41.
Mr Deeney told the Authority that his failure to include the High-Risk Bonds was

an honest mistake and that he did not think he had to include the investments

because (a) it was not business on which Fortuna had advised or been

remunerated and (b) he thought that the High-Risk Bonds were standard assets.

There was nothing in the Authority’s request to suggest that he could exclude

such business. According to Mr Deeney, he had in fact advised on two cases, and

in almost all cases he had represented to the broker arranging the investment

and the platform provider that Fortuna had advised the client involved. By

omitting the High-Risk Bonds from the NBR, Mr Deeney intended to mislead the

Authority as to Fortuna’s activities in relation to the High-Risk Bonds. Mr Deeney

also intended to mislead the investment broker and the platform provider by

falsely representing that Fortuna had given advice.

The June 2019 Information Requirement


4.42.
On 12 June 2019, the Authority sent Fortuna an information requirement (the

Fortuna Information Requirement), requiring it to provide certain information

relating to debt instruments including mini-bonds, including whether it had been

involved in the distribution of or arranged customers to invest in such

investments. The requirement indicated that it should be interpreted broadly. Mr

Deeney responded that Fortuna did not advise on or arrange for customers to

invest in any such investments.

4.43.
Mr Deeney’s responses were false and misleading because he failed to tell the

Authority that Fortuna had arranged for customers to invest in the High-Risk

Bonds and, in respect of two customers, advised them to invest.

4.44.
Mr Deeney told the Authority that he provided the responses because he thought

that the Fortuna Information Requirement related only to mini-bonds and did not

believe that the High-Risk Bonds were mini-bonds. However, the Authority rejects

Mr Deeney’s explanation. He was told to interpret the questions broadly and knew

that the High-Risk Bonds were debt instruments that were relevant to the Fortuna

Information Requirement.

4.45.
Mr Deeney also stated that he did not consider that Fortuna had been involved in

the manufacture or distribution of the High-Risk Bonds because it only arranged

the investments on an execution-only basis, meaning that Fortuna did not provide

advice in respect of the investments. However, the Authority rejects that

explanation because it must have been obvious to Mr Deeney that Fortuna had

distributed the High-Risk Bonds by arranging customers to invest in them whether

or not he had provided advice to those customers. Further, Mr Deeney’s

explanation was untrue because, as he subsequently told the Authority, Fortuna

did not arrange two customers’ investments on an execution-only basis, rather

Fortuna arranged those investments after providing advice to those customers in

respect of the High-Risk Bonds.

4.46.
The Authority concludes that Mr Deeney sought to deliberately mislead the

Authority as to Fortuna’s involvement in the sale of the High-Risk Bonds.

The June 2019 supervisory visit


4.47.
On 26 June 2019, the Authority conducted a supervisory visit to Fortuna’s

premises (the Fortuna Visit). During the Fortuna Visit, the Authority initially asked

Mr Deeney whether Fortuna had arranged investments in the High-Risk Bonds. Mr

Deeney replied, “[The High-Risk Bonds]? None in [the High-Risk Bonds].” He went

on to say that Active Wealth advised customers about the High-Risk Bonds and

that he had “taken over agency” of some of those customers who were now with

Fortuna. The Authority asked him to explain this in more detail. Mr Deeney said

that Mr Reynolds may have written to “the provider” to ask them to change the

customers to Fortuna, but they were originally Active Wealth’s customers.

4.48.
The Authority then showed Mr Deeney an application form he had completed that

indicated that Fortuna advised customers to invest in the High-Risk Bonds and

arranged the investments. The Authority highlighted to Mr Deeney that the

investments in the High-Risk Bonds took place from December 2017 to August

2018. It appeared unlikely to Authority that Active Wealth could have advised on

the High-Risk Bonds when in July 2017 Mr Reynolds undertook that it would not

provide advice on non-standard investments. Mr Deeney stated that he could not

recall but suggested that Active Wealth may have advised those customers to

invest in the High-Risk Bonds and that Fortuna “signed off” the investments after

Active Wealth “could no longer complete the transaction.” It was only at this point,

therefore, that Mr Deeney accepted that Fortuna may have arranged the

investments in the High-Risk Bonds.

4.49.
Mr Deeney’s initial statements during the Fortuna Visit were false because,

although Active Wealth had initially arranged the investments for four customers

before it went into liquidation in February 2018, Fortuna subsequently arranged

for a further 22 customers to invest in the High-Risk Bonds. It was not until later,

when pressed, that he accepted that Fortuna may have arranged the investments.

His statements that Active Wealth had advised the customers were also

misleading because he failed to tell the Authority that Fortuna had advised two

customers in respect of the High-Risk Bonds.

4.50.
On 29 August 2019, the Authority imposed requirements on Fortuna with

immediate effect to, amongst other things, cease all regulated activity and refund

the ongoing service fees. The requirements remained in place until Fortuna

entered liquidation on 10 November 2020.

4.51.
In response to the imposition of the requirements, Mr Deeney told the Authority

on 24 October 2019 that his statements during the Fortuna Visit were caused by

confusion and stress and were an honest misunderstanding. He thought that the

Authority had not asked him whether Fortuna had arranged investments in the

High-Risk Bonds, but rather had asked whether Fortuna had advised on those

investments. He maintained that Fortuna had not provided advice on the High-

Risk Bonds. However, this was also untrue. It was not until a subsequent oral

representations meeting with the Authority’s Regulatory Decision Committee

(RDC) on 26 November 2019 that Mr Deeney first told the Authority that Fortuna

had advised two of the customers in respect of the High-Risk Bonds.

