DECISION NOTICE

To:

Toni Fox

Reference
Number:
TXF00003


and

To:

CFP Management Ltd (in Liquidation)

Firm
Reference
Number:
571695


Date:
3 May 2023


1.
ACTION

1.1.
For the reasons given in this Decision Notice, the Authority has decided to:

(1)
impose on Toni Fox a financial penalty of £681,536 pursuant to section 66

of the Act;

Toni Fox has referred this Decision Notice to the Upper
Tribunal to determine: (a) in relation to the FCA’s decision
to impose a financial penalty, what (if any) is the
appropriate action for the FCA to take, and remit the matter
to the FCA with such directions as the Tribunal considers
appropriate; and (b) in relation to the prohibition order,
whether to dismiss the reference or remit it to the FCA with
a direction to reconsider and reach a decision in accordance
with the findings of the Tribunal.

Therefore, the findings outlined in this Decision Notice
reflect the FCA’s belief as to what occurred and how it
considers
the
behaviour
of
Toni
Fox
should
be

characterised. The proposed action outlined in the Decision
Notice will have no effect pending the determination of the
case by the Tribunal. The Tribunal’s decision will be made
public on its website.

(2)
make an order prohibiting Ms Fox from performing any function in relation

to any regulated activity carried on by an authorised person, exempt person,

or exempt professional firm, pursuant to section 56 of the Act; and

(3)
withdraw the approvals given to Ms Fox to perform the SMF 3 (Executive

Director) and SMF 16 (Compliance Oversight) senior management functions

at CFP Management Ltd, pursuant to section 63 of the Act.

1.2.
The Authority would have proposed to impose a financial penalty of £837,636,

consisting of £681,536 disgorgement and £156,100 as the punitive element.

However, as Ms Fox has provided verifiable evidence that payment of the full

amount of the financial penalty would cause her serious financial hardship, the

Authority has decided to reduce the financial penalty to £681,536, being the

disgorgement figure of £473,289 plus interest.

2.
SUMMARY OF REASONS

2.1.
The Authority expects individuals in senior management roles at authorised firms

to act with integrity when managing the business for which they are responsible.

When individuals in these roles at a financial advice firm fail to act with integrity,

the firm’s clients are exposed to a significant risk of financial detriment.

2.2.
Ms Fox was appointed as a director at CFP Management Ltd (“CFP”) on 28 March

2011. By the time of this appointment, she had worked in the pensions industry

for over 30 years. During the period from 21 April 2015 to 31 October 2017 (the

“Relevant Period”), Ms Fox was approved by the Authority to perform the

controlled functions of CF1 (Director), CF10 (Compliance Oversight) and CF30

(Customer) at CFP. Ms Fox was also a Pension Transfer Specialist.

2.3.
Ms Fox was a director at both CFP and its Appointed Representative, Company B.

During the Relevant Period, CFP and Company B operated a seriously flawed

Pension Transfer advice model (the “Pension Transfer Model”) designed by Ms

Fox. Under the Pension Transfer Model, customers were advised about the

transfer of their safeguarded pension benefits from a Defined Benefit Pension

Scheme into an alternative pension arrangement. The process was designed

without the appropriate safeguards in place to ensure that the advice was suitable.

As a result, the Pension Transfer Model put CFP’s clients at risk of receiving

unsuitable pension transfer advice. This risk crystallised in that a large proportion

3


of the advice given by CFP was unsuitable. Much of this unsuitable advice was

given or signed off by Ms Fox herself.

2.4.
CFP gave 1497 pieces of advice in relation to Defined Benefit Pension Transfers

using the flawed Pension Transfer Model. A recommendation to transfer was given

in 1484 instances and in 1470 instances this recommendation was followed. The

total value of Defined Benefit Pension Transfers on which CFP advised under the

Pension Transfer Model was £395,389,646. The total value that culminated in a

transfer was £392,071,572.

2.5.
On 2 September 2021, CFP entered into liquidation. The FSCS subsequently

declared CFP in default and is investigating claims made by CFP’s clients who were

advised under the Pension Transfer Model.

