FINAL NOTICE

1.
ACTION

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

(1)
publishes a statement of Susan Mary Jones’s (“Ms Jones”) misconduct for

failing to comply with Statement of Principle 2; and

(2)
makes an order, pursuant to section 56 of the Act, prohibiting Ms Jones 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 on Ms Jones of £64,614.

However, the Authority recognises that there is significant liability for redress for

West Wales Financial Services Limited’s (“WWFS” or “the Firm”) customers which

has fallen to the Financial Services Compensation Scheme ("FSCS”). As at 21

November 2023, the FSCS has paid out £758,725.55 in compensation to

customers of WWFS. Had it not been for the compensation limit of £85,000, the

total compensation available to customers would have been £972,197.28. In

these circumstances, the Authority has agreed with Ms Jones that in lieu of the

imposition of a financial penalty, the sum of £40,888 be paid direct to the FSCS

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

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

into account all the exceptional circumstances of the British Steel Pension Scheme

(“BSPS”), the Authority hereby publishes a statement of Ms Jones’s misconduct.

2.
SUMMARY OF REASONS

2.1.
Ms Jones was a financial adviser who was qualified to provide defined benefit

Pension Transfer advice at WWFS. She acted without due skill, care and diligence

in giving unsuitable Pension Transfer 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 16 March 2017 and 14 December 2017 (“the Relevant Period”), Ms Jones

was approved by the Authority to perform the CF30 (Customer) controlled

function at WWFS, where she worked as a self-employed financial adviser and

Pension Transfer Specialist. She held no senior management functions at the Firm.

WWFS

2.3.
WWFS was an Independent Financial Adviser firm based in Llanelli, Wales.

2.4.
During the Relevant Period, WWFS was authorised by the Authority to undertake

Pension Transfers and Pension Opt-Outs and to arrange deals in investments. It

is now in liquidation.

2.5.
During the Relevant Period, WWFS advised 27 of 28 customers to transfer out of

their Defined Benefit Pension Schemes (“DBPS”) before WWFS agreed to cease

providing Pension Transfer advice following the Authority’s intervention. All 27

customers followed this recommendation, and the customer who was advised by

WWFS not to transfer out of their DBPS also transferred out. Ms Jones was the

adviser in all these cases. Although the Authority published guidance which

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

Ms Jones provided regulated advice to these 27 customers to complete a Pension

Transfer, 25 of whom were members of the BSPS. Ms Jones also had initial

discussions about possible Pension Transfers with 73 Potential Customers during

3


the Relevant Period. These Potential Customers did not return to WWFS to receive

regulated advice after an initial discussion with Ms Jones (see paragraph 4.23).

2.6.
On 14 December 2017, following feedback from the Authority, and at its request,

WWFS applied for the imposition of requirements by the Authority, whereby

WWFS agreed to cease all regulated activity, including from advising further in

relation to the transfer of 141 Pipeline Customers of WWFS, all of whom were

members of the BSPS, who had received advice from WWFS to complete a Pension

Transfer. 85 of these Pipeline Customers had been advised by Ms Jones.

2.7.
The Authority reviewed 19 of WWFS’s completed Pension Transfer advice files

from the Relevant Period (“the 19 Files”). All of these customers had been advised

by Ms Jones. For a significant proportion of these customers, their pension fund

was their most valuable asset and many had limited additional resource or other

pension provision. In summary, the Authority found that 74% of the 19 Files were

not compliant with regulatory rules and guidance relating to the suitability of

Pension Transfer advice.

Statements of Principle for Approved Persons

2.8.
During the Relevant Period, Statement of Principle 2 stated that an approved

person must act with due skill, care and diligence in carrying out their accountable

functions.

Ms Jones’s failings in the performance of her CF30 (Customer) function

2.9.
The Authority considers that, during the Relevant Period, by reason of the matters

described below in Section 4 of this Notice, Ms Jones breached Statement of

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

customers on Pension Transfers.

2.10.
In particular, Ms Jones:

a)
gave unsuitable advice to customers to transfer out of their DBPS. This was

because she:

i.
based her recommendation on the incorrect assumption that a transfer

to meet a customer’s stated objectives was in the customer’s best

interests. In reality, many customers’ objectives were either not

realisable or financially viable, or could have been met by the existing

scheme;

ii.
failed to assess, or give due consideration to, whether customers

would be reliant on the income from their DBPS or whether they could

financially bear the risks involved in a Pension Transfer. She did this

despite knowing that, following the recommended transfer, customers’

retirement income would be dependent on the performance of the new

investment;

iii.
failed to assess whether the customer had the necessary attitude to

risk, as well as the experience and knowledge to understand the risks

involved in the Pension Transfer recommended and failed to give due

consideration to this where they did not; and

iv.
failed to undertake adequate transfer analysis to compare 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

customer should transfer; and

b)
made Personal Recommendations to her customers despite having failed to

obtain from them information that was necessary for her properly to assess

whether
a
Pension
Transfer
was
suitable.
Making
a
Personal

Recommendation without the necessary information increases the risk of

providing unsuitable advice.

2.11.
Ms Jones did not exploit, or seek to exploit, Pension Transfer customers.

Nevertheless, the Authority considers Ms Jones’s failings to be serious because:

a)
they caused a significant risk of loss to customers who transferred out of

their DBPS as a result of Ms Jones’s advice. The total value of transferred

funds was £9,769,550. The average completed transfer value was

£361,835;

b)
had it not been for the Authority’s intervention, a further large number of

customers may have transferred out of their DBPS as a result of her advice.

The transfer value of the 85 Pipeline Cases that Ms Jones advised on, a large

proportion of which may have been at a significantly increased risk of loss

but for the Authority’s intervention, was £25,896,984;

c)
the average loss by consumers was estimated by the Financial Ombudsman

Service to be 12% of the transfer value, resulting in an estimated average

risk of loss of £47,160 for the 19 Files sample and £37,210 for the 85

Pipeline Cases); and

d)
her advice disproportionately affected BSPS members, who made up the

majority of WWFS’s Pension Transfer advice customers during the Relevant

Period, many of whom were in a vulnerable position due to the uncertainty

surrounding the future of the BSPS.

2.12.
The Authority would have imposed a financial penalty on Ms Jones of £64,614.

However, the Authority recognises that there is significant liability for redress for

WWFS’ customers which has fallen to the FSCS. As at 21 November 2023, the

FSCS has paid out £758,725.55 in compensation to customers of WWFS. Had it

not been for the compensation limit of £85,000, the total compensation available

to customers would have been £972,197.28. In these circumstances, the

Authority has agreed with Ms Jones that in lieu of the imposition of a financial

penalty, the sum of £40,888 be paid direct to the FSCS to contribute towards any

redress due to WWFS’s customers. This is in furtherance of the Authority’s

consumer protection objective. In light of the above and taking into account all

the exceptional circumstances of the BSPS, the Authority has decided to publish

a statement of Ms Jones’s misconduct for failing to comply with Statement of

Principle 2.

2.13.
The Authority considers that Ms Jones has demonstrated a lack of competence

and capability to advise on Pension Transfers and Pension Opt-Outs.

