FINAL NOTICE

1.
ACTION

1.1.
For the reasons given in this Final Notice, the Authority hereby:

(1)
publishes a statement of Mr Cobill’s misconduct for failing to comply with

Statement of Principle 2, pursuant to section 66 of the Act; and

(2)
makes an order, pursuant to section 56 of the Act, prohibiting Mr Cobill from

performing any function in relation to the regulated activity of advising on

Pension Transfers and Pension Opt Outs carried on by an authorised person,

exempt person or exempt professional firm.

1.2
The Authority would have imposed a financial penalty of £1,113,225 on Mr Cobill.

However, the Authority recognises that there may be a significant liability for

redress for Inspirational Financial Management Ltd’s (in administration) (“IFM”)

customers which will likely fall to the Financial Services Compensation Scheme

(“FSCS”). In these circumstances, the Authority has agreed with Mr Cobill that in

lieu of the imposition of a financial penalty, the sum of £120,000 be paid direct to

the FSCS to contribute towards any redress due to IFM’s customers. This is in

furtherance of the Authority’s consumer protection objective. In light of the above

and taking into account the exceptional circumstances of the British Steel Pension

Scheme (“BSPS”), the Authority hereby publishes a statement of Mr Cobill’s

misconduct.

2.
SUMMARY OF REASONS

2.1.
Mr Cobill was qualified to provide defined benefit Pension Transfer advice at IFM.

He incompetently gave unsuitable advice to customers, most of whom were BSPS

members, to transfer away from schemes which offered important guarantees,

resulting in customers’ retirement funds being unnecessarily put at risk, against

their best interests.

2.2
Between 8 June 2015 and 22 December 2017 (“the Relevant Period”), Mr Cobill

advised 289 customers on whether to transfer out of their Defined Benefit Pension

Schemes (“DBPS”). Notwithstanding FCA guidance which created a presumption

of unsuitability in respect of transferring out of a Defined Benefit Pension

arrangement, Mr Cobill advised 245 out of 289 (85%) of these customers to

complete a Pension Transfer. The proportion of Mr Cobill’s BSPS customers

advised to transfer was even greater – 198 out of 223 (89%).

2.3
IFM’s customers faced a difficult and very important decision concerning their

pensions during the Relevant Period. Many of these pensions were of significant

value and customers were reliant on the guaranteed benefits offered under their

existing schemes. BSPS customers were required to make this decision in the

context of a high level of speculation at the time about the future of the BSPS due

to a restructuring of the scheme. Mr Cobill’s non-compliant advice to transfer out

exposed both BSPS and non-BSPS customers to the risk of not being able to meet

their income needs throughout retirement since their income would be dependent

on the performance of the recommended investment. In many cases, Mr Cobill

did not have a reasonable basis for believing that those customers could

financially bear any investment risks related to the Pension Transfers which he

recommended.

2.4
One British Steel customer advised by Mr Cobill was wholly reliant on benefits

from the BSPS as he had no other assets which could be used to provide income

in retirement. IFM provided him with a cashflow projection indicating that the fund

value following transfer would likely last until age 100, even at low growth rates.

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However, given the client’s likely expenditure in retirement, this was not accurate

and in fact there was a likelihood that the fund would be exhausted in his lifetime.

2.5
IFM operated a contingent charging model for Pension Transfer advice, meaning

that a customer paid for IFM’s advice only if the customer transferred their defined

benefit pension following IFM’s recommendation. If IFM advised the customer not

to transfer, it received no fee.

2.6
Mr Cobill personally advised 198 of IFM’s BSPS customers to transfer out CETVs

with a total value of more than £90 million and with an average value of more

than £456,000. At least 191 of those 198 BSPS customers (96%) followed his

advice and transferred out of their DBPS. By December 2020, IFM had paid Mr

Cobill a total of £1,139,487.01 in commission in connection with advice given to

its Pension Transfer clients during the Relevant Period.

2.7
The Authority has carried out significant work in response to the harm, or

prospective harm, caused to members of the British Steel Pension Scheme by

authorised firms and their advisers. The Authority has taken intervention action

in the form of requirements to vary the permissions of relevant authorised firms

to mitigate the risk of ongoing harm to consumers. The Authority has also

commenced enforcement investigations into particular firms and individuals,

including the investigation into Mr Cobill.

2.8
During the Relevant Period, Mr Cobill was approved by the Authority to perform

the CF30 (Customer) controlled function at IFM, where he worked as a self-

employed Pension Transfer Specialist.

2.9
IFM is an independent financial advice firm based in Huddersfield, West Yorkshire,

where Mr Cobill was the sole Pension Transfer Specialist. It was authorised by the

Authority to undertake Pension Transfers and Pension Opt Outs and to arrange

(bring about) deals in investments. During the Relevant Period, IFM advised 307

customers on whether to transfer out of their DBPS. IFM ceased providing advice

to BSPS customers in December 2017 and, following intervention from the

Authority, agreed to cease providing Pension Transfer advice altogether. 231 out

of IFM’s 307 customers (75%) were members of the BSPS. Mr Cobill was the

adviser for 289 out of the 307 (94%) customers advised by IFM during the

Relevant Period, including for 223 of the 231 (96%) BSPS customers advised by

2.10
Notwithstanding FCA guidance which created a presumption against advising a

customer to transfer out of their DBPS, during the Relevant Period, Mr Cobill

advised 245 (85%) of his Pension Transfer customers to transfer out. The

proportion of IFM’s BSPS customers which Mr Cobill personally advised to transfer

out was even greater at 89%.

2.11
The Authority reviewed 18 of IFM’s completed Pension Transfer advice files from

the Relevant Period. Mr Cobill provided seriously flawed Pension Transfer advice

to a significant proportion of IFM’s Pension Transfer customers. For many of his

customers, he failed to gather sufficient information from them (including on their

financial situation), meaning that he was not in a sufficiently informed position

and should not have given his customers advice on transferring their pensions.

For some customers, Mr Cobill provided advice which was unsuitable in light of

the customers’ investment objectives and attitude to risk. Moreover, Mr Cobill did

not put his customers in a sufficiently informed position to decide that transferring

out was in their best interests. Some Suitability Reports contained misleading

information, and in 176 out of the 198 (89%) BSPS cases where Mr Cobill

recommended transfer, customers were sent the Suitability Report after the

transfer documents had been submitted to the BSPS.

FCA’s Statements of Principle for Approved Persons

2.12
During the Relevant Period:

(a)
Statement of Principle 2 stated that: “An approved person must act with due

skill, care and diligence in carrying out their accountable functions”.

Mr Cobill’s failings in the performance of his CF30 (Customer) function

2.13
The Authority considers that, during the Relevant Period, by reason of the matters

described below in section 4 of this Notice, Mr Cobill breached Statement of

Principle 2, in that he failed to act with due skill, care and diligence when advising

customers on Pension Transfers.

2.14
In particular, in a significant proportion of cases, Mr Cobill:

(a)
failed to obtain the necessary information from the customer and/or failed

properly to take into account the customer’s financial situation when

assessing whether it was suitable for them to transfer out of their DBPS. As

a result, he failed to assess or give due consideration to whether customers

could financially bear the risks involved in a Pension Transfer;

(b)
failed properly to assess whether the Pension Transfer recommended met

the customer’s investment objectives;

(c)
failed properly to assess whether the customer had the necessary

experience and knowledge to understand the risks involved in the Pension

Transfer recommended and failed to give due consideration to the

customer’s lack of experience and knowledge in that context;

(d)
failed to ensure that any, or any adequate, transfer analysis (TVAS) was

prepared for and explained adequately to all customers comparing the

benefits likely to be paid under the DBPS with benefits afforded by the

personal pension or other pension scheme into which it was proposed that

the client should transfer. Even where a TVAS was prepared, it did not

always support the decision to transfer; and

(e)
failed to check the contents of the Suitability Reports issued by IFM in his

name and to ensure that the Suitability Reports contained adequate

information to explain the Personal Recommendation, having regard to the

customer’s specific circumstances and objectives. As a consequence, he did

not become aware of and did nothing to rectify the serious failings in the

drafting of the reports, such as the inclusion of incorrect and misleading

information and the use of generic wording that was almost entirely derived

from templates, meaning that reports nominally compiled for different

customers were substantially identical in content.

2.15
The Authority considers Mr Cobill’s failings to be particularly serious because:

(a)
they caused a significant risk of loss to individual consumers who transferred

out of their DBPS as a result of Mr Cobill’s advice. The average CETV of IFM’s

Pension Transfer customers was more than £394,000. The average CETV of

IFM’s BSPS customers was more than £455,000. For many customers, their

DBPS was their most valuable asset and was their only retirement provision

other than their state pension;

(b)
Mr Cobill obtained a substantial, direct benefit from his breaches; and

(c)
Mr Cobill’s breaches affected particularly vulnerable people, namely BSPS

members, who were in a vulnerable position due to the uncertainty

surrounding the future of the BSPS.

2.16
The Authority considers that Mr Cobill has demonstrated a lack of competence

and capability to advise on Pension Transfers and Pension Opt Outs. The Authority

therefore hereby prohibits Mr Cobill from performing any function in relation to

the regulated activity of advising on Pension Transfers and Pension Opt Outs

carried on by an authorised person, exempt person or exempt professional firm.