Background to the Misconduct

2.6.
Pensions are a traditional and tax-efficient way of saving money for retirement.

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

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

an individual can retire. A Defined Benefit Pension Scheme is particularly valuable

because it offers a secure, guaranteed income for life to members, which typically

increases each year in line with inflation. Given the valuable benefits offered by

Defined Benefit Pension Schemes, since 1 November 2007 and throughout the

Relevant Period, the Authority’s Handbook has contained guidance stating that a

firm should only recommend a transfer if it can clearly demonstrate, based on

contemporaneous evidence, that the transfer is in the customer’s best interests.

2.7.
Customers who engage advisers and authorised firms to provide them with advice

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

paramount importance that firms comply with regulatory requirements, ensuring

that the advice given to a customer is suitable for them, having regard to all of

the relevant circumstances.

Ms Fox’s Misconduct

2.8.
As a regulated firm and as Company B’s principal, CFP was ultimately responsible

for the management and oversight of Company B and for the suitability of the

advice given by Company B. Ms Fox designed the process for the provision of

advice from CFP to Company B’s customers. In addition to her role as director

(CF1), in her capacity as CF10 (Compliance Oversight), she was responsible for

ensuring that this advice complied with the Authority’s rules.

2.9.
The Authority considers that Ms Fox failed to comply with Statement of Principle

1 during the Relevant Period in that she failed to act with integrity in carrying out

her CF1 (Director) and CF10 (Compliance Oversight) controlled functions at CFP.

2.10.
Ms Fox’s actions in relation to the design and operation of the Pension Transfer

Model were reckless. Specifically, Ms Fox recklessly designed, implemented and

oversaw an advice process that:

(a)
lacked the requisite safeguards to ensure that CFP’s Pension Transfer

Specialists only provided Defined Benefit Pension Transfer advice when they

had gathered sufficient information to do so. The Authority reviewed 21

files, of which 14 contained Material Information Gaps, meaning that it was

not possible to assess whether the Firm’s advice was suitable for the client.

Information collection was not compliant with the Authority’s rules in 18 of

the 21 files reviewed;

(b)
enabled CFP’s Pension Transfer Specialists to issue Suitability Reports

without having properly considered their clients’ financial circumstances and

objectives, attitude to risk and capacity for loss. In particular, CFP’s Pension

i.
failed to give due consideration to whether clients could financially

bear the risks involved in a Pension Transfer;

ii.
placed undue reliance on their clients’ stated objectives regardless

of whether they were realistic or financially viable. They failed to

weigh those objectives against the benefits of remaining in the

clients’ Defined Benefit Pension Scheme, and failed to investigate or

determine whether those objectives could be met by remaining in

the current scheme;

iii.
advised clients to transfer even if the transfer analysis did not

support the recommendation; and

iv.
advised clients to transfer even when those clients had stated that

they wanted the guaranteed income afforded to them within their

Defined Benefit Pension Scheme; and

(c)
permitted CFP’s Pension Transfer Specialists to issue Suitability Reports that

were unclear or misleading. The Authority identified Suitability Reports that:

i.
contained inadequate information about the possible disadvantages

of transferring out of a client’s Defined Benefit Pension Scheme,

when considering the client’s specific circumstances and objectives;

ii.
contained warnings that contradicted the Personal Recommendation

to transfer, with no explanation; and

iii.
contained the prominent and misleading statement: “It is very

important to understand that DB benefits are not guaranteed,”

without sufficient further explanation or context.

2.11.
These failures resulted in Pension Transfer Specialists at CFP routinely providing

unsuitable or otherwise non-compliant advice to clients. As a qualified Pension

Transfer Specialist with 35 years of experience in the pensions industry by the

start of the Relevant Period, Ms Fox must have been aware of the unacceptably

high risk that the Pension Transfer Model would result in the provision of

unsuitable advice. However, Ms Fox recklessly disregarded this risk.

2.12.
These flaws in the Pension Transfer Model led to over 99% of clients receiving a

recommendation to transfer. This gave rise to a significant risk that many clients

transferred out of their Defined Benefit Pension when it was not suitable for them

to do so. This was so notwithstanding the Authority’s guidance which establishes

a general presumption against advising a client to transfer out of their Defined

Benefit Pension Scheme (COBS 19.1.6G).