2.14.
The Authority considers that, as a result of the facts and matters set out in this

Notice, Ms Jones is not a fit and proper person to carry out the regulated activity

of advising on Pension Transfers and Pension Opt-Outs carried on by an authorised

person, exempt person or exempt professional firm. The Authority hereby

prohibits Ms Jones from performing any such function.

3.
DEFINITIONS

3.1.
The definitions below are used in this Notice:

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

“the Authority” means the Financial Conduct Authority;

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

Defined Benefit Pension Scheme that was in place from 8 June 2015 to 13

December 2017;

“BSPS 2” means the scheme which replaced the BSPS after 13 December 2017;

“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” is a common type of pension where contributions

are held in investments until the holder reaches their chosen retirement age;

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

Handbook;

“EG” means the Enforcement Guide, part of the Handbook;

“the 19 Files” means the 19 completed Pension Transfer advice files provided by

WWFS and reviewed by the Authority;

“FIT” means the Fit and Proper test for Approved Persons and specified significant-

harm functions, part of the Handbook;

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

“Insistent Client” is a customer to whom the firm has given a personal

recommendation, but where the customer has decided to enter into a transaction

which was different from that recommended by the firm in the personal

recommendation and the customer wanted the firm to facilitate that transaction

(COBS 9.5A.2G defined this on 3 January 2018, after the end of the Relevant

Period);

“the Interview” means Ms Jones’s interview with the Authority on 9 February

2021;

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

transaction resulting from the decision of a retail client who is an individual 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 who belong to Defined Benefit Pension Schemes, if the employer

responsible for funding the scheme they have paid into becomes insolvent;

7


“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 (all such

references in this Notices are to transfers from a DBPS);

“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 Self-Invested Personal Pension, and

is presented as suitable for the customer to whom it is made, or is based on a

consideration of the customer’s circumstances;

“Pipeline Cases/Customers” means customer files on which WWFS had provided

a Personal Recommendation, but which had not yet been executed;

“Potential Customers” means persons who attended the offices of WWFS to

consider obtaining regulated advice on a possible Pension Transfer but who

decided, after an initial discussion(s), not to obtain such advice from WWFS;

“RDC” means the Regulatory Decisions Committee of the Authority (see further

under Procedural Matters below);

“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 the period from 16 March 2017 to 14 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;

“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;

“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;

“Warning Notice” means the Warning Notice given to Ms Jones dated 10 February

2023; and

“WWFS” or “the Firm” means West Wales Financial Services Limited.

4.
FACTS AND MATTERS

WWFS

4.1.
WWFS
was
an
independent
financial
adviser
firm
based
in
Llanelli,

Carmarthenshire, authorised since 12 December 2016. WWFS had permission to

carry on the regulated activities of, amongst other things, advising on Pension

Transfers, advising on investments, and arranging deals in investments, which it

held throughout the Relevant Period.

4.2.
On 13 December 2017, the Authority visited WWFS’s offices. An assessment of

the defined benefit Pension Transfer work identified certain customer files which

did not contain sufficient information to assess whether suitable advice had been

given. Problems were also identified with the advice process. The next day,

following feedback from the Authority, and at its request, WWFS applied for the

imposition of requirements by the Authority, whereby WWFS agreed to a

requirement to cease all regulated activities relating to defined benefit Pension

Transfer business. The requirement meant that the Personal Recommendations

made by Ms Jones to customers to Pension Transfer were not executed in the

Pipeline Cases.

4.3.
During the Relevant Period, 27 of 28 WWFS’s customers transferred out of their

DBPS, all of whom were advised to do so by Ms Jones. One customer who was

advised by Ms Jones not to transfer out of their DBPS did transfer out.

4.4.
WWFS entered creditors’ voluntary liquidation on 23 July 2021.

4.5.
Ms Jones began working in the financial services industry in 1996. She has worked

as a financial adviser since 2013, and has been qualified as a Pension Transfer

Specialist since 2016 as part of her qualification as a Chartered Financial Planner.

She was one of two Pension Transfer Specialists at WWFS and was therefore

responsible for giving or checking any Pension Transfer advice provided to

customers.

4.6.
Ms Jones held the CF30 (Customer) controlled function at WWFS from 29

December 2016 to 8 December 2019. She held no senior management function

at WWFS. Prior to joining WWFS, she had advised on only a small number of

Pension Transfers. At WWFS, she was responsible for all of the completed Pension

Transfers and 85 (60%) of the Pipeline Cases in progress at the time of the

Authority’s visit to the Firm.

4.7.
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.

4.8.
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.

4.9.
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.

4.10.
Transfer 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.

4.11.
The introduction of pensions freedoms (introduced in April 2015) for DC pensions

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

example, a customer who will not be reliant on the DBPS income in retirement

and who wishes to achieve a realistic objective attainable only once transfer has

been effected may be an example of a suitable candidate. However, as referenced

in COBS 19.1.6G, 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.

The British Steel Pension Scheme

4.12.
The BSPS was one of the largest DBPS in the UK, with approximately 125,000

members and £15 billion in assets as at 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.

4.13.
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 a Regulated Apportionment

Arrangement.

4.14.
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.

4.15.
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 (suffering a 10% drop

in the value of their fund in doing so); or

b)
transfer their benefits into BSPS 2.

4.16.
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).

4.17.
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’

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

information packs to members about these options. There were over 20 different

packs to take account of the different categories of members. The pack contained

individual estimates of BSPS 2 entitlements, generic information about PPF

compensation and comparisons between the two schemes. On the basis of this,

members were asked to decide whether they wanted to transfer their pension

rights to the new pension scheme, BSPS 2, which would be less generous than

the old scheme but more generous than PPF compensation for the majority of

members, or stay with the old scheme and move into the PPF. 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.

4.18.
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. This 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.

4.19.
Some BSPS members were in vulnerable circumstances. For example, BSPS

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

scheme than members of other schemes.

WWFS’s Pension Transfer advice business and Ms Jones’s role

Increase in DBPS work at WWFS

4.20.
When WWFS sought permission to provide Pension Transfer advice, it was

anticipated that the Firm would advise about one customer per month. Having

acquired that permission on 16 March 2017, WWFS advised its first customer to

transfer on 30 March 2017. Between March and July 2017, WWFS advised 8

customers in total, all of whom were advised by Ms Jones.

4.21.
Over
a relatively
short
period
of
time, this element
of WWFS’s business

grew rapidly as a result of the influx of BSPS customers seeking advice. Between

1 August 2017 and 14 December 2017, WWFS advised 160 Pension Transfer

customers. Ms Jones advised 104 of these 160 customers.