2.17
The Authority would have imposed a financial penalty of £1,113,225 on Mr Cobill.

However, the Authority recognises that there may be a significant liability for

redress for IFM’s customers which will likely fall to the FSCS. In these

circumstances, the Authority has agreed with Mr Cobill that in lieu of the

imposition of a financial penalty, the sum of £120,000 be paid direct to the FSCS

to contribute towards any redress due to IFM’s customers. This is in furtherance

of the Authority’s consumer protection objective. In light of the above and taking

into account the exceptional circumstances of the BSPS, the Authority hereby

publishes a statement of Mr Cobill’s misconduct for failing to comply with

Statement of Principle 2.

3
DEFINITIONS

3.1
The definitions below are used in this Final Notice:

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

“APER” means the Authority’s Statements of Principle for Approved Persons and

Code of Practice for Approved Persons;

“the Authority” means the Financial Conduct Authority;

“Authority’s Rules” means the Authority’s Conduct of Business Sourcebook as

applicable during the Relevant Period;

“British Steel Pension Scheme” or “BSPS” means the British Steel Defined Benefit

Pension Scheme that was in place during the period 8 June 2015 to 13 December

2017;

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“BSPS 2” means the Defined Benefit Pension Scheme designed to succeed the

BSPS, created after the RAA was put into effect;

“CETV” means cash equivalent transfer value, which is the cash value of benefits

which have been accrued to, or in respect of, a member of a pension scheme at

a particular date. The CETV represents the expected costs of providing the

member’s benefits within the scheme and, in the case of a Defined Benefit Pension

Scheme, the CETV is determined using actuarial assumptions;

“COBS” means the Conduct of Business Sourcebook, part of the Handbook;

“Defined Benefit Pension Scheme” or “DBPS” means an occupational pension

scheme as defined by Article 3(1) of the Financial Services and Markets Act

(Regulated Activities) Order 2001, namely where the amount paid to the

beneficiary is based on how many years the beneficiary has been employed and

the salary the beneficiary earned during that employment (rather than the value

of their investments);

“Defined Contribution” or “DC” means a common type of pension where

contributions are held in investments until the holder reaches their chosen

retirement age;

“DEPP” means the Authority’s Decision Procedure and Penalties Manual;

“EG” means the Authority’s Enforcement Guide;

“FSCS” means the Financial Services Compensation Scheme;

“the Handbook” means the Authority’s Handbook of rules and guidance;

“IFM” means Inspirational Financial Management Limited;

“Mr Cobill” means Arthur Jonathan Cobill;

“Mr Hofstetter” means William Hofstetter;

“PCLS” means pension commencement lump sum, an amount of money available

to a member of a pension scheme which may be paid out as a lump sum when

they begin taking pension benefits, and which is not subject to taxation;

“Pension Opt Out” has the meaning given in the Handbook and includes a

transaction resulting from the decision of a retail client to opt out of an

occupational pension scheme to which his employer contributes and of which he

is a member;

“Pension Protection Fund” or “PPF” is a statutory public corporation which protects

people with a defined benefit pension when an employer becomes insolvent. If

the employer doesn't have enough funds to pay you the pension they promised,

the PPF will provide compensation instead. However, some reduction may apply;

“Pension Transfer” has the meaning given in the Handbook and includes the

transfer of deferred benefits from an occupational pension scheme (with

safeguarded benefits, such as a DBPS) to a personal pension scheme;

“Pension Transfer Specialist” has the meaning given in the Handbook and includes

an individual appointed by a firm to check the suitability of, amongst other things,

a Pension Transfer, who has passed the required examinations as specified in the

Training and Competence Sourcebook, part of the Handbook;

“Personal Recommendation” means a recommendation that is advice on transfer

of pension benefits into a personal pension or SIPP, and is presented as suitable

for the customer to whom it is made, or is based on a consideration of the

customer’s circumstances;

“the Principles” means the Authority’s Principles for Businesses and rules (as

applicable during the Relevant Period);

“Regulated Apportionment Arrangement” or “RAA” means the statutory

mechanism that can be used in corporate restructuring situations where a

sponsoring employer of a DBPS stops participating in the pension scheme (thereby

freeing the sponsoring employer from its financial obligations to the pension

scheme) in order to avoid insolvency, subject to certain conditions being met and

the RAA being approved by The Pensions Regulator and the PPF;

“the Relevant Period” means 8 June 2015 to 22 December 2017;

“Statements of Principle” mean the Authority’s Statements of Principle and Code

of Practice for Approved Persons issued under section 64A(1)(a) of the Act;

“Suitability Report” means the report which a firm must provide to its customer

under COBS 9.4 which, amongst other things, explains why the firm has concluded

that a recommended transaction is suitable for the customer;

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

“TVAS” stands for ‘transfer value analysis’ and is the comparison that a firm must

carry out in accordance with COBS 19.1.2R when a firm gives advice or a personal

recommendation about, amongst other things, a Pension Transfer; and

“TVAS Report” means a document that reports to the customer in respect of the

comparison firms are required to carry on in accordance with COBS 19.1.2R.

4
FACTS AND MATTERS

4.1
IFM is an independent financial advice firm based in Huddersfield, West Yorkshire.

Since 28 July 2003, IFM has been authorised by the Authority. During the Relevant

Period, IFM had a range of permissions to carry on regulated activities, including

permission to advise on Pension Transfers.

4.2
On 21 December 2017, the Authority held a conference call with IFM. An

assessment of the defined benefit Pension Transfer work identified problems with

customer files. IFM ceased providing advice to BSPS customers in December 2017

and, following intervention from the Authority, agreed to cease providing Pension

Transfer advice altogether.

4.3
During the Relevant Period, IFM advised 261 customers to transfer out of their

DBPS, 247 of whom were advised by Mr Cobill.

4.4
Mr Cobill is an experienced financial adviser. He started working in financial

services in 1988 and was first authorised as a financial adviser in 1991. He

qualified as a Pension Transfer Specialist in 1997. Prior to his involvement with

IFM, Mr Cobill worked for and held controlled functions at a number of authorised

firms and consistently advised on Pension Transfers.

4.5
Between 24 March 2010 and 8 December 2019 (and therefore for the duration of

the Relevant Period), Mr Cobill was approved to carry out the CF30 (Customer)

function at IFM. Mr Cobill gave almost all of the advice to Pension Transfer

customers during the Relevant Period.

4.6
Throughout the Relevant Period, Mr Hofstetter was approved to perform the CF1

(Director) and CF10 (Compliance Oversight) functions at IFM. Mr Hofstetter was

also approved to perform the CF30 (Customer) function at IFM. Mr Hofstetter

acted as an adviser in a small number of Pension Transfer cases but, because he

was not a qualified Pension Transfer Specialist, his advice was subject to checking

by Mr Cobill.

4.7
Mr Cobill was supported by those working in IFM’s office. Throughout the Relevant

Period, Mr Cobill was self-employed rather than being employed by IFM. He was

paid 70% of IFM’s earnings from new business and 80% of its earnings from

renewals.

Pension transfers

4.8
Pensions are a traditional and tax-efficient way of saving money for retirement.

The value of someone’s 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. Pensions are, in most cases, a primary resource for ensuring

financial stability in retirement. For some people, they are the only way of funding

retirement. Customers who engage authorised firms to provide them with advice

in relation to their pensions place significant trust in those providing the advice.

Where a financial adviser fails to conduct the affairs of their advice business in a

manner that is compliant with the Authority’s regulatory requirements, this

exposes their customers to a significant risk of harm.

4.9
Pensions can be structured in a variety of ways. However, a DBPS is particularly

valuable because an employer sponsor carries the financial burden associated with

offering a secure, guaranteed income for life to members, which typically

increases each year in line with inflation. This is in contrast to, for example, a DC

pension scheme where employer and employee capital contributions are invested,

but the investment and mortality risk are borne by the member. The Authority

expects that for the majority of customers it is in their best interests to remain in

their DBPS because of the guarantees and protections it offers.

4.10
Customers who engage advisers and authorised firms to provide them with advice

in relation to their pensions therefore place significant trust in them. It is

important that firms and their advisers exercise due skill, care and diligence when

advising customers regarding their pensions, ensuring that the advice given to a

customer is suitable for them, having regard to all of their relevant circumstances.

This is even more important when customers have no option but to make a

decision regarding their pension.

4.11
Transferring out of a DBPS involves giving up the guaranteed benefits in exchange

for a cash-equivalent transfer value which is typically invested in a DC pension. If

a customer leaves a DBPS, they will have to buy an annuity to obtain a guaranteed

level of income. Alternatively, they may rely on income from investments, but

investments will have to be managed in such a way as to produce ongoing income;

and even then, there is no guarantee as to the amount or duration of that income.

4.12
The introduction of pensions freedoms (introduced in April 2015) for DC pensions

made transferring out of a DBPS an attractive option for some people. However,

the Authority considers that, given the nature of the guaranteed benefits provided

under a DBPS, advisers’ default assumption should be that transferring out and

giving up those benefits is unlikely to be suitable for a customer unless they can

clearly show, based on a customer’s specific circumstances, that it is in their best

interests.