4.52.
The Authority concludes that Mr Deeney’s series of statements during the Fortuna

Visit were intended to mislead the Authority as to Fortuna’s involvement in the

sale of the High-Risk Bonds.

4.53.
In summary, Mr Deeney acted without integrity when he:

(1)
dishonestly omitted the High-Risk Bonds from the NBRs provided at the

request of the Authority;

(2)
misled the Authority about the High-Risk Bonds in response to the Fortuna

Information Requirement from the Authority; and

(3)
misled the Authority during the Fortuna Visit about the High-Risk Bonds.

4.54.
Mr Deeney’s explanations that he was variously confused, stressed or genuinely

thought that he was being open and honest are not supported by the evidence.

Rather, Mr Deeney repeatedly acted dishonestly in attempting to mislead the

Authority about Fortuna’s dealings with the High-Risk Bonds. Given that Mr

Deeney knew that he was already under investigation for advising on similar

investments, the Authority concludes that he did so because he knew that if the

Authority was aware that he had placed more customers into more potentially

unsuitable investments, it would reflect poorly upon him. He also knew that he

would be called to explain why he had misled the investment broker and platform

provider by claiming that Fortuna had advised the customers. The Authority

concludes therefore that Mr Deeney acted without integrity.

Ongoing service fees and trail commission


4.55.
After Fortuna acquired Active Wealth’s goodwill including its client database on 13

February 2018, it contacted various product providers with which Active Wealth’s

customers held accounts and arranged for Fortuna to take over from Active Wealth

in a process known as a novation of agency. None of the customers were party to

this novation. As a consequence, Fortuna began to receive ongoing service fees

from the customers’ accounts that Active Wealth may have previously been

entitled to receive. In addition, Fortuna also received trail commission that

resulted from advice provided by another IFA firm before those customers

transferred to Active Wealth.

4.56.
A firm can only charge an ongoing service fee or receive trail commission where

it is providing an ongoing service to the customer, such as regularly reviewing the

performance of a customer’s investments. The firm must disclose both the fee

and service to the customer.

4.57.
The Authority understands that Fortuna wrote to each of Active Wealth’s

customers by letter dated 28 February 2018, informing them of Active Wealth’s

liquidation and Fortuna’s acquisition of Active Wealth’s client database and

offering its services. The letter made no reference to the services Fortuna

proposed to provide to those customers, the fees it intended to charge for doing

so or the trail commission it intended to receive.

4.58.
Fortuna charged ongoing service fees to, or received trail commission in relation

to, about 155 Active Wealth customers. The Authority became aware during the

Fortuna Visit on 26 June 2019 that Fortuna had received fees and commission but

that it had only provided a service to a small number of customers. At the time,

Mr Deeney told the Authority that he had provided ongoing advice for six or seven

customers. Following the Fortuna Visit, Fortuna agreed to undertakings to stop

collecting ongoing fees where it was not providing a service.

4.59.
On 5 July 2019, the Authority invited Fortuna to apply for the imposition of

requirements on its permissions which included ceasing all regulated activities and

refunding ongoing service fees were no ongoing service was provided. On 1

August 2019, Fortuna declined to apply for the requirements but proposed to

repay the fees.

4.60.
Information provided to the Authority on 5 August 2019 indicated that only 40

customers entered into a service agreement with Fortuna that disclosed the

service that Fortuna would provide and the fees that it would charge. The

information further indicated that Fortuna had only carried out annual reviews for

23 customers.

4.61.
As stated in paragraph 4.50, on 29 August 2019 the Authority imposed

requirements on Fortuna including a requirement that it refund ongoing service

fees that it charged without providing a service.

4.62.
In response to the imposition of requirements, on 24 October 2019, Mr Deeney

provided further information to the Authority about the fees and commission

payments Fortuna received, including that Fortuna had only carried out annual

reviews for around 27 of the customers it had acquired from Active Wealth.

Consequently, the information suggested that Fortuna had taken ongoing service

fees and commission from about 120 customers without providing them with any

service, and most of them without their knowledge or consent.

4.63.
Mr Deeney told the Authority that in January 2019 Fortuna had asked one of the

product providers to stop the payment of ongoing service fees in respect of 47 of

the 120 customers because Fortuna “had not managed to make contact” with

them. Although Fortuna stopped collecting fees from these customers this was

nearly a year after it had purchased Active Wealth’s client database, during which

time it had been receiving fees without providing any service. Fortuna did not take

any meaningful or timely steps to refund these fees, or stop or refund any other

fees or commission charged to the remaining 73 or so customers without

providing a service, until September 2019 after the Authority required it to do so.

4.64.
The Authority has analysed fees data subsequently provided by Fortuna in

November 2019. According to that analysis, from February 2018 to November

2019, Fortuna improperly received £52,078 in fees and commission from 152 out

of 155 customers. This includes £35,435 taken from 118 customers where Fortuna

had not disclosed that it would take the fee or commission. It also includes

£42,563 taken from 148 customers where either no service had been provided to

the customer or they had been overcharged for a service that was provided.

4.65.
Following the Authority’s intervention, Fortuna repaid nearly £30,000 in ongoing

service fees and trail commission to customers that it wrongly charged. However,

when Fortuna entered liquidation on 10 November 2020, over £15,000 in fees and

commission remained outstanding to at least 65 customers where the service was

not provided or the customers were overcharged. Only 14 of those customers had

been made creditors of the company in liquidation, but the liquidator has informed

the Authority that none of them are likely to receive any repayment.