4.22.
WWFS’s office was located a short distance from a Tata Steelworks plant, and this

significant increase in the volume of Pension Transfer customers was driven by

demand from BSPS members. Apart from several cases where customers were

introduced to WWFS by introducers, WWFS was approached directly by BSPS

members to provide defined benefit Pension Transfer advice. From August 2017

onwards, Ms Jones’s day to day activities predominantly involved the provision of

Pension Transfer advice to BSPS members. WWFS was not prepared for the

dramatic increase in requests for transfer advice and agreed to take on a large

number of customers over a short period with insufficient resource in place to

manage the volume whilst complying with the expected standards. Ms Jones did

not take active steps to increase the volume of the Pension Transfer business and

the volume of work Ms Jones took on was partly motivated by a desire to assist

as many BSPS members as possible. Ms Jones was under significant pressure

during this period. However, Ms Jones had control over her own workload as she

was self-employed.

The Advice Process

4.23.
Customers seeking Pension Transfer advice from WWFS met or spoke with their

adviser on several occasions. An initial meeting was undertaken at which an

introductory discussion took place about the customer’s aims and objectives, and

the options available. Customers were also provided with terms of engagement

and an advisory pack of documents produced by WWFS about pensions and

retirement. No pressure was exerted by Ms Jones and customers were given time

and space to consider their position. 73 Potential Customers did not return to

receive regulated advice after an initial discussion with Ms Jones.

4.24.
Where a customer wished to proceed, key information was then sought from them

to provide a basis for advice. The content of the Suitability Report and the

recommendation itself were presented thereafter, either in person or by

telephone.

4.25.
In response to the significantly increased demand for Pension Transfer advice, Ms

Jones relied increasingly on an administration team of three staff, and a

paraplanner who would undertake tasks including the preparation of TVAS

documents and Suitability Reports.

Initial and ongoing transfer fees

4.26.
In most cases, WWFS charged its customers a fee of 1% to 1.5% of the value of

the transferred fund along with an ongoing advice charge of 0.5% for the basic

level of service. However, the Firm set out the typical initial fee range of 1% to

3% for occupational pension transfers depending on the size of the investment

and the work involved.

4.27.
The Authority reviewed 19 of WWFS’s completed Pension Transfer advice files

from the Relevant Period. Of the 19 Files, the total advice fees charged was

£83,578, with an average of £4,398 per customer. During the Relevant Period,

customer payments for initial advice fees for Pension Transfer advice totalled

£63,832.

4.28.
WWFS’s Terms of Engagement stated that payment would be due from a customer

if advice was given which was not followed or if the advice was not to transfer,

albeit in the latter scenario the fee was capped at £1,000. However, Ms Jones

stated in the Interview that unless the Pension Transfer was complete, no fee

would be paid by the customer.

4.29.
WWFS set out the precise fees to be charged to the customer for the advice and

offered several methods of how payment could be taken. Most customer files

reviewed by the Authority showed customers opting to have payment taken from

the invested fund.

4.30.
All of the 19 Files reflected the fact that the customer had opted for an ongoing

review service for which the pension holder would be charged. Whilst the ongoing

advice charge was an optional service for customers, were it not for the Authority’s

intervention, the sharp rise in WWFS’s Pension Transfer customers over this

period would have translated into future additional income from this service for

WWFS and Ms Jones.

4.31.
WWFS paid 82.5% of the initial and ongoing transfer fee for Ms Jones’s services

on a case-by-case basis to a third party limited company connected to Ms Jones.

£52,252 was paid in fees for Ms Jones’s services for initial Pension Transfer advice

during the Relevant Period. The total fees paid by WWFS to the third party limited

company for defined benefit transfer advice provided by Ms Jones during the

Relevant Period, but which was paid during or after the Relevant Period, was

£133,024.

WWFS’s compliance arrangements

Internal compliance

4.32.
In most cases, suitability letters were sent for approval to WWFS’s co-director and

Head of Compliance, Nigel Lewis. However, Mr Lewis was not a Pension Transfer

Specialist, and he was not qualified to assess the suitability of the

recommendations. Whilst Mr Lewis identified some mistakes within the

documentation, such as where an error had been made regarding the customer’s

date of birth, he did not comment on, or challenge, the advice.

4.33.
Nevertheless, in most of the cases on which Ms Jones provided advice and which

completed prior to the Authority’s intervention, Mr Lewis identified certain

inaccuracies. For example, mandatory information, including fact find information,

was found to be missing and TVAS and Suitability Report errors were found.

4.34.
Advice provided to eight customers by Ms Jones was reviewed by her more

experienced Pension Transfer Specialist colleague. In each case, remedial action

was required due to risk profile and report errors albeit the Pension Transfer and

investment advice passed the colleague’s review. None of the reviews by Ms

Jones’s colleague were of advice forming part of the sample reviewed by the

Authority.

4.35.
Despite feedback from both Mr Lewis and the other Pension Transfer Specialist

requiring changes to be made in all of the 27 cases which went on to be

transferred, Ms Jones made no discernible change to her practices and continued

to make these same mistakes which the Authority’s own review later identified.

4.36.
WWFS also engaged external compliance consultants, at Ms Jones’s expense, to

provide ongoing compliance advice to assist Mr Lewis in discharging his

compliance obligations. The consultants were asked by Mr Lewis, in March, April

and August 2017 respectively, to undertake reviews of three DBPS files on which

Ms Jones advised. In each case, significant failings were identified.

4.37.
These failings included:

a)
failures to capture information around expected expenditure in retirement;

for example, one file review stated it was difficult to tell if the customer

could afford the pension transfer;

b)
unclear customer objectives: one file stated it was unclear why the customer

had a need to repay their debts;

c)
the risk of the investment not matching the customer’s capacity for loss:

clarification was needed to address the discrepancy between capacity for

loss and attitude to risk;

d)
inaccurate illustrations and models: for example, early retirement and

commutation factors were incorrectly stated and the CETV was out of date

and therefore should not be used;

e)
numerical errors; and

f)
a failure to explain why the transfer met the customer’s needs in the

Suitability Report. For example, the need of one customer to repay the

mortgage was not demonstrated given a large monthly income surplus.

4.38.
The three reviews by the external consultants were sent to Mr Lewis. He met with

Ms Jones to provide oral feedback and suggest what further action was needed.

Ms Jones stated to the Authority that she was not told by Mr Lewis that there were

significant failings. Ms Jones then undertook the additional work which was

checked by Mr Lewis. No further cases were submitted by Mr Lewis to the external

consultants for review.

Ms Jones’s approach to Pension Transfer advice

4.39.
Once Ms Jones had explained the benefits of the DBPS to the customer and a

decision had been made to proceed with the Pension Transfer advice process, she

provided advice designed to achieve the customer’s stated objectives rather than

engage in an objective assessment of what was in their best interests and whether

those objectives were realistic.

4.40.
In the Interview Ms Jones stated:

“we looked at the options for them. We looked at what they wanted to

achieve, and we took lots of things into consideration, and if they couldn’t

achieve what they wanted to, then the option was the transfer out.’

4.41.
The Pension Transfer advice that she gave was therefore overly influenced by the

aims of customers.

4.42.
Although Ms Jones stated that options were not ruled out prior to assessment of

a customer’s circumstances, she was of the view that the reduction in the value

of a BSPS customer’s funds, on entering the PPF, was a very significant factor for

many of them, making a Pension Transfer more likely. She stated that the 10%

drop in the value of their fund from the BSPS, when entering the PPF, was a ‘big

thing’ for those customers.