4.13
During the Relevant Period, IFM advised 307 customers on potential transfers

from a DBPS to an alternative pension arrangement, 231 (75%) of whom were

members of the BSPS. Mr Cobill personally advised 289 out of 307 (94%) of those

customers on IFM’s behalf and approved the advice given to the other 18

customers by Mr Hofstetter. Notwithstanding FCA guidance which created a

presumption against advising a customer to transfer out of their DBPS, 247 out

of 289 (85%), of its Pension Transfer customers were advised by Mr Cobill to

transfer. The proportion of IFM’s BSPS customers advised to transfer was even

greater – 198 out of 223 (89%). IFM advised its BSPS customers to transfer out

CETVs with a total value of more than £93 million and with an average value of

more than £455,000. At least 198 out of 206 (96%) of those BSPS customers

followed IFM’s advice and transferred out.

The BSPS

4.14
The BSPS was one of the largest DBPSs in the UK, with approximately 125,000

members and £15 billion in assets as of 30 June 2017. In March 2017, the BSPS

was closed to future accruals, which meant that no new members could join it and

existing members could no longer build up their benefits. The BSPS also had an

ongoing funding deficit.

4.15
In early 2016, various options were being explored in relation to the BSPS as a

result of insolvency concerns relating to one of its sponsoring employers. These

options included seeking legislative changes which would have allowed pension

increases available under the BSPS to be reduced to the statutory minimum levels,

and the sale of one of the sponsoring employers. However, it was concluded that

the only way to avoid insolvency would be to enter into a Regulated

Apportionment Arrangement (“RAA”).

4.16
On 11 August 2017, the Pensions Regulator gave its clearance for the RAA. Under

the RAA, the BSPS would receive £550 million and a 33% equity stake in one of

the sponsoring employers and the BSPS would transfer into the PPF. In addition,

a new DBPS (“BSPS 2”) was proposed by the sponsoring employers in combination

with the RAA proposal. The RAA received formal approval on 11 September 2017,

which resulted in the BSPS being separated from the sponsoring employers.

4.17
As a consequence of the RAA, members of the BSPS were required to make a

choice between two options offered by the BSPS, namely to either:

(a)
remain in the BSPS and therefore move into the PPF; or

(b)
transfer their benefits into BSPS 2.

4.18
Alternatively, BSPS members could take a CETV and transfer their pension

benefits into an alternative pension arrangement (for example a personal pension

scheme or another occupational pension scheme held by the member).

4.19
On 11 and 21 September 2017, the BSPS announced that it would separate from

the sponsoring employers, including the principal sponsor, Tata Steel UK.

Information about the options available to members was available on the BSPS’s

website from 11 August 2017, and in October 2017, the BSPS distributed

information packs to members about these options. Members were required to

choose their preferred option by 22 December 2017. Those who wanted to

transfer their pension benefits from the BSPS to a personal pension were required

to submit the required paperwork to execute the transfer by 16 February 2018.

4.20
The Rookes Review, an independent review of the support given to BSPS members

during restructuring and ‘Time to Choose’, stated that BSPS members

experienced, and were influenced by, a set of unique circumstances. These

included the following:

(a)
distrust of their employer;

(b)
limited information on alternative options;

(c)
tight timescales to make a decision; and

(d)
limited support.

4.21
Some BSPS members were in vulnerable circumstances. For example, BSPS

members tended to have no other assets and relied more on income from their

DBPS than members of other schemes.

IFM’s Pension Transfer advice business and Mr Cobill’s role

4.22
Before enquiries from BSPS members started to come in to IFM in mid-2017,

Pension Transfer advice made up a less significant proportion of IFM’s business

and revenue. In the period of nearly two years from 8 June 2015 to 1 April 2017,

IFM advised on only 56 Pension Transfers. Mr Cobill advised 48 out of 56 of these

customers. The remaining customers were advised by Mr Hofstetter and Mr Cobill

checked the advice given.

4.23
As IFM’s only Pension Transfer Specialist, Mr Cobill had a key role in determining

IFM’s Pension Transfer advice process, deciding, for example, how many times he

would see each customer and when customer signatures would be obtained on

transfer documents. He also conducted the advice process for 94% of Pension

Transfer customers, obtaining information from customers, analysing the

information provided and providing his recommendation to them.

The Advice Process

4.24
IFM’s Pension Transfer advice process before mid-2017 was described by IFM as

consisting of a series of steps. Once a customer had made contact, there would

be an initial conversation to discuss the matter in general terms. If the customer

wanted to take matters further, IFM would gather information about the customer

and about the ceding scheme, including the CETV. IFM would then carry out a

comparison between the ceding scheme and the proposed arrangement (a TVAS).

There would be further discussions or emails between IFM and the customer to

ensure that IFM had all the information it needed to advise.

4.25
According to IFM, once all the information had been gathered, there would

normally be at least two, possibly three face-to-face meetings with the customer.

The first meeting would be for the purposes of gathering further information; at

the second meeting, the information gathered would be presented and the advice

would be given. IFM would then issue the customer’s Suitability Report – a written

summary and explanation of its advice - which would be drafted by back-office

staff. On Mr Hofstetter’s account, the Suitability Report would be reviewed and

signed off by Mr Cobill before being sent to the customer for their consideration.

However, there was no system in place to ensure the review of Suitability Reports

and Mr Cobill accepted in interview that he did not review every Suitability Report

before it was provided to a customer.

4.26
If IFM advised the customer to transfer their pension and the customer decided

to follow that advice, there would be a final meeting with the customer to complete

the documentation. IFM’s back-office staff would then check that all relevant

paperwork had been uploaded to its electronic file and would submit the necessary

applications to the ceding scheme and the new provider.

4.27
IFM operated a contingent charging model for the Pension Transfer advice it

provided, meaning that a customer paid for its advice only if the customer

transferred their defined benefit pension following IFM’s recommendation. If IFM

advised the customer not to transfer, it received no fee. The fee charged was

typically 3% or 4% of the customer’s CETV and was paid out of the customer’s

transferred funds, in addition to a £250 fixed fee for the initial set up. Mr Cobill

was self-employed and received in commission 70% of the initial fees charged by

IFM to its Pension Transfer customers and 80% of the fees charged for ongoing

advice.

4.28
In around March 2017, Mr Cobill was approached by an adviser at another

authorised firm with connections to the British Steel community but without the

capacity to advise BSPS members on Pension Transfers. IFM and the other firm

agreed that IFM would accept introductions from the other firm of BSPS customers

who were interested in receiving advice on transferring out of their DBPS. Under

the arrangement between the two firms, the other firm provided only the

customer’s contact details directly to Mr Cobill. No other information was provided

and no fee was payable by IFM or Mr Cobill in exchange for the introductions. This

was a voluntary and relatively informal arrangement; neither IFM nor Mr Cobill

were bound to accept every introduction received from the other firm. Mr Cobill

therefore retained control of the volume of work undertaken by him.

4.29
In the second half of 2017, the other firm introduced significant numbers of BSPS

members seeking Pension Transfer advice to IFM. IFM began to take on Pension

Transfer advice customers in ever greater numbers, all of them with the same

ceding scheme – the BSPS. This volume of new Pension Transfer business was

unprecedented in IFM’s experience. IFM altered its charging structure for BSPS

customers with Mr Cobill’s agreement. They were to be charged less than non-

BSPS customers: IFM’s contingent charging model was maintained, but a cap of

£5,000 was introduced.

4.30
BSPS customers also went through an advice process different to that used by

IFM prior to mid-2017 (as described above). BSPS customers had fewer meetings

with IFM’s adviser. The two to three meetings were replaced by one or two and in

the majority of cases there was only one. IFM’s explanation for these changes is

that it considered that there was less work involved for IFM in advising BSPS

members, because the BSPS members all had the same ceding scheme and

because they had in many cases already obtained information, including their

CETV, from the scheme trustees.

4.31
In September 2017, approximately six months after the first approach from the

other firm, that firm stopped referring customers to IFM. However, IFM continued

to acquire new BSPS Pension Transfer customers in significant numbers through

customer referrals.

4.32
Almost all of IFM’s BSPS Pension Transfer customers were advised by Mr Cobill.

IFM’s summary information for its BSPS files shows him as adviser in 223 out of

231 files (96%). Mr Cobill’s role as sole Pension Transfer Specialist meant that he

was also responsible for checking the advice given in the other eight files, for

which Mr Hofstetter was the adviser.

Significant increase in the rate at which Mr Cobill gave Pension Transfer advice

4.33
Having advised a customer on a Pension Transfer on average once every 10 days

or so before the BSPS introductions began, Mr Cobill quickly transitioned to

working at a much faster rate. During IFM’s busiest period advising Pension

Transfer customers, the four months from August 2017 to November 2017

inclusive, it was common for Mr Cobill to meet several BSPS customers per day

to advise them on transferring their pensions. There were 26 occasions on which

he had three meetings per day, 17 on which he had 4 meetings per day and 4 on

which he had five meetings per day. In this period, IFM, almost exclusively

through Mr Cobill, met customers 231 times and made 208 Personal

Recommendations over 87 working days, giving averages of approximately 2.65

meetings and 2.39 recommendations per day. The vast majority of those

customers (87%) were advised to transfer out of the BSPS.

The increase in Mr Cobill’s workload

4.34
The increase in Pension Transfer business led to a significant increase in Mr Cobill’s

workload. Mr Cobill described himself when interviewed by the Authority as,

“working 14 hours a day seven days a week” throughout the period August to

November 2017. He told the Authority that he had never worked at that rate

before and that “there was more work than reasonably one person would deal

with”.