4.66.
Mr Deeney acted recklessly when he charged ongoing service fees and trail

commission to a large number of customers without:

(1)
their knowledge;

(2)
their consent; and

(3)
actually providing an ongoing service.

4.67.
It was only when the Authority discovered Mr Deeney’s misconduct that he took

steps to refund those customers, and by the time Fortuna entered liquidation,

there were still some refunds outstanding.

5.
FAILINGS

5.1.
The regulatory provisions relevant to this Notice are referred to in Annex A.

5.2.
Statement of Principle 1 required Mr Deeney to act with integrity in carrying out

his controlled functions. The Authority concludes that Mr Deeney acted without

integrity, by acting both dishonestly and recklessly as set out below.

5.3.
Mr Deeney breached Statement of Principle 1 during his time as an adviser at

Active Wealth as follows:

(1)
as set out in paragraphs 4.12 to 4.24, Mr Deeney dishonestly received

substantial prohibited commission payments as a consequence of advice he

provided to Active Wealth customers contrary to the Authority’s ban on

commission payments;

(2)
as set out in paragraphs 4.25 to 4.33, Mr Deeney recklessly ignored the

obvious risk that P6 was unsuitable for his clients, and proceeded to

recommend it.

5.4.
Mr Deeney breached Statement of Principle 1 during his time as director and

adviser at Fortuna as follows:

(1)
as set out in paragraphs 4.37 to 4.54, Mr Deeney dishonestly and

repeatedly sought to mislead the Authority regarding Fortuna’s dealings

with the High-Risk Bonds; and

(2)
as set out in paragraphs 4.55 to 4.67, Mr Deeney recklessly allowed Fortuna

to receive ongoing service fees and trail commission from Active Wealth’s

former customers without their knowledge, consent or even without

actually providing an ongoing service and it was only when challenged by

the Authority that Mr Deeney took steps to refund some fees.

6.
SANCTION

Financial penalty


6.1.
The Authority’s policy for imposing a financial penalty is set out in Chapter 6 of

DEPP. In respect of conduct occurring on or after 6 March 2010, the Authority

applies a five-step framework to determine the appropriate level of financial

penalty. DEPP 6.5B sets out the details of the five-step framework that applies in

respect of financial penalties imposed on individuals in non-market abuse cases.

6.2.
Where the breaches stem from two or more separate and distinct areas of

misconduct, the Authority will usually treat them as separate cases and calculate

separate penalties. The Authority considers this an appropriate matter in which to

calculate three separate penalties in respect of Mr Deeney’s breaches.

6.3.
The penalty calculations are set out at Annexes B, C and D to this Notice. Having

regard to all the circumstances, the Authority considers the following financial

penalties to be appropriate:

(1) As set out in Annex B, £318,000 for breaching Statement of Principle 1 in

respect of his conduct during the First Relevant Period in respect of his time

at Active Wealth.

(2) As set out at Annex C, £39,500 for breaching Statement of Principle 1

during the Second Relevant Period by misleading the Authority with respect

to the High-Risk Bonds; and

(3) As set out at Annex D, £39,900 for breaching Statement of Principle 1

during the Third Relevant Period in respect of Fortuna’s ongoing service

fees and trail commission.

6.4.
The Authority therefore imposes a total penalty of £397,400.

6.5.
The Authority has had regard to the guidance in Chapter 9 of EG in deciding to

impose a prohibition order on Mr Deeney. The Authority has the power to

prohibit individuals under section 56 of the Act.

6.6.
The Authority considers that Mr Deeney is not a fit and proper person to perform

any function in relation to any regulated activity carried on by an authorised

person, exempt person or exempt professional firm. The Authority therefore has

decided that is appropriate and proportionate in all the circumstances to impose

a prohibition order on him under section 56 of the Act in those terms. This follows

from the Authority’s findings that Mr Deeney lacks integrity by:

(1)
acting dishonestly and recklessly and by breaching Statement of Principle

1 during his time as an adviser for Active Wealth; and

(2)
acting dishonestly and recklessly by breaching Statement of Principle 1

during his time as a director and adviser at Fortuna.

7.
PROCEDURAL MATTERS

7.1.
This Notice is given to Andrew Deeney under and in accordance with section 390

of the Act.

7.2.
The following statutory rights are important.

Decision maker


7.3.
The decision which gave rise to the obligation to give this Notice was made by the

Settlement Decision Makers.

Manner and time for payment

7.4.
The financial penalty must be paid in full by Mr Deeney to the Authority no later

than 12 October 2023.

If the financial penalty is not paid

7.5.
If all or any of the financial penalty is outstanding after 12 October 2023, the

Authority may recover the outstanding amount as a debt owed by Mr Deeney and

due to the Authority.

7.6.
Sections 391(4), 391(6) and 391(7) of the Act apply to the publication of

information about the matter to which this notice relates. Under those provisions,

the Authority must publish such information about the matter to which this notice

relates as the Authority considers appropriate. The information may be published

in such manner as the Authority considers appropriate. However, the Authority

may not publish information if such publication would, in the opinion of the

Authority, be unfair to Mr Deeney or prejudicial to the interests of consumers or

detrimental to the stability of the UK financial system.

7.7.
The Authority intends to publish such information about the matter to which this

Final Notice relates as it considers appropriate.

Authority contacts


7.8.
For more information concerning this matter generally, contact Roshani Pulle at

the Authority (direct line: 020 7066 6241/email: roshani.pulle3@fca.org.uk).