4.43.
Further, many customers did not like the option of joining BSPS 2 because its

terms did not retain some of the benefits that had been available under the BSPS.

For example, under its “high-low” option, some members of the BSPS had been

able to obtain a full BSPS pension income when they reached 60, rather than wait

until they were 65, albeit the BSPS pension income then reduced once they

became entitled to a state pension at age 65. Thereby those customers enjoyed

a higher income in those earlier years. Early retirement was a very common

objective for BSPS customers.

4.44.
This benefit was valued by many of Ms Jones’s customers because they had told

her about friends and family who had been steel workers, some of whom had

suffered from various health conditions, who had died soon after retirement, or

just before they were due to retire. But this benefit was not available under BSPS

2.

The Authority’s review of Ms Jones’s advice

4.45.
In November and December 2017, the Authority visited and reviewed the

processes of firms active in the Pension Transfer advice market. On 13 December

2017, WWFS was visited and assessed by the Authority who reviewed a sample

of six of WWFS’s customer files involving Pension Transfer advice, all of whom

had been advised by Ms Jones. The Authority found almost identical customer

objectives recorded, insufficient personal detail captured, and insufficient

supporting soft facts noted. This suggested Ms Jones did not ask sufficient

questions or gather enough personalised information about each customer to

advise each customer based on their own personal circumstances, aims and

objectives. The Authority found that two files contained suitable transfer advice,

and four files did not contain sufficient information to make an assessment of

suitability.

4.46.
The review found that in most files:

a)
customers were recorded as wanting control and flexibility in respect of their

pension. There were few supporting facts recorded to demonstrate their

rationale and to demonstrate the customer had the financial capability to

understand the implications;

b)
customers were recorded as stating that they had lost faith in the sponsoring

employer. However, there seemed little evidence that Ms Jones had

discussed with the customer the implications of not taking up the PPF and

BSPS 2 options and the investment risk which would need to be accepted;

c)
customers were recorded as wanting to retire early and work part-time.

There was insufficient evidence to show that the PPF and BSPS 2 options

permitted customers to retire early and had been properly compared to the

option of taking benefits early through a transfer and this had been

appropriately discussed; and

d)
most Suitability Reports used identical, or near identical, bullet points

setting out the key reasons for the recommendation to transfer.

4.47.
Following intervention by the Authority, the 19 Files were requested from WWFS

and assessed. All of these customers had been advised by Ms Jones. All but two

of them were former BSPS members. No files were requested for assessment in

respect of the Potential Customers.

4.48.
The review of the 19 Files demonstrated that, amongst other failings, Ms Jones

a)
given non-compliant unsuitable Pension Transfer advice in 10 cases (and

had given suitable advice in five cases) (see “Unsuitable Pension Transfer

advice” below); and

b)
made Personal Recommendations to its customers despite having failed to

obtain from them information that was necessary for Ms Jones properly to

assess whether a Pension Transfer was suitable in nine cases. In four of

these cases the absence of necessary information was so significant that the

Authority was unable to assess whether the Firm’s advice was suitable (see

“Making Personal Recommendations without the necessary information”

below).

4.49.
Nine of the 10 customers who received unsuitable Pension Transfer advice were

members of the BSPS.

4.50.
The average transfer value for the customers within the 19 Files who received

unsuitable transfer advice was £393,006. The majority of customers within the 19

Files had transfer values similar to this figure, albeit these ranged from £86,294

to £600,172.

Unsuitable Pension Transfer advice

4.51.
All 10 of the 19 Files that failed the assessment for suitability of transfer advice

did so for multiple reasons.

4.52.
For example, Customer E was married and a BSPS member with nearly 37 years

pensionable service, and a current gross salary of £40,000 per annum (£30,479

net). The customer also had access to a DC workplace arrangement that he joined

in April 2017 and was eligible for full state pension from age 67. The couple owned

their own home, valued at £70,000, with no mortgage. They had joint savings of

£22,000. Their combined expenditure was recorded as £1,157 per month. Ms

Jones had not obtained the information for their expenditure in retirement. Ms

Jones assessed Customer E as having ‘lowest medium’ attitude to investment risk

and medium capacity for loss. Customer E’s objectives were to have flexible

income, retire early and to remove the fund from the BSPS:

a)
Ms Jones recommended transfer out when there was strong reliance on the

BSPS, particularly between early retirement and state pension age;

b)
no sustainability assessment was completed showing how his lifestyle could

be affected by transfer, or how crystallising some of the benefits in an

unplanned way may impact the funds over time. Ms Jones did not show the

customer could bear the risk of transfer;

c)
the need for flexibility is not self-evident, explained or scrutinised in the file;

d)
despite Customer E’s concern about the fund reduction on entering the PPF,

the receiving scheme would have to achieve a critical yield of 6.6% to match

these benefits which was a challenge for the ‘lowest medium’ attitude to risk

rating. The critical yield to match the BSPS’ benefits was 12% (without tax-

free cash taken) and highly unlikely to be achievable given Customer E’s

risk profile;

e)
Customer E’s only investment experience was entering into his employer’s

new DC scheme shortly before the advice, such that there was nothing to

suggest he would understand the risks noted above.

Reliance on the Defined Benefit Scheme and inability to bear transfer risk

4.53.
The customer was assessed as being reliant on the ceding scheme in all 10 of the

19 Files which contained unsuitable Pension Transfer advice. These customers did

not have significant assets which could be used to supplement any shortfalls in

their income needs.

4.54.
A customer is considered by the Authority to be reliant on income from the ceding

scheme in retirement if it would be their primary income source with no capacity

to bear the risk of losing it; for example, because without it they would be unable

to meet non-discretionary expenditure.

4.55.
Ms Jones’s advice to these customers to complete a Pension Transfer exposed

them to the 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. The Authority considers that the Firm did not have a

reasonable basis for believing that these customers could financially bear the

investment risks related to the Pension Transfers recommended in their cases.

4.56.
In five of the 10 files, Ms Jones recommended transfer away from the ceding

scheme when there was insufficient evidence to suggest that the customer could

bear the transfer risk. There was a pattern of the Firm not completing a detailed

sustainability analysis to illustrate the potential for customers to run out of

money; rather this was dealt with by a warning or illustration which lacked context

and analysis and did not adequately reflect how the customer wanted to access

their fund.

4.57.
For example, Customer D was 53 and married at the time of the advice and was

due to start a new job. The CETV was £86,294. Although the customer had

another pension, the fund under consideration was her only defined benefit

pension. She wanted to retire at 60 and provide her family with a lump sum on

her death. Customer D had no investments and had £2,000 in savings.

Information concerning the customer’s long-term expenditure was not obtained

by Ms Jones. She had little financial experience, appearing to spend the net

household income on living expenses. Customer D’s financial situation was such

that she could not withstand losses:

a)
although Customer D and her spouse had other pension provision, the

Suitability Report suggested that the customer was likely to deplete the

transfer fund in her 70s. Without the required information obtained about

Customer D’s retirement needs, it appeared likely the customer would be

reliant on the DB income given the level of expenditure at the time of the

fact find;

b)
Ms Jones had not demonstrated the basis for believing that Customer D was

able financially to bear the risk of transfer consistent with her objectives.