4.35
Mr Cobill remained IFM’s only Pension Transfer Specialist throughout the period

August to November 2017. The only increase in staffing at IFM at that time took

the form of an administrative assistant engaged by Mr Hofstetter for one or two

days a week over a two-week period. However, in his interviews with the Authority

Mr Cobill did not complain of being unsupported, of raising concerns as to his

workload or of being placed under undue pressure, by IFM or anybody else. Mr

Cobill accepted that he had not been obliged to take on every introduction or

inquiry that he or IFM received.

4.36
In early/mid December 2017, IFM stopped taking on new Pension Transfer

business. Although Mr Cobill told the Authority that he could not remember exactly

why this had happened, he suspected that it was because he had been “burnt out”

and unable to continue at the pace adopted during the previous four months.

Before December 2017, neither IFM nor Mr Cobill had declined any new business

on grounds of lack of capacity.

A compressed approach to Pension Transfer advice

4.37
Mr Cobill advised the increased number of Pension Transfer customers at such a

fast rate without additional support by taking a compressed approach to the

advice process. For at least 70 out of the 206 (34%) BSPS customers who were

advised to transfer out Mr Cobill held the first meeting with the customer,

gathered the fact-find from them, made the Personal Recommendation to them

to transfer out of their DBPS and obtained the customer’s signature on the BSPS

discharge forms to effect the transfer, all on the same day. In some cases, the

customer signed the discharge forms for the BSPS at the first meeting, before

receiving Mr Cobill’s Personal Recommendation.

4.38
Mr Cobill asserted that obtaining signed transfer documents prior to issuing

Suitability Reports was an acceptable practice because customers could revoke

their agreement to transfer even after submission of the forms to the BSPS.

However, the practice of obtaining signed transfer forms at the first meeting

decreased the likelihood that customers would pay close attention to the Personal

Recommendation and make a considered decision based on the advice given. The

practice also suggests that Mr Cobill’s advice did not start from the correct

presumption that transferring out of the BSPS would not be in the customer’s best

interests.

The Authority’s review of Mr Cobill’s advice

4.39
The Authority reviewed a representative sample of 18 customer files of the

customers who were advised by IFM during the Relevant Period; 14 out of 18 of

files in the sample related to BSPS members and more than half were from IFM’s

busiest period of August to November 2017. Mr Cobill was the adviser in 15 of

these files; in the other three files, Mr Cobill checked advice given by Mr

Hofstetter. The Authority assessed the files against the applicable rules in COBS

relating to suitability. As an approved person performing the CF30 (Customer)

function, Mr Cobill had a duty to act with due skill, care and diligence when

advising IFM’s customers and checking the advice given by Mr Hofstetter. Mr Cobill

was an experienced financial services professional. He should have been aware of

the Authority’s rules and guidance relating to the suitability of advice and acted

with due skill, care and diligence in ensuring that the Personal Recommendations

he gave and approved were suitable and met those requirements.

4.40
The Authority found that in 15 out of 18 (83%) of the customer files it reviewed,

and 13 out of 15 (86%) of those files where Mr Cobill was the adviser, IFM failed

to comply with relevant regulatory requirements regarding Pension Transfer

advice. All the files contained material information gaps and for six customer files

the Pension Transfer advice given was unsuitable, as detailed further below. The

Authority considers it appropriate to infer from the prevalence of failures within

the sample that the advice given or approved to IFM’s customers failed to comply

with relevant regulatory requirements regarding Pension Transfer advice for a

significant proportion of all Pension Transfer customers during the Relevant

Period. Mr Cobill was either the named adviser or he checked the advice provided

in Mr Hofstetter’s name for all of IFM’s Pension Transfer customers.

4.41
During the Relevant Period, as presently, COBS stated that the overarching

suitability requirement was for a firm to take reasonable steps to ensure that a

personal recommendation (which included, in this context, a recommendation to

transfer or not to transfer a pension) was suitable for its customer (COBS 9.2.1R,

see Annex A).

4.42
To do so, a firm should obtain the necessary information regarding the

customer’s:

(a)
knowledge and experience in the investment field relevant to the pension

transfer;

(b)
financial situation; and

(c)
investment objectives.

4.43
Making a personal recommendation without the necessary information increases

the risk of providing unsuitable advice. During the Relevant Period, as presently,

COBS stated that if a firm did not obtain the necessary information to assess

suitability, it should not make a personal recommendation (COBS 9.2.6R, see

Annex A).

4.44
The Authority’s review revealed gaps in the necessary information recorded in 15

out of the 18 files reviewed (83%), including 13 out of 15 (86%) of those files

where Mr Cobill was the adviser. In such circumstances, Mr Cobill should not have

made a Personal Recommendation or approved Mr Hofstetter’s Personal

Recommendation.

4.45
There was a pervasive failure, occurring in 13 out of 18 files, to obtain information

concerning the customer’s predicted expenditure in retirement. There was also a

common failure, occurring in 14 out of 18 files, on 13 of which Mr Cobill was the

adviser, to obtain information about the customer’s financial situation. Both areas

are key in determining suitability. Without such information, IFM should not have

made a Personal Recommendation. The customer’s predicted expenditure

throughout retirement is a key indicator of what their income needs will be in

retirement, information which is important in assessing whether a customer

should give up their defined benefits. Information about a customer’s wider

financial situation, including, for example, any other pensions that they may have,

is central to assessing the extent of their reliance on the income provided by their

DBPS, and their capacity for loss.

4.46
An example of IFM’s failure to obtain the information necessary to enable it to

advise can be seen in the case of Mr B. Mr B was one of four BSPS Pension Transfer

clients seen by IFM during a single day, on 19 October 2017. He was one of two

clients seen on that day who signed his fact-find, received a Personal

Recommendation to transfer out of his Defined Benefit Pension Scheme and

signed his discharge forms to effect the transfer all on the same day. Mr B’s fact-

find both lacks information and contains conflicting information about Mr B’s

liabilities and expenditure. For example, the only item of monthly expenditure

recorded is a £600 mortgage payment and no other detail is recorded in relation

to the mortgage, despite the templated wording seeking these details. However,

later on in the document, a box next to the wording, “I have no mortgage but

have a few other obligations like credit card payments etc.” has been ticked. The

notes page of the fact-find is blank. There is a page of handwritten notes on the

file which merely records the information in the fact-find in summary form, with

nothing additional. IFM failed to obtain sufficient information in respect of Mr B to

make a Personal Recommendation.

4.47
The prevalence of information gaps in the 18 customer files reviewed by the

Authority shows that Mr B’s was not an isolated case. The Authority considers it

appropriate to infer from the prevalence of information gaps within the sample of

18 customer files that for a significant proportion of IFM’s other Pension Transfer

customers during the Relevant Period, IFM did not obtain the information

necessary to make a Personal Recommendation.

Explanations given for the gaps in the customer information on file

4.48
IFM’s position is that necessary information was obtained from customers in every

case, even if the information was not recorded on the customer file. However, IFM

staff members gave differing explanations to the Authority regarding the gaps in

customer information on file. Mr Cobill asserted that he recorded customer

information in notes which were placed on the customer file, but that these had

not been scanned by administrative staff and had subsequently disappeared. Mr

Hofstetter and a member of the back office staff disagree with Mr Cobill’s account,

asserting that all hard copy notes on the customer files were scanned prior to the

paper files being destroyed.

4.49
Having carefully considered all of the evidence on this issue, the Authority accepts

that IFM may in some cases have obtained, but failed to record, some information

in addition to that which is recorded in the customer files. However, the Authority

does not accept that all of the necessary information was obtained in every

customer’s case or that IFM took reasonable steps to ensure the suitability of its

advice to each of its customers.

Unsuitable Pension Transfer advice

4.50
The overarching suitability requirement (COBS 9.2.1R) is for a firm to take

reasonable steps to ensure that a personal recommendation (which includes, in

this context, a recommendation to transfer or not to transfer a pension) is suitable

for its customer.

4.51
The starting point for Pension Transfer advice is the guidance in COBS 19.1.6G(3)

(or, from 8 June 2015 to 1 April 2018, in COBS 19.1.6G) that a firm should only

consider a transfer, conversion or opt-out to be suitable if it can clearly

demonstrate, on contemporary evidence, that the transfer, conversion or opt-out

is in the customer’s best interests. These provisions indicate that if the firm cannot

clearly demonstrate this, then it should assume the transaction will not be

suitable. In the worst scenarios, a loss of guaranteed benefits equates to severe

customer harm, surrendering a primary resource for ensuring financial stability in

retirement or, alternatively, commencing retirement.

4.52
Of the fifteen customer files where IFM had failed to gather sufficient information,

the Authority has been able to assess six as giving unsuitable advice. All six of

the customers who received unsuitable advice were BSPS members and Mr Cobill

was the adviser in all cases. Therefore, in the sample reviewed by the Authority,

Mr Cobill personally gave unsuitable advice to 6 out of 15 of his customers (40%).

According to their fact-finds, all six customers were still employed in the steel

industry, with above average earnings and significant CETVs, reflecting significant

safeguarded benefits due to them through their membership of the BSPS. None

of them had other assets or investments of any significance and they had little or

no knowledge or experience of financial services or investing.