Financial Conduct Authority, Enforcement and Market Oversight Division

ANNEX A

RELEVANT STATUTORY AND REGULATORY PROVISIONS

RELEVANT STATUORY PROVISIONS

The Authority’s statutory objectives, set out in section 1B(3) of the Act, include the

consumer protection objective. The consumer protection objective is defined at

section 1C of the Act as securing an appropriate degree of protection for consumers.

Section 66 of the Act provides that the Authority may take action against a person

if it appears to the Authority that he is guilty of misconduct and the Authority is

satisfied that it is appropriate in all the circumstances to take action against him.

A person is guilty of misconduct if, while an approved person, he has failed to

comply with a statement of principle issued under section 64 of the Act, or has been

knowingly concerned in a contravention by a relevant authorised person of a

relevant requirement imposed on that authorised person.

Section 56 of the Act provides that the Authority may make an order prohibiting an

individual from performing a specified function, any function falling within a

specified description or any function, if it appears to the Authority that that

individual is not a fit and proper person to perform functions in relation to a

regulated activity carried on by an authorised person, exempt person or a person

to whom, as a result of Part 20, the general prohibition does not apply in relation

to that activity. Such an order may relate to a specified regulated activity, any

regulated activity falling within a specified description, or all regulated actives.

RELEVANT REGULATORY PROVISIONS

Statements of Principle for Approval Persons

The Authority’s Statements of Principle and Code of Practice for Approved Persons

(“APER”) have been issued under section 64 of the Act.

Statement of Principle 1 states:

“An approved person must act with integrity in carrying out his accountable

functions”

SUP 10A and SUP 10C.3 provide that accountable functions also include controlled

functions.

The Fit and Proper Test for Approved Persons

The part of the Authority’s Handbook entitled “The Fit and Proper Test for Approved

Persons” (“FIT”) sets out the criteria that the Authority will consider when assessing

the fitness and propriety of a candidate for a controlled function. FIT is also relevant

in assessing the continuing fitness and propriety of an approved person.

FIT 1.3.1G states that the Authority will have regard to a number of factors when

assessing the fitness and propriety of a person. The most important considerations

will be the person’s honesty, integrity and reputation, competence and capability

and financial soundness.

The Authority’s Conduct of Business Sourcebook (COBS)

COBS 6.1A.4R states that a firm must:

“(1) only be remunerated for the personal recommendation (and any other related

services provided by the firm) by adviser charges; and

(2) not solicit or accept (and ensure that none of its associates solicits or accepts)

any other commissions, remuneration or benefit of any kind in connection with a

firm’s business of advising or any other related services, regardless of whether it

intends to refund the payments or pass the benefits on to the retail client; and

(3) not solicit or accept (and ensure that none of its associates solicits or accepts)

adviser charges in relation to the retail client's retail investment product or P2P

agreement which are paid out or advanced by another party over a materially

different time period, or on a materially different basis, from that in or on which

the adviser charges are recovered from the retail client.”

The Authority’s policy for exercising its power to make a prohibition order

The Authority’s policy in relation to prohibition orders is set out in Chapter 9 of

the Enforcement Guide (“EG”).

EG 9.1 states that the Authority may exercise this power where it considers that,

to achieve any of its regulatory objectives, it is appropriate either to prevent an

individual from performing any functions in relation to regulated activities or to

restrict the functions which he may perform.

DEPP

Chapter 6 of DEPP sets out the Authority’s statement of policy with respect to the

imposition and amount of financial penalties under the Act.

ANNEX B

PENALTY ANALYSIS – ACTIVE WEALTH BREACHES

1.
The Authority’s policy for imposing a financial penalty is set out in Chapter 6 of

DEPP. In respect of conduct occurring on or after 6 March 2010, the Authority

applies a five-step framework to determine the appropriate level of financial

penalty. DEPP 6.5B sets out the details of the five-step framework that applies in

respect of financial penalties imposed on individuals in non-market abuse cases.

2.
This Annex relates to Mr Deeney’s breaches of Statement of Principle 1 during the

First Relevant Period in respect of his time at Active Wealth.

Step 1: disgorgement

3.
Pursuant to DEPP 6.5B.1G, at Step 1 the Authority seeks to deprive an individual

of the financial benefit derived directly from the breach where it is practicable to

quantify this.

4.
Mr Deeney derived direct financial benefit from his breaches. He received prohibited

commission payments totalling £206,349.

5.
DEPP 6.5A.1G(1) states that the Authority will ordinarily charge interest on the

financial benefit. Interest at the UKFI instant access deposit monthly rate on the

commission payments that Mr Deeney received, starting from the date of the last

payment, is £2,043.

6.
Step 1 is therefore £208,392.

Step 2: Seriousness of the breach

7.
Pursuant to DEPP 6.5B.2G, at Step 2, the Authority determines a figure that reflects

the seriousness of the breach. That figure is based on a percentage of the

individual’s relevant income. The individual’s relevant income is the gross amount

of all benefits received by the individual from the employment in connection with

which the breach occurred, and for the period of the breach.

8.
The period of Mr Deeney’s breaches was 26 March 2015 to 12 December 2017. The

Authority considers Mr Deeney’s relevant income during the period of his breaches

to be £301,122, comprised of prohibited commission payments of £206,349 and

payments from Active Wealth totalling £94,773.