The objectives of providing for her family with a lump sum on her death may

have come at the expense of giving up guaranteed income; and

c)
Customer D’s aim of retiring at the age of 60 had not been assessed for

affordability, given that retirement expenditure information had not been

recorded on file.

It therefore could not be demonstrated that transferring out of her pension was

in the best interests of Customer D.

Lack of evidence to support customer objectives

4.58.
Ms Jones failed to provide sufficient evidence to demonstrate that specific

customer objectives, for example, family benefits on death, flexibility, maximising

tax-free cash and protecting the pension fund from decrease in value, which drove

the Pension Transfer were in the customer’s best interests. This was seen in all

10 cases assessed by the Authority as being unsuitable for transfer.

4.59.
The Authority considers that the primary purpose of a pension is to meet the

income needs of an individual in retirement. Where a customer expresses a strong

wish to maximise their death benefits, or to increase the flexibility of alternative

arrangements, there is an increased risk that this will undermine the primary

purpose of their pension. A balance therefore needs to be achieved between these

objectives, which is in the best interests of the customer given their

circumstances.

4.60.
Amongst the 10 files there were several examples where the customer expressed

a wish to maximise their death benefits and/or a need for increased flexibility,

with the result that they were given advice to complete a Pension Transfer. But

the information in those files did not adequately demonstrate that those wishes

and needs had been properly tested, or this outcome was in the customer’s best

interests.

4.61.
Instead, Ms Jones set out, in generic terms, the customer’s acceptance of the

disadvantages of transfer, such as lower pension income and increased risk, and

the customer’s apparent knowledge of their options, risk and investments. As a

result:

a)
the implication, whether intended by Ms Jones or not, was that the

customer, from an apparent informed and knowledgeable position, was

responsible for the advice (not the decision) to transfer out; and

b)
Ms Jones failed to analyse and present findings of why, for the customer in

question, weighing the competing factors, to transfer out was in the best

interests of the customer.

4.62.
The Authority considers that a firm which provides advice on a Pension Transfer,

has a responsibility to explore whether any concerns expressed by a customer are

legitimate, and to ensure that the customer is properly informed about those

concerns.

4.63.
In several of the 10 files, customers expressed concerns relating to the possibility

that the BSPS would enter the PPF. But when explaining the reasons for the

recommendation to complete a Pension Transfer, instead of exploring those

concerns and considering what weight should be attached to them given the

customer’s particular circumstances, Ms Jones repeated the customer’s views on

the instability of the BSPS and stated that it was under-funded.

4.64.
In some of the 10 files, the Suitability Reports for BSPS members were very

similar, often stating that the customer had the objectives of wanting their

pension reviewed along with control and flexibility without explaining the need

underlying the aim. Similar vague or templated wording was also seen in the

section listing the reasons for the recommendation.

4.65.
Instead of engaging in an assessment of transfer, the reasons for transfer

sometimes consisted of different ways of restating the desire for an objective, or

made general assertions without personalisation such as, ‘the current BSPS rules

do not allow you to take full advantage of new pension freedom rules…’ Ms Jones

accepted in the Interview that she should have ‘formulated [the reasons] in a

different way’. In some cases, the driver for transfer as explained by Ms Jones in

the Interview was not articulated in the Suitability Report at all, and Ms Jones

explained that she would have ‘gone down a different route’ with the customer if

giving advice again.

Lack of necessary attitude to transfer risk and knowledge and experience

4.66.
WWFS was obliged to obtain information on the customer’s preferences regarding

risk taking and their risk profile (COBS 9.2.2R) to ensure that the customer was

prepared to exchange the guaranteed benefits of the DBPS for non-guaranteed

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

also required to obtain sufficient information to provide a reasonable basis for

believing that the customer had the necessary experience and knowledge to

understand the risks involved in the transfer (COBS 9.2.3R). Ms Jones failed to

ensure WWFS met these requirements.

4.67.
Ms Jones failed to demonstrate the customer had sufficient knowledge to

understand the risks of transfer in six cases. Despite the fact find form asking for

detail around current and previous investments, Ms Jones often recorded only that

the customer had little experience but some understanding without explaining

how this satisfied the adviser as to this factor in determining suitability. 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 Ms Jones

challenging or scrutinising these answers on file. Ms Jones relied on her own

impression of the customer’s understanding even when the customer had no

investment experience at all, with very limited savings yet, post-transfer, went

on to manage the pension himself. This exposed the customer to significant risk.

4.68.
In five cases, the customer did not have the necessary attitude to transfer risk.

Customer files lacked evidence of discussions around risk, depletion of the fund

and customer responses/rationale as regards their views. The general lack of

investment experience indicates that Ms Jones could not have been informed by

the customer’s investment history. Ms Jones failed to properly evaluate the

attitude to risk questionnaires. She stated in the Interview that the answers

provided by the customer were a tool to prompt discussion, and that the outcome

of that discussion could have been better documented. She accepted that the

answers were not used to assess whether the customer had an appetite to give

up guarantees offered by Defined Benefit schemes, and that, with hindsight, they

should have been used in that way. Where a customer had stated that they

wanted a guaranteed rate of return rather than uncertainty, this should have been

a clear signal that the customer enjoyed the guaranteed benefits of the BSPS.

Low/medium risk profiles within the sample suggested a preference for safe

returns.

Transfer analysis not supportive of transfer

4.69.
In order to provide Pension Transfer advice, Ms Jones was obliged to carry out a

comparison between the benefits likely to be paid by the ceding DBPS with the

benefits afforded by a personal pension. The TVAS document facilitates this

comparison as required by COBS 19.1.2R(1). The main output from this document

is a series of percentages, known as “critical yields”. These illustrate the annual

growth rate (net of charges) that the customer would need to obtain on an

investment of the CETV in order to replicate the benefits provided by the ceding

DBPS. The firm must ensure that the comparison included enough information for

the customer to be able to make an informed decision, drawing the customer's

attention to factors that both support and detract from the firm’s advice.

4.70.
Ms Jones failed to follow this guidance in seven cases. Ms Jones failed to fairly

present the comparison or take into account the customer’s objectives so as to

make the comparison useful for the customer. Common errors include calculating

the comparison to the incorrect retirement age, and not reflecting a desire to take

tax-free cash. 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. Critical yields, where correctly calculated in these

cases, were so high as to be unlikely to be achieved and exceeded what was likely

to be achieved with the customer’s attitude to risk grading.

4.71.
Ms Jones failed to explain why despite the required growth rate, transfer was in

the best interests of the customer. 17 suitability reports stated that, ‘Even though

it is unlikely the critical yield required to match the benefits that could be provided

by your existing defined benefit pension can be achieved, I have still

recommended that you transfer for all the other reasons stated’. As stated above,

the other reasons were often not personalised.