Reliance on the Defined Benefit Scheme and Inability to Bear Transfer Risk

4.53
Five of the six customers for whom Mr Cobill’s Pension Transfer advice was

unsuitable were reliant on their DBPS to meet their income needs throughout

retirement. Their DBPS pension was their primary source of income in retirement.

These customers did not have significant assets which could be used to

supplement any shortfalls in their income needs. Given their financial situation, it

was especially important for these customers to retain guaranteed income

because they did not have the capacity to bear the risks of transferring. In all 5

cases, IFM recommended transfer away from the defined benefit scheme when

there was insufficient evidence to suggest that the customer could bear the

transfer risk. Mr Cobill’s advice to transfer out exposed these customers to a risk

of not being able to meet their income needs throughout retirement because their

income would be dependent on the performance of the recommended investment.

Mr Cobill did not have a reasonable basis for believing that these customers could

financially bear the risk that the value of their pension investments may fall

following the Pension Transfers recommended in their cases.

Lack of Evidence to Support Customer Objectives

4.54
IFM failed to provide sufficient evidence to demonstrate that specific objectives

which drove the transfer were in the customer’s best interests. This was seen in

all 6 cases assessed by the Authority as being unsuitable for transfer.

4.55
As the primary purpose of a pension is to meet the income needs of an individual

in retirement, when maximising the customer’s death benefits or the flexibility of

alternative arrangements is treated as a high priority, there is an increased risk

that this is at the expense of the primary purpose. There may therefore be a

trade-off that must be resolved in the best interests of the customer given their

circumstances (COBS 9.2.1R(1) and 9.2.2R(1)(b)). The file reviews uncovered

examples of where this tension was resolved in favour of transfer, but where the

firm did not demonstrate why this was the case.

4.56
All but one of the Suitability Reports for BSPS customers reviewed by the Authority

listed the customer’s primary objective as providing greater flexibility when

drawing benefits from their pension funds, suggesting a heavily templated

approach and failure to properly explore the customers’ objectives. In all six files

where unsuitable Pension Transfer advice was given, Mr Cobill failed to

demonstrate that maximising flexible benefits was in the customer’s best

interests. There was either no evidence in support of the need to access funds

flexibly or insufficient evidence that to do so was in the customer’s best interests.

4.57
Other objectives indicated by customers on the fact-find had no supporting

explanation or facts recorded. It was therefore unclear on what basis Mr Cobill

had recommended the transfers. An example is provided by the file of Mr C. Mr C

was 53 years old and anticipated retiring at age 60. Having no source of

retirement income other than the BSPS and the state pension, he was reliant on

the income provided by the BSPS in retirement. He had no mortgage and his

current income needs were relatively low, with no reason for them to increase in

retirement. Accordingly, taking into account early retirement factors, BSPS 2

might have provided him with retirement income adequate to his needs, with

minimal risk. In terms of his other requirements or objectives, he had no need for

a PCLS at retirement and his preferred type of death benefit was a pension.

4.58
Mr C was a cautious investor. The Authority’s guidance provides that a transfer

should only be considered suitable where it can clearly be demonstrated, on the

basis of contemporary evidence, that the transfer is in the customer’s best

interests. Moreover, the Authority’s Rules require that there is a reasonable basis

for believing that a recommendation meets a customer’s investment objectives.

Given Mr C’s attitude to risk, the risks inherent in a decision to transfer out of a

DBPS, and the lack of strong drivers to transfer in his case, the Authority would

expect to find evidence of a thorough explanation of how the recommended

transfer met Mr C’s objectives, including consideration of available alternatives to

transferring. In fact, the fact-find recorded nothing about his objectives beyond

ticking templated boxes; no further information or explanation was captured. The

Suitability Report contains only generic reasons, described using templated

wording.

4.59
Mr Cobill did not have a reasonable basis for believing that the recommendation

to transfer met the customer’s investment objectives.

No basis for believing customer had necessary knowledge or experience to

understand the risks involved in the transfer

4.60
Pursuant to COBS 9.2.2R(1)(c), IFM was obliged to obtain sufficient information

to provide a reasonable basis for believing that its clients had the necessary

experience and knowledge to understand the risks involved in the transfers. COBS

9.2.3R states that the information obtained had to include the types of service,

transaction and investment with which the client was familiar, the nature, volume

and frequency of their investment decisions, and their level of education.

4.61
The only information concerning the customers’ knowledge and experience

recorded in the six files assessed by the Authority where unsuitable Pension

Transfer advice was given took the form of the customers’ responses to a single

tick-box, multiple choice question on the fact-find about their knowledge of

financial decisions. In two cases, the customers ticked the box describing

themselves as having “Very little understanding or knowledge” of financial

decisions. In the other cases, where the customer had asserted a level of

knowledge when their occupation and investments suggested this was not the

case, there was no evidence of the adviser challenging or scrutinising these

answers on file. A general lack of knowledge and experience could be inferred in

all cases. Five out of six customers had worked for the same employer for a

substantial period of time and, apart from the benefits available in their DBPS, all

six customers had little in the way of other assets or investments (save for their

ongoing contributions to their employer’s group pension plan and, in one case, an

ISA). Further, there was no evidence of them having previously taken financial

advice and no evidence of them having any knowledge of managing pension

investments.

4.62
The customers advised by Mr Cobill faced a difficult and very important decision

concerning their pensions in the context of the pensions’ significant value and a

high level of speculation about the future of the BSPS. The customers whose files

were reviewed by the Authority had limited knowledge and experience. Given the

nature of the customers, the type of transaction envisaged, and the risks involved,

Mr Cobill did not obtain sufficient information to provide a reasonable basis for

believing that the customers had the necessary experience and knowledge to

understand the risks involved in the transfer of their defined benefits.

Failure to consider attitude to transfer risk

4.63
Pursuant to COBS 9.2.2R(1)(a), IFM was obliged to obtain information giving it a

reasonable basis for believing that its recommendation to transfer met the client’s

investment objectives. As part of that, IFM was obliged to obtain information on

the client’s preferences regarding risk taking and their risk profile, in accordance

with COBS 9.2.2R(2). IFM had to have a reasonable basis for believing that the

customer was prepared to take the risk involved in transferring out of their DBPS

– in particular, the risk involved in exchanging guaranteed benefits for non-

guaranteed benefits which are subject to investment risk borne by the customer.

4.64
In three out of the six cases assessed where unsuitable Pension Transfer advice

was given (Mr B, Mr E and Mr W), there is no evidence that Mr Cobill had a

reasonable basis for believing that the Personal Recommendation to transfer met

the customer’s objectives in the context of their attitude to risk. Customer files

lacked evidence of discussions around risk, depletion of the fund and customer

responses/rationale as regards their views.

4.65
By way of example, Mr W generally selected the most cautious responses available

in the fact-find, categorised himself as a ‘cautious risk’ investor and added

narrative comments on more than one occasion to emphasise the point, such as:

“I am quite a cautious person and require a stable income for my retirement which

will not exhaust and be able to support my wife when I die.”

4.66
The Suitability Reports for Mr B, Mr E and Mr W make no reference to their

attitudes to risk. Instead, they all contain the following templated wording:

“As a result of our discussions, it became clear that you are attracted to the

flexibility of the personal pension and imagine this will suit your retirement

needs better than a fixed income for life. Equally, it is very important to you

that you are in control of your retirement provisions and that you can draw

benefits when you want rather than being bound by scheme rules and

trustee discretion. Ensuring your pension will not die with you and allowing

it to be fully inherited by your family is also a key objective of yours.”

“Ultimately, the level of value placed on one aspect of a pension is down to

the individual. In other words, if an individual wants the peace of mind from

a guaranteed pension, then they will clearly place a high value on a Scheme

Pension.

From our discussions, it is clear that you place a higher value on having

choice and control over your pension fund than having a guaranteed lifetime

income.”

4.67
The documentation on file provides no explanation of how the above conclusions

have been reached in light of these customers’ attitudes to risk as expressed in

their fact-finds. Mr B and Mr E did not complete the section of the Pension Review

Questionnaire which asked them to list their priorities in numerical order. Mr W

did complete this section and prioritised his three most important objectives as

follows: “1) Improve the security of my pension fund; 2) Ability to afford to retire

early; and 3) Flexibility and control of income in retirement.” He added a note

stating that he required a stable income for retirement. All three described

themselves as cautious investors who would tolerate only low volatility. Neither

Mr B nor Mr E mentioned leaving money to their family as an objective for them.

In the cases of Mr B and Mr E, insufficient information was recorded to justify the

conclusion that their desire for flexibility outweighed their cautious approaches to

risk. For Mr W, this conclusion was inconsistent with the objectives stated in his

questionnaire and insufficiently justified given his attitude to risk.

Transfer analysis not supportive of transfer or no transfer analysis

4.68
In order to provide Pension Transfer advice in accordance with COBS 19.1.2R, IFM

was obliged to carry out a comparison between the benefits likely to be paid by

the ceding scheme with the benefits afforded by a personal pension. IFM further

had to ensure that the comparison included enough information for the client to

be able to make an informed decision and give the customer a copy of the

comparison, drawing the customer's attention to the factors that did and did not

support IFM's advice. Finally, IFM had to take reasonable steps to ensure that the

customer understood its comparison and its advice. This was important, given the

limited knowledge and experience of many of the customers in the sample. Where

files did not demonstrate that this was the case, there was a risk that the customer

followed the advice without understanding how the transfer compared with what

they were giving up.