9.
In deciding on the percentage of the relevant income that forms the basis of the

step 2 figure, the Authority considers the seriousness of the breach and chooses a

percentage between 0% and 40%. This range is divided into five fixed levels which

represent, on a sliding scale, the seriousness of the breach; the more serious the

breach, the higher the level. For penalties imposed on individuals in non-market

abuse cases there are the following five levels:

Level 1 – 0%

Level 2 – 10%

Level 3 – 20%

Level 4 – 30%

Level 5 – 40%

10.
In assessing the seriousness level, the Authority takes into account various factors

which reflect the impact and nature of the breach, and whether it was committed

deliberately or recklessly.

Impact of the breaches

11.
Mr Deeney’s financial gain stemming from his breaches was substantial (DEPP

6.5B.2G(8)(a)).

12.
Mr Deeney’s failings in respect of his advice to Active Wealth customers to invest

in P6 meant that they were at a risk of having invested in investments that were

unsuitable for them. The investments were unregulated investments and were not

typically covered by the FSCS. Customers investing in unregulated investments

were therefore at risk of losing all of their capital. Further, Mr Deeney’s conflict of

interest put customers at a significant risk of receiving unsuitable advice and

therefore suffering loss ((DEPP 6.5B.2G(8)(c)).

13.
The loss of substantial value in customers’ pensions has caused substantial

inconvenience and distress to those customers (DEPP 6.5B.2G(8)(e)).

Nature of the breaches

14.
Mr Deeney’s breaches spanned the entire period of his role at Active Wealth, being

almost 3 years (DEPP 6.5B.2G(9)(b)).

15.
Mr Deeney failed to act with integrity because he acted dishonestly and recklessly

(DEPP 6.5B.2G(9)(e)).

16.
Mr Deeney’s misconduct meant that he did not comply with the Chartered

Insurance Institute’s Code of Ethics which required him to act with integrity and in

the customers’ best interests (DEPP 6.5B.2G(9)(g)).

Deliberate misconduct

17.
Mr Deeney acted deliberately in respect of his receipt of commission in the manner

set out in paragraphs 4.12 to 4.24 (DEPP 6.5B.2G(10)(b)).

18.
Mr Deeney sought to conceal his knowledge about the commission he received from

the Authority by misleading the Authority and creating invoices falsely recording

the nature of the payments in the manner set out in paragraphs 4.17 to 4.22 (DEPP

6.5B.2G(10)(d)).

Reckless misconduct

19.
Mr Deeney acted recklessly in respect of his advice to customers to switch or

transfer out of their existing pension arrangements into SIPPs investing in P6 in the

manner set out in paragraphs 4.25 to 4.33 (DEPP 6.5B.2G(11)(a)).

Level of seriousness

20.
DEPP 6.5B.2G(12) lists factors likely to be considered ‘level 4 or 5 factors’. Of

these, the Authority considers the following factors to be relevant:

a. The breaches caused a significant risk of loss to a large number of customers

(DEPP 6.5B.2G(12)(a)).

b. Mr Deeney failed to act with integrity (DEPP 6.5B.2G(12)(d)).

c. Mr Deeney sought to conceal the purpose of the payments he received from

the Second Company by creating false invoices (DEPP 6.5B.2G(12)(d)).

d. Mr Deeney abused the trust his customers placed in him as a financial

adviser (DEPP 6.5B.2G(12)(e)).

e. The
breaches
were
committed
deliberately
and
recklessly
(DEPP

6.5B.2G(12)(g)).

21.
DEPP 6.5B.2G(13) lists factors likely to be considered ‘level 1, 2 or 3 factors’. The

Authority considers that none of these factors apply.

22.
Taking all of these factors into account, the Authority considers the seriousness of

the breach to be level 5 and so the Step 2 figure is 40% of £301,122.

23.
Step 2 is therefore £120,449.

Step 3: mitigating and aggravating factors

24.
Pursuant to DEPP 6.5B.3G, at Step 3 the Authority may increase or decrease the

amount of the financial penalty arrived at after Step 2, but not including any

amount to be disgorged as set out in Step 1, to take into account factors which

aggravate or mitigate the breach.

25.
The Authority considers that the following factors aggravate the breach:

a. Mr Deeney took no steps to bring the breach to the FCA’s attention (DEPP

6.5B.3G(2)(a).

b. Mr Deeney provided misleading and dishonest answers in relation to the

commission payments he received when interviewed in the course of the

Authority’s investigation, and accordingly did not properly co-operate with

the investigation (DEPP 6.5B.3G(2)(b).

c. Mr Deeney did not take any steps to stop the breaches. In particular, he

would have likely continued to receive prohibited commission had it not

been for the Authority’s intervention in Active Wealth’s business (DEPP

6.5B.3G(2)(c)).

d. The Authority previously published alerts in 2013 and 2014 relating to the

provision of advice on pension transfers or switches to SIPPs with a view to

investing in unregulated, high-risk investments. Mr Deeney’s conduct took

place after the publication of the alerts (DEPP 6.5B.3G(2)(k)).

26.
The Authority considers that there are no factors that mitigate the breach.

27.
The Authority considers Mr Deeney’s dishonesty with the Authority to be very

serious warranting a substantial uplift to the Step 2 figure. Having taken into

account these aggravating and mitigating factors, the Authority considers that the

Step 2 figure should be increased by 30%.

28.
Step 3 is therefore £156,583.

Step 4: adjustment for deterrence

29.
Pursuant to DEPP 6.5B.4G, if the Authority considers the figure arrived at after Step

3 is insufficient to deter the individual who committed the breach, or others, from

committing further or similar breaches, then the Authority may increase the

penalty.