Customer objectives can be met by the Defined Benefit Pension Scheme

4.72.
In several cases, Ms Jones recommended transfer away from the ceding DBPS, in

these instances the BSPS, in circumstances where the customer had the objective

of early retirement, or had stated a preference for guaranteed returns, when this

could be met by BSPS 2 or the PPF. When transfer away from a DBPS is not

necessary to achieve customer objectives, or results in the loss of a benefit which

is important to the customer, the risk materialises that transfer is highly unlikely

to be in the customer’s best interests. This was the case in four customer files

reviewed by the Authority.

Making Personal Recommendations without the necessary information

4.73.
During the Relevant Period, COBS 9.2.1R stated that a firm must 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).

4.74.
When making the Personal Recommendation, a firm must 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.

4.75.
COBS 9.2.2R stated that a firm must obtain from the customer 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.

4.76.
COBS 9.2.6R stated that if a firm did not obtain the necessary information to

assess suitability, it must not make a Personal Recommendation. Making a

Personal Recommendation without the necessary information increases the risk

of providing unsuitable advice.

4.77.
In four of the 19 Files there was an absence of necessary information, such that

Ms Jones was required not to make a Personal Recommendation on behalf of

WWFS, as an assessment as to suitability could not properly be made. The

customer was therefore at risk of receiving unsuitable advice. In all of those four

cases, there was a failure to obtain information about the customer’s retirement

needs and/or spousal pension or other income entitlement such that a proper and

accurate assessment of reliance on the fund could not be undertaken.

Additional breaches found in the review of the 19 Files

4.78.
In addition to the four files where the absence of necessary information meant

that an assessment could not properly be made, and therefore suitability could

not be demonstrated by Ms Jones, there was a failure to collect necessary

information in a further five files. However, despite the absence of this

information, the Authority was able to assess transfer suitability by making

reasonable assumptions or inferences as to the missing information. All five of

these files were assessed by the Authority as containing unsuitable transfer

advice.

4.79.
The suitability requirement in COBS 9.2.1R extends to the investment advice into

which the firm has recommended the customer should transfer their pension funds

(COBS 9.2.1R(1)(a) and COBS 9.2.2R(1)(b)). Ms Jones failed to ensure that

WWFS, through her advice, complied with these rules in four files with some of

them failing on multiple areas of assessment.

4.80.
The Authority’s rules about the provision of information to customers require that

consumers are given all the necessary information to enable them to make an

informed decision and are, ultimately, treated fairly.

4.81.
Ms Jones was unable to demonstrate WWFS’s compliance with rules set out in

COBS in 15 of the 19 Files. Objectives, priorities, and recommendations were

insufficiently tailored to the customer’s circumstances. Ms Jones stated in the

Interview that, ‘I have fallen down on the…to be able to adequately articulate [the

reason for the recommendation] in writing’. Suitability Reports were not compliant

with rules set out in COBS in 10 cases. The effect of this was exacerbated where

the report did not engage in a meaningful assessment of the alternatives to

transfer. Some reports included incorrect, complex information and repetitive

content with little attempt to clearly explain how options might meet retirement

needs. Others did not bring important information to the attention of the

customer. Similarly, in eight cases, the transfer analysis reports contained

numerous tables and figures, making their significance hard to understand,

particularly in light of the Suitability Report failings.

5.
FAILINGS

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

5.2.
The Authority considers that Ms Jones breached Statement of Principle 2 during

the Relevant Period, in that she failed to act with due skill, care and diligence

when advising customers on Pension Transfers. Her failings meant that the

Pension Transfer advice she provided did not comply with regulatory requirements

and standards, and created a significant risk that her advice that a customer

should transfer out of their DBPS would not be suitable for them.

5.3.
In particular, Ms Jones:

a)
gave unsuitable advice to customers to transfer out of their DBPS. This was

because she:

i.
based her recommendation on the incorrect assumption that a transfer

to meet a customer’s stated objectives was in the customer’s best

interests. In reality, many customers’ objectives were either not

realisable or financially viable, or could have been met by the existing

scheme;

ii.
failed to assess, or give due consideration to, whether customers

would be reliant on the income from their DBPS or whether they could

financially bear the risks involved in a Pension Transfer. She did this

despite knowing that, following the recommended transfer, customers’

retirement income would be dependent on the performance of the new

investment;

iii.
failed to assess whether the customer had the necessary attitude to

risk, as well as the experience and knowledge to understand the risks

involved in the Pension Transfer recommended and failed to give due

consideration to this where they did not; and

iv.
failed to undertake adequate transfer analysis to compare 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

customer should transfer; and

b)
provided advice to customers to transfer out of their DBPS when there was

missing information, without which the suitability of transfer advice could

not be determined. Making a Personal Recommendation without the

necessary information increases the risk of providing unsuitable advice.

5.4.
As a consequence of her actions, Ms Jones failed to meet the regulatory standards

applicable to a Pension Transfer Specialist performing the CF30 (Customer)

controlled function. The Authority therefore considers that she 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. 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.
Based on the 19 Files, the Authority considers that 74% of WWFS’s completed

Pension Transfers following advice given by Ms Jones were non-compliant with

the Authority’s rules (53% unsuitable transfer advice plus 21% missing

information such that advice should not have been given).

6.4.
The Authority considers that Ms Jones received a financial benefit of £31,388 as

a result of her non-compliant Pension Transfer advice in breach of Statement of

Principle 2.

6.5.
The Authority has charged interest on Ms Jones’s benefit at 8% per year from the

end of the Relevant Period to the date of this Notice, amounting to £14,226.

6.6.
Step 1 is therefore £45,614 (rounded down to the nearest £1).

Step 2: the seriousness of the breach

6.7.
Pursuant to DEPP 6.5B.2 G, 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 Ms Jones’s breach of Statement of Principle 2 was from 16 March

2017 to 14 December 2017. Pursuant to DEPP 6.5B.2G(2), in cases where the

breach lasted less than 12 months, the relevant income will be that earned by the

individual in the 12 months preceding the end of the breach. The Authority

considers Ms Jones’s relevant income for this period to be £47,626, which sum is

calculated by taking her relevant income during the Relevant Period and pro-

rating that sum to an annual equivalent.

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%

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

6.10.
DEPP 6.5B.2.2G(8) lists factors relating to the impact of a breach committed by

an individual.

6.11.
Ms Jones’s breach caused a significant risk of loss, as a whole, to consumers who

transferred out of their DBPS as a result of her advice. Completed transfers had

a total CETV of £9,769,550. The total CETVs of completed cases and the Pipeline

Cases stopped for which Ms Jones was responsible was £35,666,534. Ms Jones’s

breaches may have placed a large proportion of those funds at significantly

increased risk of loss had it not been for the Authority intervening, which stopped

her advice on the Pipeline Cases from being executed (DEPP 6.5B.2G(8)(b)).