4.69
During the Relevant Period, this comparison would typically be contained in a

TVAS Report, which would set out, amongst other things, a comparison relating

to specific benefits (for example, death benefits) and a critical yield calculation.

The critical yield is guidance on the level of return (expressed as a percentage)

that the customer’s investment will need to achieve up to the point they start

drawing from the pension to match the benefits they would receive from their

DBPS.

4.70
Mr Cobill gave the vast majority of IFM’s Personal Recommendations to transfer

to IFM’s BSPS customers. His Personal Recommendations often coincided with the

customer’s signature of the BSPS discharge forms necessary to effect the transfer.

This meant that the customer’s decision to transfer was often being made and

implemented in a face-to-face meeting with Mr Cobill. A TVAS should have formed

part of his analysis and he should therefore have ensured that one was completed

to an adequate standard for every customer. He should also have taken

reasonable steps to ensure that the customer understood the comparison and

should have explained to the customer why he was recommending that they

transfer out of their DBPS if the results of the comparison did not support the

transfer.

4.71
In three of the files reviewed, the TVAS Report was not properly prepared, in that

it was not conducted on the basis of the customer’s preferred retirement age or

on the basis of their stated intention to draw a PCLS. Where calculated to a higher

retirement age than desired by the customer, the critical yield figure will be lower,

suggesting the receiving fund does not need to perform as well. For example, in

the case of Mr H, the TVAS was prepared to the retirement age of 65 rather than

the preferred retirement age of 55. The critical yield calculated to age 55 is likely

to be much higher than that calculated to age 65. Moreover, the TVAS was not

prepared assuming Mr H took his PCLS, even though this is indicated as a

possibility in the suitability report.

4.72
Further, in all six of the files assessed by the Authority where Mr Cobill was the

adviser and unsuitable Pension Transfer advice was given, the transfer analysis

did not support the Personal Recommendation to transfer, in that the critical yield

referred to in the Suitability Report was greater than the return likely to be

achievable in light of the customer’s attitude to investment risk. For example, in

the case of Mr W, the BSPS customer described at paragraphs 4.64 to 4.67 above,

the critical yield obtained was 7.7%. The Authority considers that this return was

unlikely to be matched by investments consistent with Mr W’s extremely cautious

attitude to risk.

4.73
In seven out of 14 (50%) of the BSPS files reviewed by the Authority and three

out of six of the files assessed by the Authority where unsuitable Pension Transfer

advice was given, there was no TVAS Report in the customer file where one was

required. This omission occurred throughout IFM’s BSPS customer book. For 71

of the 206 BSPS customers (34%) for whom IFM made a recommendation to

transfer (of whom 67 were advised by Mr Cobill), IFM did not obtain a TVAS Report

or otherwise carry out the comparison required by the rules.

4.74
In many cases (including some, such as that of Mr W, where a TVAS was prepared)

the Suitability Report contained the following templated wording:

“Any comparison is made against the expected retirement income at 65

under the current scheme rules and benefits. Given we know these are to

change, the analysis will not represent a true picture and will arguably add

no value to the process. Moreover, as your intention behind transferring is

to take full advantage of pensions ‘freedom’ rather than purchase a lifetime

annuity in the future, the results of a TVAS are largely academic.

For your information however, I can confirm that our analysis to date of the

British Steel Scheme has shown that annual investment returns of typically

around 8.0% p.a. are required in order to match the benefits available at

65 from the ‘current’ British Steel scheme. Given the terms are due to

change for the worse however, it follows that the required growth rate to

match the British Steel 2 scheme will be lower.” [emphasis added]

4.75
COBS 19.1.2R requires that Pensions Transfer clients are provided with a TVAS

which contains sufficient information to enable them to make an informed

decision. Mr Cobill accepted that TVAS comparisons would always yield different

return figures for different customers. However, customers who were not provided

with a TVAS were given an imprecise and potentially inaccurate figure of a typical

annual return of 8%. Customers were entitled to receive a precise comparison,

taking into account their personal circumstances and evaluating the benefits of

the ceding scheme with those of the receiving scheme. Without such comparison,

customers were deprived of information which would have increased their level of

understanding in the decision-making process.

4.76
Customer objectives were often recorded in a generic way suggesting a

standardised templated approach. In accordance with COBS 9.4.7R, IFM was

obliged to set out in the Suitability Report, as a minimum, the customer’s

demands and needs; why it had concluded that the transfer was suitable for the

customer having regard to the information provided by the customer; and any

possible disadvantages of the transaction for the customer. In other words, the

report was a written record of the customer’s circumstances and the adviser’s

Personal Recommendation and the reasons for it.

4.77
The Suitability Reports reviewed by the Authority contained little evidence to

suggest that the stated objectives of the customers had been properly explored,

scrutinised and challenged by the adviser to ensure they were appropriate and

achievable, particularly the desire for flexibility. The underlying reason for the

customer objectives was not always recorded meaning the driver for transfer

could not be assessed; alternative means of achieving the aim or the appropriate

importance to attach to the objective cannot be evaluated.

4.78
All but one of IFM’s Suitability Reports for BSPS customers reviewed by the

Authority gave in the first instance the customer’s primary objective as “Transfer

your defined benefit pension to a money purchase pension plan to provide greater

flexibility when drawing benefits from your pension fund”. In 9 out of 14 of these

Suitability Reports, the customer’s recorded objectives were substantively the

same. 11 of the 14 BSPS Suitability Reports reviewed contained identical reasons

for the recommendation to transfer. In all 14 cases, the warnings of the possible

disadvantages were identical.

4.79
Mr Cobill sought to justify similarities in advice by reference to similarities in the

BSPS customers’ circumstances. However, the circumstances of every customer

were unique. The Suitability Reports failed to reflect these differences in sufficient

detail or to explain to customers how IFM had taken into account the information

provided by the customer in reaching the conclusion that the advice was suitable.

Important elements of the rationale for transfer were highly templated and the

Suitability Reports do not clearly communicate the reasons for IFM’s advice.

Incorrect information about the PPF given in Suitability Reports

4.80
If BSPS members did not opt for BSPS 2 or to transfer out of the BSPS, the default

outcome was to enter into the PPF and receive compensation in lieu of a pension.

Nine out of the 14 Suitability Reports for BSPS customers reviewed by the

Authority contained incorrect information about the benefits available to BSPS

members entering into the PPF. Early retirement would always have been

available as an option for those BSPS members who went into the PPF. However,

nine Suitability Reports used templated wording with incorrect information on that

point, as follows:

(a)
in the first in time (advice given in July 2017) the report stated that on the

scheme entering the PPF, “the option of early retirement will be lost”;

(b)
in the next six (advice given in August, September and October 2017) the

reports stated that, “Early retirement is unlikely to be an option under the

PPF” (and stated that the terms of BSPS 2 in this context were as yet

unknown);

(c)
in the next two (advice given in October and November 2017) the reports

stated that, “Early retirement will not be an option under the PPF” (but

stated that it would under BSPS 2).

4.81
Of the five remaining customer files reviewed by the Authority, one Suitability

Report does not address the customer’s stated concerns that early retirement may

not be available under the PPF, and the remaining four (all of which were prepared

in November and December 2017) correctly state that early retirement was an

option under the PPF. It appears from these four files that IFM corrected the

wording regarding the availability of early retirement in the PPF by at least early

November 2017 and, based on some IFM customer Suitability Reports obtained

by the Authority outside its file review exercise, it appears that some Suitability

Reports contained the correct information as early as September 2017.

Regardless of when exactly the error was realised, IFM allowed Suitability Reports

containing incorrect information to be provided to customers and did not

subsequently write to those customers to correct the position.

The materiality of the PPF issue

4.82
Early retirement was a common objective among BSPS members. In that context,

for Mr Cobill to wrongly advise its BSPS customers at any stage in the advice

process that early retirement was either unavailable or unlikely to be available in

the PPF created a significant risk that members’ decisions to transfer out of their

DBPSs would be made or maintained on a materially false basis. The mistake also

had the potential to make the riskier option of a Pension Transfer seem more

attractive than it might otherwise to cautious BSPS members. In some cases, the

templated wording in the Suitability Report risked making it appear that the BSPS

member might not be able to retire early at all unless they transferred out of the

BSPS altogether.

Failure to check Suitability Reports

4.83
Mr Cobill accepted in interview with the Authority that as an adviser he should

have ensured that Suitability Reports were accurate before they were sent to

customers. However, throughout the Relevant Period, Mr Cobill failed to ensure

that he took sufficient steps to ensure the accuracy and completeness of

Suitability Reports sent to customers having been drafted by a paraplanner. For

BSPS customers in the latter part of 2017, he read only a “tiny proportion” of

reports. This gave rise to the risk that Suitability Reports sent to customers were

inaccurate, a risk that in fact crystallised as set out in paragraph 4.80 above.

Reviewing the Suitability Reports would have provided Mr Cobill with an

opportunity to identify and correct such errors. However, in the absence of

adequate review by him, the inaccurate statements regarding the PPF were not

corrected in Suitability Reports and clients who had received incorrect information

were not notified of the error.

Benefit derived by Mr Cobill

4.84
IFM operated a contingent charging model for Pension Transfer advice, meaning

that a customer paid for IFM’s advice only if the customer transferred their defined

benefit pension following IFM’s recommendation. The fee charged was typically

3% or 4% of the customer’s CETV and was paid out of the transferred funds, in

addition to a £250 fixed fee for the initial set up. This was subject to a £5,000 cap

for BSPS customers.