2.13.
The Authority considers Ms Fox’s failings to be particularly serious because she

was responsible for recklessly designing, implementing and overseeing a business

model which resulted in 1497 pieces of potentially unsuitable advice on the

transfer of safeguarded pension benefits being given. She therefore may have

caused detriment to a very large number of clients, some of whom were

vulnerable due to their age and financial situation.

2.14.
The Pension Transfer Model was lucrative for the parties involved when a

recommendation to transfer was followed. Introducers only received a fee when

the clients they referred to CFP transferred out of their Defined Benefit Pension

Schemes. CFP received at least £1,500 (and up to £20,000) when a

recommendation to transfer was followed, compared with a fee of £500 plus VAT

whenever a client decided not to transfer.

2.15.
Ms Fox's financial benefit from her breach of Statement of Principle 1 was

substantial. During the Relevant Period, Ms Fox received £473,289 by way of

salary, dividends and pension contributions from CFP.

2.16.
The Authority considers that Ms Fox’s reckless conduct throughout the Relevant

Period demonstrates a lack of integrity. For this reason, the Authority considers

she is not fit and proper to perform any function in relation to any regulated

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

professional firm. The Authority therefore has decided to make an order

prohibiting Ms Fox from performing any such functions at an authorised or exempt

firm. The Authority considers that doing so is necessary in order to secure an

appropriate degree of protection for consumers. In addition, in light of her lack

of integrity and lack of fitness and propriety, the Authority has also decided to

withdraw Ms Fox's approval to perform the SMF 3 (Executive Director) and SMF

16 (Compliance Oversight) senior management functions at CFP.

2.17.
Further, the Authority considers that the nature and seriousness of the breach

warrants the imposition of a financial penalty on Ms Fox in the amount of

£681,536.

3.
DEFINITIONS

3.1.
The definitions below are used in this Notice:

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

“the 2015 Act” means the Pension Schemes Act 2015;

“APER” means the Statements of Principle and Code of Practice for Approved

Persons, part of the Handbook;

“Appointed Representative” is a firm or person who conducts regulated

activities and acts as an agent for a firm directly authorised by the Authority;

“the Authority” means the Financial Conduct Authority;

7


“Ceding Scheme” means the Defined Benefit Pension Scheme from which the

member is transferring their benefits;

“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, is determined using actuarial assumptions;

“CFP” means CFP Management Limited (in Liquidation);

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

Handbook (as applicable during the Relevant Period);

“Company A” means a company that provides financial planning software to

IFAs. Its majority-owned subsidiary, Company B, was CFP’s Appointed

Representative.

“Company B” means Company A’s majority-owned subsidiary and CFP’s

Appointed Representative.

“Compliance Consultant” means the independent, third-party compliance

consultancy engaged by CFP during the Relevant Period;

The “Critical Yield” means the rate of return that would have to be achieved in

the Defined Contribution Pension Scheme to replicate the benefits of the

Defined Benefit Pension Scheme;

“Defined Benefit Pension Scheme” or “Defined Benefit Pension” 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 Benefit Pension Transfer” means a member of a Defined Benefit

Pension Scheme giving up the guaranteed benefits associated with membership

in exchange for a transfer value, which is typically then invested in a Defined

Contribution Pension;

“Defined Contribution Pension Scheme” or “Defined Contribution Pension”

means a pension where money is paid by an employee or employer into an

investment by a pension provider. These investments can also be referred to

as a “personal pension”;

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

the Handbook;

“EG” means the Authority’s Enforcement Guide;

“Fact Find” is the process of collecting information from a private client to help

identify the client’s needs and should include personal and financial

circumstances;

“the File Review” means the review carried out by the Authority of 21 of CFP’s

Defined Benefit Pension Transfer files;

“FSCS” means the Financial Services Compensation Scheme;

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

“IFA” means independent financial advisers (professional firms or individuals

who offer independent financial advice to their clients);