30.
The Authority considers that the Step 3 figure of £156,583 represents a sufficient

deterrent to Mr Deeney and others, and so has not increased the penalty at Step

4.

31.
Step 4 is therefore £156,583.

Step 5: settlement discount

32.
Pursuant to DEPP 6.5B.5G, if the Authority and the individual on whom a penalty

is to be imposed agree the amount of the financial penalty and other terms, DEPP

6.7 provides that the amount of the financial penalty which might otherwise have

been payable will be reduced to reflect the stage at which the Authority and the

individual reached agreement. The settlement discount does not apply to the

disgorgement of any benefit calculated at Step 1.

33.
The Authority and Mr Deeney reached agreement at Stage 1 and so a 30% discount

applies to the Step 4 figure, reducing it to £109,608.

34.
The Authority has therefore decided to impose a total financial penalty of £318,000

on Mr Deeney for breaching Statement of Principle 1.

PENALTY ANALYSIS – FORTUNA HIGH-RISK BONDS BREACHES

1.
The Authority’s policy for imposing a financial penalty is set out in Chapter 6 of

DEPP. In respect of conduct occurring on or after 6 March 2010, the Authority

applies a five-step framework to determine the appropriate level of financial

penalty. DEPP 6.5B sets out the details of the five-step framework that applies in

respect of financial penalties imposed on individuals in non-market abuse cases.

2.
This Annex relates to Mr Deeney’s breach of Statement of Principle 1 during the

Second Relevant Period by misleading the Authority with respect to the High-Risk

Bonds.

Step 1: disgorgement

3.
Pursuant to DEPP 6.5B.1G, at Step 1 the Authority seeks to deprive an individual

of the financial benefit derived directly from the breach where it is practicable to

quantify this.

4.
The Authority identified no financial benefit to Mr Deeney derived directly from the

breach.

5.
Step 1 is therefore £0.

Step 2: Seriousness of the breach

6.
Pursuant to DEPP 6.5B.2G, at Step 2, the Authority determines a figure that reflects

the seriousness of the breach. That figure is based on a percentage of the

individual’s relevant income. The individual’s relevant income is the gross amount

of all benefits received by the individual from the employment in connection with

which the breach occurred, and for the period of the breach.

7.
The period of Mr Deeney’s breaches was 16 May 2018 to 29 August 2019. Mr

Deeney’s income from Fortuna during this period was £75,250.

8.
In deciding on the percentage of the relevant income that forms the basis of the

step 2 figure, the Authority considers the seriousness of the breach and chooses a

percentage between 0% and 40%. This range is divided into five fixed levels which

represent, on a sliding scale, the seriousness of the breach; the more serious the

breach, the higher the level. For penalties imposed on individuals in non-market

abuse cases there are the following five levels:

Level 1 – 0%

Level 2 – 10%

Level 3 – 20%

Level 4 – 30%

Level 5 – 40%

9.
In assessing the seriousness level, the Authority takes into account various factors

which reflect the impact and nature of the breach, and whether it was committed

deliberately or recklessly.

Impact of the breach

10.
Mr Deeney did not gain any financial benefit from misleading the Authority in

relation to the High-Risk Bonds. However, Mr Deeney misled the Authority because

he knew that he was already under investigation for advising on similar investments

and knew that Fortuna’s involvement with the High-Risk Bonds may reflect poorly

on him (DEPP 6.5B.2G(8)(a)).

Nature of the breach

11.
Mr Deeney’s breach involved providing misleading information to the Authority on

multiple occasions (DEPP 6.5B.2G(9)(b)).

12.
Mr Deeney failed to act with integrity because he acted dishonestly (DEPP

6.5B.2G(9)(e)).

13.
Mr Deeney was an experienced industry professional (DEPP 6.5B.2G(9)(j).

14.
Mr Deeney held the only senior roles at the firm (DEPP 6.5B.2G(9)(k))

Deliberate misconduct

15.
Mr Deeney deliberately misled the Authority (DEPP 6.5B.2G(10)(a)).

Level of seriousness

16.
DEPP 6.5B.2G(12) lists factors likely to be considered ‘level 4 or 5 factors’. Of

these, the Authority considers the following factors to be relevant:

a. Mr Deeney failed to act with integrity (DEPP 6.5B.2G(12)(d)).

b. The breach was committed deliberately (DEPP 6.5B.2G(12)(g)).

17.
DEPP 6.5B.2G(13) lists factors likely to be considered ‘level 1, 2 or 3 factors’. Of

these, the Authority considers the following factors to be relevant:

a. Mr Deeney did not make any profits as a result of the breach (DEPP

6.5B.2G(13)(a)).

18.
Taking all of these factors into account, the Authority considers the seriousness of

the breach to be level 4 and so the Step 2 figure is 30% of £75,250.

19.
Step 2 is therefore £22,575.

Step 3: mitigating and aggravating factors

20.
Pursuant to DEPP 6.5B.3G, at Step 3 the Authority may increase or decrease the

amount of the financial penalty arrived at after Step 2, but not including any

amount to be disgorged as set out in Step 1, to take into account factors which

aggravate or mitigate the breach.

21.
The Authority considers that the following factors aggravate the breach:

a. Mr Deeney failed to adequately co-operate with the Authority following the

breach. As set out at paragraph 4.51, he continued to make false and

misleading statements to the Authority after the end of the Second Relevant

Period (DEPP 6.5B.3G(2)(b)); and

b. Mr Deeney was aware that the Authority had expressed concerns about his

involvement with advising customers regarding investments similar to the

High-Risk Bonds (DEPP 6.5B.3G(2)(f)).