6.12.
Ms Jones’s breach caused a significant risk of loss to individual consumers who

transferred out of their DBPS as a result of her advice. For many customers, their

DBPS was their most valuable asset (average CETV of the file sample was

£393,006, average CETV for Pipeline Cases was £310,090) and was their main

retirement provision (DEPP 6.5B.2G(8)(c)). The average loss by consumers was

estimated by the Financial Ombudsman Service to be 12% of the transfer value,

resulting in an estimated average risk of loss of £47,160 for the 19 Files sample

and £37,210 for the 85 Pipeline Cases.

6.13.
Ms Jones’s breach disproportionately affected BSPS members, who made up the

majority of her 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

6.14.
DEPP 6.5B.2.2G(9) lists factors relating to the nature of a breach committed by

an individual.

6.15.
The breach was a continuous one during the Relevant Period (DEPP

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

6.16.
Ms Jones has worked in financial services for several years. However, she had

only worked as a Pension Transfer Specialist for a short period prior to the

Relevant Period (DEPP 6.5B.2G(9)(j) and (k)). As a Pension Transfer Specialist,

she had responsibility for the Pension Transfer advice issued by the Firm where

the failings arose.

6.17.
However, the Compliance oversight in place at WWFS was wholly inadequate and

failed properly to identify and address poor reasoning and errors evident from Ms

Jones’s work as a Pension Transfer Specialist towards the beginning of the

Relevant Period thereby potentially contributing to her continuing to give non-

compliant Pension Transfer advice throughout the Relevant Period ((DEPP

6.18.
Ms Jones did not exploit, or seek to exploit, Pension Transfer customers. The

greater than anticipated number of such customers who sought advice from

WWFS, during the busy Relevant Period, was largely a consequence of the Firm’s

location, rather than active steps taken by Ms Jones to increase the volume of

such business (for example the use of introducers).

Whether the breach was deliberate and/or reckless

6.19.
DEPP 6.5B.2G(10) and (11) list factors tending to show whether the breach was

deliberate or reckless. The Authority considers that the breaches committed by

Ms Jones were as a result of her serious lack of competence, rather than deliberate

or reckless acts (DEPP 6.5B.2G(11)).

Level of Seriousness

6.20.
DEPP 6.5B.2G(12) lists factors likely to be considered ‘level 4 or 5 factors’. The

Authority considers that the fact that Ms Jones’s breach caused a significant risk

of loss to customers is particularly relevant (DEPP 6.5B.2G(12)(a)).

6.21.
DEPP 6.5B.2G(13) lists factors likely to be considered ‘level 1, 2 or 3 factors’. The

Authority considers that Ms Jones’s breach of Statement of Principle 2 was

committed negligently (DEPP 6.5B.2G(13)(d)).

6.22.
Taking all of these factors into account, the Authority considers the seriousness

of the breach to be level 3 and so the Step 2 figure is 20% of £47,626.

6.23.
Step 2 is therefore £9,525.

Step 3: mitigating and aggravating factors

6.24.
Pursuant to DEPP 6.5B.3G, at Step 3 the Authority may increase or decrease the

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

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

aggravate or mitigate the breach.

6.25.
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.

6.26.
Step 3 is therefore £9,525.

Step 4: adjustment for deterrence

6.27.
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.

6.28.
The Authority considers that the Step 3 figure of £9,525 does not represent a

sufficient deterrent to Ms Jones and others, and so has increased the penalty at

Step 4 by a factor of two to meet its objective of credible deterrence (DEPP

6.29.
Step 4 is therefore £19,050.

Step 5: settlement discount

6.30.
The Authority and Ms Jones did not reach agreement to settle at Stage 1, so no

discount applies. The Step 5 figure is therefore £19,000 (rounded down to the

nearest £100, in accordance with the Authority’s usual practice).

Conclusion as to financial penalty

6.31.
Having applied the five-step framework set out in DEPP, the appropriate level of

financial penalty to be imposed on Ms Jones is £64,614.

6.32.
The Authority would have imposed a financial penalty on Ms Jones of £64,614.

However, the Authority recognises that there is significant liability for redress for

WWFS’s customers which has fallen to the FSCS. As at 21 November 2023, the

FSCS has paid out £758,725.55 in compensation to customers of WWFS. Had it

not been for the compensation limit of £85,000, the total compensation available

to customers would have been £972,197.28. In these circumstances, the

Authority has agreed with Ms Jones that in lieu of the imposition of a financial

penalty, the sum of £40,888 be paid direct to the FSCS to contribute towards any

redress due to WWFS’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 Ms Jones’ misconduct.

6.33.
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

Ms Jones’s breaches are not yet quantified, they may be significant. In light of

this, and the FSCS having already paid out £758,725.55 to WWFS’s customers,

the Authority has agreed that the sum of £40,888 should be paid direct to the

FSCS.

6.34.
The Authority has had regard to the fact that Ms Jones has agreed to transfer 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 WWFS’s

customers. On that basis, the Authority has decided not to impose a financial

penalty on Ms Jones but instead hereby publishes on its website the Notice as a

statement of Ms Jones’s misconduct under section 66 of the Act.

6.35.
The Authority has had regard to the guidance in Chapter 9 of EG in considering

whether to impose a prohibition order on Ms Jones. The Authority has the power

to prohibit individuals under section 56 of the Act.

6.36.
The Authority considers that Ms Jones lacks fitness and propriety in all the

circumstances, in particular relating to her lack of competence and capability for

the reasons set out above. Therefore, the Authority considers it appropriate and

proportionate in all the circumstances to prohibit Ms Jones from performing any

functions 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.

7.
PROCEDURAL MATTERS

7.1.
This Notice is given to Ms Jones 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 Kingsley Moore at

the Authority (direct line: 020 7066 0401/email: kingsley.moore2@fca.org.uk).

Financial Conduct Authority, Enforcement and Market Oversight Division

ANNEX A

RELEVANT STATUTORY AND REGULATORY PROVISIONS

RELEVANT STATUTORY PROVISIONS

The Financial Services and Markets Act 2000

The Authority’s operational objectives

1.
The Authority’s operational objectives are set out in section 1B(3) of the Act and

include the consumer protection objective of securing an appropriate degree of

protection for consumers (section 1C) and the integrity objective of protecting and

enhancing the integrity of the UK financial system (section 1D).

Section 56 of the Act

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, a person who is an exempt person in relation to that

activity 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.

Sections 66 and 66A of the Act

3.
Under section 66 of the Act, 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, including

the imposition of a penalty of such amount as it considers appropriate.

4.
Under section 66A of the Act a person is guilty of misconduct if, inter alia, he at any

time failed to comply with rules made by the Authority under section 64A of the Act

and at that time was an approved person, or had been knowingly concerned in a

contravention of relevant requirement by an authorised person and at that time the

person was an approved person in relation to the authorised person.

RELEVANT REGULATORY PROVISIONS

The Handbook

5.
The Authority must have regard to the relevant regulatory provisions in the

Handbook. The main provisions that the Authority considers relevant are set out

below.

Statements of Principle and Code of Practice for Approval Persons1

6.
The part of the Handbook entitled the Statements of Principle and Code of Practice

for Approval Persons, and known as APER, sets out the Statements of Principle issued

under section 64A of the Act as they relate to approved persons and descriptions of

conduct which, in the opinion of the Authority, do not comply with a Statement of

Principle.