4.85
In many BSPS cases, the £5,000 cap was met. As a consequence, the initial

charges charged by IFM to 206 BSPS Pension Transfer customers that it advised

to transfer out in the eight-month period May 2017 to December 2017 inclusive

totalled £972,438.96.

4.86
70% of initial charges and 80% of ongoing charges were paid by IFM to Mr Cobill

under the terms of the agreement between them. This meant that IFM paid Mr

Cobill more than £640,000 for BSPS cases in the period May 2017 to December

2017. By December 2020, IFM had paid Mr Cobill a total of £1,139,487.01 in

commission in connection with advice given to its Pension Transfer customers

during the Relevant Period.

5.
FAILINGS

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

5.2
Mr Cobill breached Statement of Principle 2 during the Relevant Period, in that he

failed to act with due skill, care and diligence when advising customers on Pension

Transfers. His failings meant that the advice he provided did not comply with

regulatory requirements and standards, which created a significant risk that his

advice that a customer should transfer out of their DBPS would not be suitable for

them. In particular, Mr Cobill:

(a)
failed to obtain the necessary information from the customer, particularly

information concerning their financial situation when assessing whether it

was suitable for them to transfer out of their DBPS. That meant that Mr

Cobill was unable properly to assess the customer’s income needs in

retirement, the extent of their reliance on the retirement income provided

by their DBPS, or their capacity for loss. Those issues went to the heart of

whether a Pension Transfer was suitable for a customer;

(b)
failed properly to assess, on the basis of the information obtained, or give

due consideration to, whether the recommendation was suitable for the

customer and in their best interests and in particular whether:

(i)
the customer could financially bear the risks involved in a Pension

Transfer. Mr Cobill advised customers with no source of retirement

income other than their DBPS and the state pension and with cautious

attitudes to risk to give up their guaranteed benefits without sufficient

justification;

(ii)
the Pension Transfer recommended met the customer’s investment

objectives. In some cases, there was no evidence of Mr Cobill having

properly
scrutinised
customer’s
objectives
or
giving
proper

consideration to whether the Pension Transfer met the customer’s

retirement goals; nor any evidence of due consideration by him of the

customer’s risk-taking preferences or their risk profile;

(iii)
the customer had the necessary experience and knowledge to

understand the risks involved in the Pension Transfer recommended

and failed to give due consideration to the customer’s lack of

experience and knowledge in that context. Mr Cobill advised steel

industry employees with limited experience or knowledge of

investments to give up the guaranteed benefits of their DBPS in a

rushed and perfunctory manner; and

(iv) failed to ensure that any, or any adequate, transfer analysis was

prepared for and explained adequately to all customers comparing the

benefits likely to be paid under the DBPS with benefits afforded by the

personal pension scheme into which it was proposed that the customer

should transfer. Even where a TVAS was prepared, it did not always

support the decision to transfer.

5.3
Mr Cobill failed to check the contents of the Suitability Reports issued by IFM in

his name and to ensure that the Suitability Reports contained adequate

information to explain the Personal Recommendation, having regard to the

customer’s specific circumstances and objectives. As a consequence of this, he

did not become aware of and did nothing to rectify the serious failings in the

drafting of reports, such as the inclusion of incorrect and misleading information

and the use of generic wording that was almost entirely derived from templates,

meaning that reports nominally compiled for different customers were

substantially identical.

5.4
As a consequence of his actions, Mr Cobill failed to meet the regulatory standards

applicable to a Pension Transfer Specialist performing the CF30 controlled

function. The Authority therefore considers that he is not fit and proper to perform

any function in relation to the regulated activity of advising on Pension Transfers

and Pension Opt Outs carried on by an authorised person, exempt person or

exempt professional firm.

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.

Step 1: disgorgement

6.2
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.

6.3
Mr Cobill derived direct financial benefit from his role in giving Pension Transfer

advice on behalf of IFM, in the form of commission payments from IFM of 70% of

initial charges to Pension Transfer customers and 80% of ongoing charges levied

on those customers by IFM for investment advice given after the customers had

transferred out of their Defined Benefit Pension Schemes. IFM paid Mr Cobill a

total of £1,139,487.01 for Pension Transfer advice given by him during the

Relevant Period.

6.4
In calculating Mr Cobill’s direct financial benefit from his breach, the Authority

considers it appropriate to calculate an amount reflective of the proportion of IFM’s

customer files it identified during its review where IFM failed to comply with

relevant regulatory requirements regarding Pension Transfer advice (after

deduction of quantifiable tax liabilities incurred by Mr Cobill). This is £562,860.23.

6.5
The Authority has charged interest on Mr Cobill’s benefits at 8% per year from 22

December 2017 to the date of this Notice, amounting to £280,165.61.

6.6
Step 1 is therefore £843,025 (rounded down to the nearest £1).

Step 2: the seriousness of the breach

6.7
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.

6.8
The period of Mr Cobill’s breaches of Statement of Principle 2 was from 8 June

2015 to 22 December 2017. The Authority considers Mr Cobill’s relevant income

for that period to be £900,887.02.

6.9
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%

6.10
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 breach

6.11
Mr Cobill gained a substantial, direct benefit from his breach. IFM paid him a total

of £1,139,487.01 in commission in connection with his advice to its Pension

Transfer customers during the Relevant Period. (DEPP 6.5B.2G(8)(a)).

6.12
Mr Cobill’s breach caused a significant risk of loss, as a whole, to consumers who

transferred out of their DBPS as a result of his advice. IFM’s 307 Pension Transfer

customers held pensions with CETVs totalling more than £111 million. IFM’s BSPS

customers transferred out CETVs with a total value of more than £93 million. Mr

Cobill’s breach placed a large proportion of those funds at significantly increased

risk (DEPP 6.5B.2G(8)(b)).

6.13
Mr Cobill’s breach caused a significant risk of loss to individual consumers who

transferred out of their DBPS as a result of his advice. The average CETV of IFM’s

Pension Transfer customers was more than £394,000. The average CETV of IFM’s

BSPS customers was more than £455,000. For many customers, their DBPS was

their most valuable asset and was their only retirement provision other than their

state pension (DEPP 6.5B.2G(8)(c)).

6.14
Mr Cobill’s breach affected particularly vulnerable people, namely BSPS members,

who made up the majority of his Pension Transfer advice customers during the

Relevant Period and many of whom were in a vulnerable position due to the

uncertainty surrounding the future of the BSPS (DEPP 6.5B.2G(8)(d)).

Nature of the breach

6.15
Mr Cobill’s breach was committed repeatedly over the course of more than two

years, in respect of many separate instances of Pension Transfer advice (DEPP

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

6.16
Mr Cobill is an experienced industry professional (DEPP 6.5B.2G(9)(j)).

6.17
Mr Cobill, as IFM’s sole Pension Transfer Specialist, bore significant responsibility

for the business area affected by his breach – Pension Transfer advice (DEPP

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

Whether the breach was committed deliberately or recklessly

6.18
Mr Cobill’s breach was committed negligently rather than deliberately or recklessly

(DEPP 6.5B.2G(13)(d)).

Level of seriousness

6.19
DEPP 6.5B.2G(12) lists factors likely to be considered ‘level 4 or 5 factors’. Of

these, the Authority considers that the fact that Mr Cobill’s breach caused a

significant risk of loss to individual consumers who transferred out of their DBPS

as a result of his advice is particularly relevant (DEPP 6.5B.2G(12)(a)).

6.20
DEPP 6.5B.2G(13) lists factors likely to be considered ‘level 1, 2 or 3 factors’. Of

these, the Authority considers that Mr Cobill’s breach was committed negligently

(DEPP 6.5B.2G(13)(d)).

6.21
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 £900,887.02, or

£270,266.11.

6.22
Step 2 is therefore £270,266.11.

Step 3: mitigating and aggravating factors

6.23
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.

6.24
The Authority has considered whether any of the mitigating or aggravating factors

listed in DEPP 6.5B.3G, or any other such factors, apply in this case and has

concluded that none applies to a material extent, such that the penalty ought to

be increased or decreased.

6.25
Step 3 is therefore £270,266.11.

Step 4: adjustment for deterrence

6.26
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.

6.27
The Authority considers that the Step 3 figure of £270,266.11 represents a

sufficient deterrent to IFM and others, and so has not increased the penalty at

Step 4.

6.28
Step 4 is therefore £270,266.11.

Step 5: settlement discount

6.29
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

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

disgorgement of any benefit calculated at Step 1.

6.30
No settlement discount applies.

6.31
Step 5 is therefore £270,266.11. This is to be rounded down to £270,200.

Conclusion as to financial penalty

6.32
Having applied the five-step framework set out in DEPP, the appropriate level of

financial penalty to be imposed on Mr Cobill is £1,113,225.

6.33
The Authority would have imposed a financial penalty of £1,113,225 on Mr Cobill.

However, the Authority recognises that there may be a significant liability for

redress for IFM’s customers which will likely fall to the FSCS. In these

circumstances, the Authority has agreed with Mr Cobill that in lieu of the

imposition of a financial penalty, the sum of £120,000 be paid direct to the FSCS

to contribute towards any redress due to IFM’s customers. This is in furtherance

of the Authority’s consumer protection objective. In light of the above and taking

into account the exceptional circumstances of the BSPS, the Authority hereby

publishes a statement of Mr Cobill’s misconduct.