“Introducer” means an authorised financial advice firm that referred its clients

to Company B for the purpose of obtaining Defined Benefit Pension Transfer

advice;

“Material Information Gaps” refers to the failure to adequately record or collect

information regarding a client or the benefits of a proposed scheme;

“Mr Price” means David Brian Price;

“Ms Fox” means Toni Fox;

“Pension Commencement Lump Sum” or “PCLS” means a lump sum of 25% of

a pension pot that is withdrawn tax free once pension funds have been

crystallised. It is paid after an individual reaches the minimum pension age

which is currently 55 years;

“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 Defined Benefit Pension Scheme) to a personal

pension scheme;

“Pension Transfer Model” means the Pension Transfer advice model operated

by CFP and Company B throughout the Relevant Period;

“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 the

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

as suitable for the client to whom it is made, or is based on a consideration of

the client’s circumstances;

“PPF” means Pension Protection Fund, a statutory corporation that protects

people with a defined benefit pension when an employer becomes insolvent;

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

under Procedural Matters below);

“the Relevant Period” means 21 April 2015 to 31 October 2017;

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

of Practice for Approved Persons;

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

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

concluded that a recommended transaction is suitable for the client;

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

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

was required to carry out in accordance with COBS 19 (as in force during the

Relevant Period) when it gave advice or a Personal Recommendation about,

amongst other things, a Pension Transfer;

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

comparison firms were required to carry out in accordance with COBS 19.1.2R

(as in force during the Relevant Period);

“VREQ” means a voluntary requirement which is imposed by the Authority on a

firm following an application by the firm under section 55L(5) of the Act; and

“the Warning Notice” means the Warning Notice given by the Authority to Ms

Fox dated 20 January 2023.

4.
FACTS AND MATTERS

Pensions

4.1.
Pensions are a traditional and tax-efficient way of saving money for retirement. The

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

quality of life during retirement and, in some circumstances, can affect when an

individual is able to retire. A Defined Benefit Pension Scheme is particularly valuable

because it offers a secure, guaranteed income for life to members, which typically

increases each year in line with inflation.

4.2.
It is possible to “transfer out” of a Defined Benefit Pension. This involves the scheme

member giving up the guaranteed benefits associated with membership in exchange

for a transfer value, which is typically then invested in a Defined Contribution

Pension. Unlike a Defined Benefit Pension, a Defined Contribution Pension does not

provide a guaranteed income for its members but sets the payments that are

required to be paid into the fund to provide a pension benefit and is itself highly

dependent on the performance of the underlying investment. Given the valuable

benefits offered by a Defined Benefit Pension Scheme, the Authority’s guidance

states that a firm should only recommend a transfer if it can clearly demonstrate on

contemporary evidence that a transfer is in the customer’s best interests (COBS

19.1.6G).

4.3.
Pursuant to section 48 of the 2015 Act, where the value of an individual member’s

assets in a Defined Benefit Pension Scheme exceeds £30,000, pension providers

must ensure members take “appropriate independent advice” before allowing a

transfer to proceed. Pension Transfer Specialists are suitably qualified individuals

with permission to advise on such Pension Transfers in accordance with the

Authority’s rules.

4.4.
Clients who engage advisers and authorised firms to provide them with advice in

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

importance that advisers understand their clients’ needs and account for all the

relevant individual circumstances and how this might affect the advice provided when

advising on the suitability of any Pension Transfer. Where advisers fail to do this, it

exposes clients to a significant risk of harm.

Toni Fox

4.5.
Ms Fox has worked in the financial services industry since 1979. She was appointed

director of CFP on 28 March 2011.

4.6.
Ms Fox is an associate of the Chartered Insurance Institute and a Chartered Financial

Planner. She is a qualified Pension Transfer Specialist, with a diploma from the

Pensions Management Institute, and holds an Investment Management Certificate,

alongside other relevant pension transfer advice qualifications.