22.
The Authority considers that there are no factors that mitigate the breach.

23.
The Authority considers that Mr Deeney’s failure to cooperate with the Authority to

be very serious warranting a substantial uplift to the Step 2 figure. Having taken

into account these aggravating factors, the Authority considers that the Step 2

figure should be increased by 25%.

24.
Step 3 is therefore £28,219.

Step 4: adjustment for deterrence

25.
Pursuant to DEPP 6.5B.4G, if the Authority considers the figure arrived at after Step

3 is insufficient to deter the individual who committed the breach, or others, from

committing further or similar breaches, then the Authority may increase the

penalty.

26.
The Authority considers that the Step 3 figure of £28,597 does not represent a

sufficient deterrent to Mr Deeney and others, and therefore has increased the

penalty at Step 4. The Authority considers this to appropriate given that:

a. The Authority considers the value of the penalty too small in relation to

breach to meet its objective of credible deterrence (DEPP 6.5B.4G(a));

b. The Authority relies on senior individuals at firms to provide adequate

information to it to enable it to determine whether the firm is complying

with relevant regulatory requirements. The Authority was able to detect Mr

Deeney’s breach because Fortuna was under greater scrutiny as a result of

the investigation into his conduct at Active Wealth. However, ordinarily the

likelihood of the Authority detecting a similar breach is low (DEPP

6.5B.4G(d)).

27.
Taking the above factors into account, the Authority considers it appropriate to

increase the figure at Step 4 by a multiple of two.

28.
Step 4 is therefore £56,438.

Step 5: settlement discount

29.
Pursuant to DEPP 6.5B.5G, if the Authority and the individual on whom a penalty

is to be imposed agree the amount of the financial penalty and other terms, DEPP

6.7 provides that the amount of the financial penalty which might otherwise have

been payable will be reduced to reflect the stage at which the Authority and the

individual reached agreement. The settlement discount does not apply to the

disgorgement of any benefit calculated at Step 1.

30.
The Authority and Mr Deeney reached agreement at Stage 1 and so a 30% discount

applies to the Step 4 figure.

31.
The Step 5 figure is therefore £39,506.

32.
The Authority has therefore decided to impose a total financial penalty of £39,500

on Mr Deeney for breaching Statement of Principle 1.

ANNEX D

PENALTY ANALYSIS – FORTUNA FEES AND COMMISSION BREACHES

1.
The Authority’s policy for imposing a financial penalty is set out in Chapter 6 of

DEPP. In respect of conduct occurring on or after 6 March 2010, the Authority

applies a five-step framework to determine the appropriate level of financial

penalty. DEPP 6.5B sets out the details of the five-step framework that applies in

respect of financial penalties imposed on individuals in non-market abuse cases.

2.
This Annex relates to Mr Deeney’s breach of Statement of Principle 1 during the

Third Relevant Period in respect of Fortuna’s ongoing service fees and trail

commission.

Step 1: disgorgement

3.
Pursuant to DEPP 6.5B.1G, at Step 1 the Authority seeks to deprive an individual

of the financial benefit derived directly from the breach where it is practicable to

quantify this. The Authority identified no financial benefit to Mr Deeney derived

directly from the breach.

4.
Step 1 is therefore £0.

Step 2: Seriousness of the breach

5.
Pursuant to DEPP 6.5B.2G, at Step 2, the Authority determines a figure that reflects

the seriousness of the breach. That figure is based on a percentage of the

individual’s relevant income. The individual’s relevant income is the gross amount

of all benefits received by the individual from the employment in connection with

which the breach occurred, and for the period of the breach.

6.
During the Third Relevant Period, Mr Deeney received total payments of £79,250

from Fortuna. Therefore, the Authority considers Mr Deeney’s relevant income to

be £79,250.

7.
In deciding on the percentage of the relevant income that forms the basis of the

step 2 figure, the Authority considers the seriousness of the breach and chooses a

percentage between 0% and 40%. This range is divided into five fixed levels which

represent, on a sliding scale, the seriousness of the breach; the more serious the

breach, the higher the level. For penalties imposed on individuals in non-market

abuse cases there are the following five levels:

Level 1 – 0%

Level 2 – 10%

Level 3 – 20%

Level 4 – 30%

Level 5 – 40%

8.
In assessing the seriousness level, the Authority takes into account various factors

which reflect the impact and nature of the breach, and whether it was committed

deliberately or recklessly.

Impact of the breach

9.
Fortuna received a financial benefit from its breach which, while not large, was not

insignificant as it accounted for about 26.7% of its income during this period,

although Mr Deeney indirectly benefited from the breach through the income that

he received from Fortuna.(DEPP 6.5B.2G(8)(a)).

10.
Fortuna’s wrongful charging of ongoing service fees and trail commission caused a

loss to at least 148 customers ranging from less than £100 to over £1,000 each.

Not all of the fees and commission was repaid to customers by the time Fortuna

went into liquidation. While the cumulative value of the loss was not large it was

substantial and the individual losses likely would have been significant to some

customers. It involved Fortuna taking funds from customers’ investments that it

was not entitled to and inconvenience to some customers whose repayment

depends on the outcome of Fortuna’s liquidation (DEPP 6.5B.2G(c) and (e)).