7.
APER further describes factors which, in the opinion of the Authority, are to be taken

into account in determining whether or not an approved person’s conduct complies

with a particular Statements of Principle.

8.
Statement of Principle 2 states that:

An approved person must act with due skill, care and diligence in carrying out

his accountable functions.

9.
During the Relevant Period, accountable functions are in summary: the Authority’s

controlled functions; the Prudential Regulatory Authority’s controlled functions; and

any other functions in relation to the carrying on a regulated activity; in relation to

the authorised persons in relation to which that person is an approved person.

10.
APER 3.2.1E states that:

In determining whether or not the particular conduct of an approved person

within their accountable function complies with the Statements of Principle, the

following are factors which, in the opinion of the Authority, are to be taken into

account:

(1) whether that conduct relates to activities that are subject to other

provisions of the Handbook;

1 Where APER or COBS have been the subject of subsequent amendment they are stated as applicable during

the Relevant Period.

(2) whether that conduct is consistent with the requirements and

standards of the regulatory system relevant to his firm.

11.
Those descriptions and factors relevant to Statement of Principle 2 include:

APER 4.2.2G which states:

In the opinion of the Authority conduct of the type described in […] APER

4.2.5G, […] does not comply with Statement of Principle 2.

APER 4.2.5G which states:

Recommending an investment to a customer, or carrying out a

discretionary transaction for a customer, where the approved person does

not have reasonable grounds to believe that it is suitable for that

customer, falls within APER 4.2.2G.

The Conduct of Business Sourcebook

12.
COBS applies to a firm with respect to designated investment business carried on

from an establishment maintained by it, or its appointed representative, in the United

Kingdom and activities connected with them.

13.
The following provisions of COBS applied to WWFS during the Relevant Period.

The client’s best interest rule

14.
COBS 2.1.1R:

(1) A firm must act honestly, fairly and professionally in accordance with the

best interests of its client (the client's best interests rule).

15.
COBS 9.2.1R:

(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.

16.
COBS 9.2.2R:

(1) 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) 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.

(3) 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.

17.
COBS 9.2.3R:

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.

18.
COBS 9.2.6R:

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.

19.
During the Relevant Period COBS 9.4 set out the following rules and guidance

concerning Suitability Reports.

20.
COBS 9.4.1R:

A firm must provide a suitability report to a retail client if the firm makes

a personal recommendation to the client and the client (4) enters into a

pension transfer or pension opt-out.

21.
COBS 9.4.7 R:

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.

22.
COBS 19.1 applies, with some exclusions, to a firm that gives advice or a personal

recommendation about a pension transfer, a pension conversion or a pension opt-

out. The following provisions of COBS 19.1 are set out as they applied during the

Relevant Period.

23.
COBS 19.1.2 R:

A firm must:

(1) compare the benefits likely (on reasonable assumptions) to be paid

under a defined benefits pension scheme or other pension with

safeguarded benefits with the benefits afforded by a personal pension,

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.

24.
COBS 19.1.3 G:

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.

25.
COBS 19.1.4R:

When a firm compares the benefits likely 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 (COBS 19.1.2R (1)), it must:

(1) [make certain listed assumptions in its calculations, or use more cautious

assumptions]; (2) calculate the interest rate in deferment; and (3) have regard

to benefits which commence at difference times.

26.
COBS 19.1.6 G:

When advising a retail client who is, or is eligible to be, a member of a defined

benefits occupational 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 then 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.

27.
COBS 19.1.7 G:

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.

28.
COBS 19.1.7A G:

When giving a personal recommendation about a pension transfer or pension

conversion, a firm should clearly inform the retail client about the loss of the

safeguarded benefits and the consequent transfer of risk from the defined

benefits pension scheme or other scheme with safeguarded benefits to the

retail client, including:

(1) the extent to which benefits may fall short of replicating those in the

defined benefits pension scheme or other scheme with safeguarded

benefits;

(2) the uncertainty of the level of benefit that can be obtained from the

purchase of a future annuity and the prior investment risk to which the

retail client is exposed until an annuity is purchased with the proceeds of

the proposed personal pension scheme or stakeholder pension scheme;

and

(3) the potential lack of availability of annuity types (for instance, annuity

increases linked to different indices) to replicate the benefits being given

up in the defined benefits pension scheme.

29.
COBS 19.1.7B G:

In considering whether to make a personal recommendation, a firm should not

regard a rate of return which may replicate the benefits being given up from

the defined benefits pension scheme or other scheme with safeguarded

benefits as sufficient in itself.

30.
COBS 19.1.8 G:

When a firm prepares a suitability report it should include:

(1) a summary of the advantages and disadvantages of its personal

recommendation;

(2) an analysis of the financial implications (if the recommendation is to

opt-out); and

(3) a summary of any other material information.

Fit and Proper test for Employees and Senior Personnel

31.
The part of the 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.

32.
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 to perform a particular controlled

function. FIT 1.3.1BG states that the most important considerations will be the

person’s:

(1) honesty, integrity and reputation,

(2) competence and capability and

(3) financial soundness.

33.
For the purposes of this notice the relevant consideration is (2) competence and

capability.

34.
FIT 2.2.1G provides guidance in that in determining a person’s competence and

capability, the Authority in accordance with FIT 1.1.2G, will have regard to all

relevant matters including but not limited to (2) whether the person has

demonstrated by experience and training that they are suitable, or will be suitable if

approved, to perform the controlled function.

The Enforcement Guide

35.
The Authority’s policy for exercising its power to make a prohibition order is set out

in Chapter 9 of the Enforcement Guide (“EG”).

36.
EG 9.2.2 states that the Authority has the power to make a range of prohibition

orders depending on the circumstances of each case and the range of regulated

activities to which the individual’s lack of fitness and propriety is relevant. Depending

on the circumstances of each case, the Authority may seek to prohibit an individual

from performing any class of function in relation to any class of regulated activity,

or it may limit the prohibition order to specific functions in relation to specific

regulated activities. The Authority may also make an order prohibiting an individual

from being employed by a particular firm, type of firm or any firm.

37.
EG 9.2.3 states that the scope of a prohibition order will depend on the range of

functions which the individual concerned performs in relation to regulated activities,

the reasons why he is not fit and proper and the severity of risk which he poses to

consumers or the market generally.

38.
EG 9.3.5(4) gives a serious lack of competence, as an example of a type of behaviour

which has previously resulted in the Authority deciding to issue a prohibition order.

39.
EG sets out the Authority’s approach to taking disciplinary action. The Authority’s

approach to financial penalties is set out in Chapter 7 of EG, which can be accessed

Decision Procedures and Penalties Manual

40.
Chapter 6 of the Decision Procedures and Penalties Manual (“DEPP”), which forms

part of the Authority’s Handbook, sets out the Authority’s policy for imposing a

financial penalty. 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 to financial penalties imposed on individuals in non-market

abuse cases, which can be accessed here:

https://www.handbook.fca.org.uk/handbook/DEPP/6/?view=chapter