4.7.
Throughout the Relevant Period, Ms Fox was approved by the Authority to perform

the controlled functions of CF1 (Director), CF10 (Compliance Oversight) and CF30

(Customer) at CFP. Following the introduction of the Senior Managers and

Certification Regime for all firms authorised by the Authority, the controlled functions

that Ms Fox was approved to perform were replaced by Senior Management

Functions. As a result, from 9 December 2019 Ms Fox has been approved to perform

the SMF3 (Executive Director) and SMF16 (Compliance Oversight) senior

management functions.

CFP, Company A and Company B

4.8.
CFP was a firm of insurance brokers and financial advisers. It was first authorised on

1 August 2012 to carry on the regulated activities of, amongst other things, advising

on Pension Transfers, advising on investments and arranging (bringing about) deals

in investments. Ms Fox held a 50% share in CFP, together with one other

shareholder, David Brian Price. Ms Fox and Mr Price were the only directors at CFP.

During the Relevant Period, CFP employed between three and six Pension Transfer

Specialists.

4.9.
Company A is a company that provides financial planning software to IFAs. Its

majority-owned subsidiary, Company B, was incorporated on 23 August 2012.

Company B was established to provide a Defined Benefit Pension Transfer advice

service to the clients of financial advice firms that used Company A’s software but

did not have the necessary permission to provide this service themselves. According

to Ms Fox, Company A approached CFP with a proposal to set up a joint venture in

which CFP would advise Company B’s clients, because Company B’s staff were not

qualified to do so. Clients would be introduced to Company B by the Introducers

which used Company A’s software. In this arrangement, CFP held the critical role of

providing the advice that allowed the trustees of Defined Benefit Pension Schemes

to release Company B’s clients’ funds.

4.10. As part of the joint venture with Company A, CFP became a minority shareholder of

Company B. Ms Fox became a director of Company B on 25 June 2014, and on the

same date Company B became an Appointed Representative of CFP. Mr Price became

a director of Company B on 15 July 2016.

4.11. Company B advised on Pension Transfers from Defined Benefit Pension Schemes

from April 2015 until 31 October 2017. Company B is now dissolved. CFP commenced

insolvency proceedings on 13 April 2021 and is now in liquidation.

4.12. During the Relevant Period, through Company B as its Appointed Representative,

CFP gave 1497 pieces of advice to clients on the transfer of their safeguarded pension

benefits from a Defined Benefit Pension Scheme into an alternative pension

arrangement. A recommendation to transfer was given in 1484 instances and in 1470

instances this recommendation was followed.

4.13. The total value of Defined Benefit Pension Transfers on which CFP advised during the

Relevant Period was £395,389,646. The total value of Defined Benefit Pension

Transfers on which CFP advised in this period that culminated in a transfer was

£392,071,572. The average transfer value of transfers that were made following a

recommendation was approximately £266,715. Funds were transferred from

hundreds of different schemes.

The Pension Transfer Model

4.14. Ms Fox designed the Pension Transfer Model, an advice process through which CFP

and Company B provided advice to clients. All advice was given by Pension Transfer

Specialists at CFP via Company B as its Appointed Representative.

4.15. In each case Company B would provide an introducer pack to the referring financial

advice firm. This contained copies of the introducing adviser agreement (which set

out the terms of the relationship between Company B and the Introducer); the client

agreement (which contained terms of business, a client services agreement, the fee

agreement, and a letter of authority), data gathering forms (which included

questions concerning the client’s attitude to risk and financial objectives) and an

advised case timeline. The Introducer was responsible for providing these documents

to the client and returning the completed forms to Company B. It is unclear whether

the Introducer was present with the client when they were being completed;

however, it was the Introducer who made all initial client contact.

4.16. Each client file would be passed to a senior pensions administrator at CFP who would

check to ensure that all the relevant forms and information required by CFP had been

provided and that any missing information would be sought, either from the

Introducer or the client. An initial letter was then sent by Company B to the client

requesting confirmation of the information submitted in the client data gathering

form, risk profile and client objectives documents. Once confirmed, this information

was used to ascertain the client’s risk profile rating using risk profiling software tools.

4.17. A senior pensions administrator at CFP would review the details of the Ceding

Scheme arrangement and send a letter requesting any missing information required

to complete a TVAS to the trustees of the Ceding Scheme, enclosing the client's

signed authority.