Nature of the breach

11.
Mr Deeney’s breach was continual over two years and eight months (DEPP

12.
Mr Deeney failed to act with integrity because he acted recklessly (DEPP

6.5B.2G(9)(e)).

13.
Mr Deeney’s misconduct meant that he did not comply with the Chartered

Insurance Institute’s Code of Ethics which required him to act with integrity and in

the customers’ best interests (DEPP 6.5B.2G(9)(g)).

Deliberate misconduct

The Authority has not identified any deliberate misconduct (DEPP 6.5B.2G(10)(a)).

Reckless misconduct

14.
Mr Deeney acted recklessly in the manner set out in paragraphs 4.55 to 4.67 (DEPP

6.5B.2G(11)).

Level of seriousness

15.
DEPP 6.5B.2G(12) lists factors likely to be considered ‘level 4 or 5 factors’. Of

these, the Authority considers the following factors to be relevant:

a. Mr Deeney failed to act with integrity (DEPP 6.5B.2G(12)(d)).

b. The breach was committed recklessly (DEPP 6.5B.2G(12)(g)).

16.
DEPP 6.5B.2G(13) lists factors likely to be considered ‘level 1, 2 or 3 factors’. The

Authority considers that none of these factors are relevant, particularly because:

a. Substantial profits were made as a result of the breach, both directly and

indirectly (DEPP 6.5B.2G(13)(a));

b. As explained at paragraph 10 above, the cumulative value of the loss to

customers was substantial and the individual losses would likely have been

significant to some customers (DEPP 6.5B.2G(13)(b)).

17.
Taking all of these factors into account, the Authority considers the seriousness of

the breach to be level 4 and so the Step 2 figure is 30% of £79,250.

18.
Step 2 is therefore £23,775.

Step 3: mitigating and aggravating factors

19.
Pursuant to DEPP 6.5B.3G, at Step 3 the Authority may increase or decrease the

amount of the financial penalty arrived at after Step 2, but not including any

amount to be disgorged as set out in Step 1, to take into account factors which

aggravate or mitigate the breach.

20.
The Authority considers that the following factors aggravates the breach:

a. Although Mr Deeney identified the breach no later than January 2019 and

knew that the Authority was interested in Fortuna’s activities, he did not

bring
the
breach
to
the
Authority’s
attention
at
any
time

(DEPP.5B.3G(2)(a)).

21.
The Authority considers that the following factors have both aggravating and

mitigating components but on balance aggravate the breach:

Steps taken to stop the breach, remedial steps taken and failure to comply with
undertaking (DEPP 6.5B.3G(2)(c), (d) and (g))

22.
Mr Deeney took steps to partly stop the breach by instructing one of the product

providers to cease paying some ongoing service fees to Fortuna in January 2019.

23.
After January 2019, Fortuna continued to charge ongoing service fees and collect

trail commission in respect of other customers. On 26 June 2019, Fortuna

undertook to the Authority that it would stop collecting ongoing service fees where

it was not providing a service. However, Fortuna continued to receive fees and

commission for several months afterwards. It also did not take any steps to refund

any of the fees or commission wrongly taken until after the Authority required it to

do so. Further, Fortuna failed to repay all of the fees and commission before it

entered liquidation.

24.
The Authority considers that, on balance, Fortuna’s failure to completely stop the

breach in accordance with its undertaking and take remedial steps in a timely

manner, and not until after the Authority required it to, more than negate the

mitigatory effects of the January 2019 steps to the extent that they aggravate the

breach.

25.
The Authority considers that there are no other factors that mitigate the breach.

26.
Having taken into account these aggravating and mitigating factors, the Authority

considers that the Step 2 figure should be increased by 20%.

27.
Step 3 is therefore £28,530.

Step 4: adjustment for deterrence

28.
Pursuant to DEPP 6.5B.4G, if the Authority considers the figure arrived at after Step

3 is insufficient to deter the individual who committed the breach, or others, from

committing further or similar breaches, then the Authority may increase the

penalty. The Authority considers that the Step 3 figure of £28,530 does not

represent a sufficient deterrent to Mr Deeney and others, and therefore has

increased the penalty at Step 4. The Authority considers this to appropriate given

that:

a. The Authority considers the value of the penalty too small in relation to

breach to meet its objective of credible deterrence (DEPP 6.5B.4G(a)); and

b. The Authority relies on senior individuals at firms to provide adequate

information to it to enable it to determine whether the firm is complying

with relevant regulatory requirements. The Authority was able to detect Mr

Deeney’s breach because Fortuna was under greater scrutiny as a result of

the investigation into his conduct at Active Wealth. However, ordinarily the

likelihood of the Authority detecting a similar breach is low (DEPP

6.5B.4G(d)).

29.
Taking the above factors into account, the Authority considers it appropriate to

increase the figure at Step 4 by a multiple of two.

30.
Step 4 is therefore £57,060.

Step 5: settlement discount

31.
Pursuant to DEPP 6.5B.5G, if the Authority and the individual on whom a penalty

is to be imposed agree the amount of the financial penalty and other terms, DEPP

6.7 provides that the amount of the financial penalty which might otherwise have

been payable will be reduced to reflect the stage at which the Authority and the

individual reached agreement. The settlement discount does not apply to the

disgorgement of any benefit calculated at Step 1.

32.
The Authority and Mr Deeney reached agreement at Stage 1 and so a 30% discount

applies to the Step 4 figure.

33.
Step 5 is therefore £39,942

34.
The Authority has therefore decided to impose a total financial penalty of £39,900

on Mr Deeney for breaching Statement of Principle 1.