6.34
The Authority’s policy in relation to the imposition of a public censure is set out in

Chapter 6 of DEPP. DEPP sets out non exhaustive factors that may be of particular

relevance in determining whether it is appropriate to issue a public censure rather

than impose a financial penalty. DEPP 6.4.2G (5) includes that it may be a factor

(depending on the nature and seriousness of the breach) in favour of a public

censure rather a financial penalty including but not limited to where a person has

taken steps to ensure that those who have suffered loss due to the breach are

fully compensated for those losses. Whilst the full amount of any losses due to Mr

Cobill’s breach is not yet quantified, they may be significant. In light of this, the

Authority has agreed that the sum of £120,000 should be paid direct to the FSCS.

6.35
The Authority has had regard to the fact that Mr Cobill has agreed to pay direct

to the FSCS assets that would otherwise be used to satisfy any financial penalty

imposed by the Authority to be used towards any redress due to IFM’s customers.

On that basis, the Authority has not imposed a financial penalty on Mr Cobill but

instead hereby publishes on its website this Notice as a statement of Mr Cobill’s

misconduct under section 66 of the Act.

6.36
The Authority has had regard to the guidance in Chapter 9 of EG and FIT 2 of the

Handbook in considering whether to impose a prohibition order on Mr Cobill. The

Authority has the power to prohibit individuals under section 56 of the Act.

6.37
The Authority considers that it is appropriate and proportionate to prohibit Mr

Cobill from performing any function in relation to the regulated activity of advising

on Pension Transfers and Pension Opt Outs carried on by an authorised person,

exempt person or exempt professional firm, on the grounds that he is not a fit

and proper person to perform such functions due to his lack of competence and

capability.

7.
PROCEDURAL MATTERS

7.1
This Notice is given to Mr Cobill 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.

7.4
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 you or prejudicial to the interests of consumers or

detrimental to the stability of the UK financial system.

7.5
The Authority intends to publish such information about the matter to which this

Final Notice relates as it considers appropriate.

Authority contacts

7.6
For more information concerning this matter generally, contact Laurenz Maurer

(direct line: 020 7066 8096 / email: Laurenz.Maurer@fca.org.uk).

Financial Conduct Authority, Enforcement and Market Oversight Division

ANNEX A

RELEVANT STATUTORY AND REGULATORY PROVISIONS

1.
RELEVANT STATUTORY PROVISIONS

1.1.
The Authority’s statutory objectives, set out in section 1B(3) of the Act, include the

operational objective of securing an appropriate degree of protection for consumers

(section 1C).

1.2.
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 activities.

1.3.
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.

2.
RELEVANT REGULATORY PROVISIONS

Statements of Principle and Code of Practice for Approval Persons

2.1.
The Authority’s Statements of Principle and Code of Practice for Approved Persons

(“APER”) have been issued under section 64 of the Act. The Code of Practice for

Approved Persons sets out descriptions of conduct which, in the opinion of the

Authority, do not comply with a Statement of Principle. It also sets out factors

which, in the Authority’s opinion, are to be taken into account in determining

whether an approved person’s conduct complies with a Statement of Principle.

2.2.
During the Relevant Period, Statement of Principle 2 stated:

“An approved person must act with due skill, care and diligence in carrying out his

accountable functions.”

Conduct of Business Sourcebook

2.3.
The following rules and guidance in COBS (as were in place during the Relevant

Period) are relevant to assessing suitability of Pension Transfer advice given to

customers.

2.4.
COBS 2.1.1R states that a firm must act honestly, fairly and professionally in

accordance with the best interests of its client.

2.5.
COBS 4.2.1R(1) states that a firm must ensure that a communication or a financial

promotion is fair, clear and not misleading.

2.6.
COBS 9.2.1R states that:

(1) A firm must take reasonable steps to ensure that a personal recommendation,

or a decision to trade, is suitable for its client.

(2) When making the personal recommendation or managing his investments, the

firm must obtain the necessary information regarding the client’s:

(a) knowledge and experience in the investment field relevant to the specific

type of designated investment or service;

(b) financial situation; and

(c) investment objectives;

so as to enable the firm to make the recommendation, or take the decision,

which is suitable for him.

2.7.
COBS 9.2.2R (1) states that a firm must obtain from the client such information as

is necessary for the firm to understand the essential facts about him and have a

reasonable basis for believing, giving due consideration to the nature and extent of

the service provided, that the specific transaction to be recommended, or entered

into in the course of managing:

(a) meets his investment objectives;

(b) is such that he is able financially to bear any related investment risks

consistent with his investment objectives; and

(c) is such that he has the necessary experience and knowledge in order to

understand the risks involved in the transaction or in the management of his

portfolio.

2.8.
COBS 9.2.2R (2) states that the information regarding the investment objectives of

a client must include, where relevant, information on the length of time for which

he wishes to hold the investment, his preferences regarding risk taking, his risk

profile, and the purposes of the investment.

2.9.
COBS 9.2.2R(3) states that the information regarding the financial situation of a

client must include, where relevant, information on the source and extent of his

regular income, his assets, including liquid assets, investments and real property,

and his regular financial commitments.

2.10. COBS 9.2.3R states that the information regarding a client’s knowledge and

experience in the investment field includes, to the extent appropriate to the nature

of the client, the nature and extent of the service to be provided and the type of

product or transaction envisaged, including their complexity and the risks involved,

information on:

(1) the types of service, transaction and designated investment with which the

client is familiar;

(2) the nature, volume, frequency of the client’s transactions in designated

investments and the period over which they have been carried out;

(3) the level of education, profession or relevant former profession of the client.

2.11. COBS 9.2.6R states that if a firm does not obtain the necessary information to

assess suitability, it must not make a personal recommendation to the client or take

a decision to trade for him.

2.12. COBS 9.4.1R(4) states that a firm must provide a suitability report to a retail client

if the firm makes a personal recommendation to the client and the client enters into

a pension transfer, pension conversion or pension opt-out.

2.13. COBS 9.4.7R states that the suitability report must, at least:

(1) specify the client's demands and needs;

(2) explain why the firm has concluded that the recommended transaction is

suitable for the client having regard to the information provided by the client;

and

(3) explain any possible disadvantages of the transaction for the client.

2.14. COBS 19.1.1R states that if an individual who is not a pension transfer specialist

gives advice or a personal recommendation about a pension transfer, a pension

conversion or pension opt-out on a firm's behalf, the firm must ensure that the

recommendation or advice is checked by a pension transfer specialist.

2.15. COBS 19.1.2R states that a firm must:

(1) compare the benefits likely (on reasonable assumptions) to be paid under a

defined benefits pension scheme or other pension scheme with safeguarded

benefits with the benefits afforded by a personal pension scheme, stakeholder

pension scheme or other pension scheme with flexible benefits, before it advises

a retail client to transfer out of a defined benefits pension scheme or other

pension scheme with safeguarded benefits;

(2) ensure that that comparison includes enough information for the client to be

able to make an informed decision;

(3) give the client a copy of the comparison, drawing the client's attention to the

factors that do and do not support the firm's advice, in good time, and in any

case no later than when the key features document is provided; and

(4) take reasonable steps to ensure that the client understands the firm's

comparison and its advice.

2.16. COBS 19.1.3G explains the information that should be contained within a

comparison. In particular, the comparison should:

(1) take into account all of the retail client's relevant circumstances;

(2) have regard to the benefits and options available under the ceding scheme and

the effect of replacing them with the benefits and options under the proposed

scheme;

(3) explain the assumptions on which it is based and the rates of return that would

have to be achieved to replicate the benefits being given up;

(4) be illustrated on rates of return which take into account the likely expected

returns of the assets in which the retail client's funds will be invested; and

(5) where an immediate crystallisation of benefits is sought by the retail client prior

to the ceding scheme’s normal retirement age, compare the benefits available

from crystallisation at normal retirement age under that scheme.

2.17. COBS 19.1.6G states that when advising a client who is, or is eligible to be, a

member of a Defined Benefit Pension Scheme or other scheme with safeguarded

benefits whether to transfer, convert or opt-out, a firm should start by assuming

that a transfer, conversion or opt-out will not be suitable. A firm should only

consider a transfer, conversion or opt out to be suitable if it can clearly demonstrate,

on contemporary evidence, that the transfer, conversion or opt-out is in the client’s

best interests.

2.18. COBS 19.1.7G states that when a firm advises a retail client on a pension transfer,

pension conversion or pension opt-out, it should consider the client’s attitude to

risk including, where relevant, in relation to the rate of investment growth that

would have to be achieved to replicate the benefits being given up.

The Fit and Proper Test for Approved Persons

2.19. 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.

2.20. 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 policy for exercising its power to make a prohibition order

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

Enforcement Guide (“EG”).

2.22. 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

2.23. Chapter 6 of DEPP, which forms part of the Authority’s Handbook, sets out the

Authority’s statement of policy with respect to the imposition and amount of

financial penalties under the Act.

The Enforcement Guide

2.24. The Enforcement Guide sets out the Authority’s approach to exercising its main

enforcement powers under the Act.

2.25. Chapter 7 of the Enforcement Guide sets out the Authority’s approach to exercising

its power to impose a financial a penalty.