4.18. Company B would then produce a TVAS Report using Company A’s software. This

would be checked by a Pension Transfer Specialist at CFP to determine whether a

transfer was suitable. A draft Suitability Report would then be prepared by one of

the Pension Transfer Specialists at CFP, which was then checked by a second Pension

Transfer Specialist to ensure agreement with the proposed recommendation.

4.19. Where a recommendation was made to transfer, the client would be sent a letter

attaching a full Suitability Report, a checklist of documents to be returned, a letter

confirming fees, and a confirmation letter listing the client’s objectives, which they

were requested to sign and return.

4.20. Company B offered clients a restricted advice model without ongoing advice. Once

advice in relation to the Pension Transfer had been provided and the transfer had

been completed, clients were directed back to the relevant Introducer in respect of

their ongoing advice needs.

The Charging Model

4.21. Company B charged a flat fee of £500 plus VAT for each scheme or policy to be

reviewed in order to assess whether it would be in the client’s best interests to

transfer into a new policy. The client could choose to pay this to Company B directly,

or through a product provider via an “adviser charge” if a new policy was set up. If

the client decided not to transfer, no further fee was payable. Introducers would not

receive a fee where Company B did not recommend a transfer.

4.22. If the client decided to proceed with the transfer a further fee would be payable, the

exact amount depending on the size of the transfer. For transfer values of less than

£50,000 a fee of 5% of the transferred pension would be charged. For transfer values

between £50,000 and £100,000 the fee was 4%, and for transfers with a value over

£100,000 the fee was 3% and was subject to a maximum fee of £15,000 per scheme

and £20,000 per client. Introducer and network fees were deducted from this income,

with the remainder split equally between CFP and Company A.

4.23. During the Relevant Period, CFP generated £8,890,859 in revenue from the Pension

Transfer Model. Once payments to the Introducers, networks and Company A had

been made, CFP received £2,528,067.

4.24. On 31 October 2017, following intervention by the Authority, CFP applied to the

Authority to request the imposition of a VREQ. This required CFP to cease providing

advice in relation to the transfer or conversion of safeguarded benefits under a

pension scheme to flexible benefits. The VREQ was removed on 25 October 2018 on

the basis that CFP revised its business model and processes, and limited processing

Defined Benefit Transfers to a maximum of six cases per month.

Monitoring and Oversight

4.25. Throughout the Relevant Period, Ms Fox held the CF1 (Director) and CF10

(Compliance Oversight) controlled functions and, together with Mr Price was

responsible for the oversight of CFP’s and Company B’s compliance with regulatory

requirements. Ms Fox was responsible for ensuring she designed a process that

would comply with regulatory requirements. She was also responsible, together with

Mr Price, for monitoring that process once it was operational to ensure that it

complied with regulatory requirements.

4.26. Ms Fox did not implement safeguards to ensure that Pension Transfer Specialists had

consulted properly with their clients in the course of making a Personal

Recommendation. She did not adequately review management information or

Company B’s adviser due diligence records, and she did not arrange for the advice

to be formally reviewed until over 800 clients had been advised. When Ms Fox did

engage a compliance consultant, the file reviews did not address the suitability of

the advice.

Design of the Pension Transfer Model

4.27. Ms Fox designed the Pension Transfer Model. This included “setting out how the

process might work; how introductions might come in; who dealt with them initially

and who dealt with what stage of the process and putting the process together.”

4.28. The Pension Transfer Model did not require Pension Transfer Specialists at CFP to

consult or meet with Company B’s clients about the information that had been

gathered by Introducers unless there appeared to be an issue with it. Ms Fox

informed the Authority in interview that Company B’s clients were sent a copy of the

information gathering forms and asked to confirm that their contents were correct,

but she was unable to confirm what proportion of clients would have interacted

directly with CFP’s Pension Transfer Specialists. This meant that the Pension Transfer

Specialists at CFP were reliant upon the information in the client information

gathering forms that had been submitted by the Introducers. Due to the flaws in the

Pension Transfer Model designed by Ms Fox, CFP did not do comprehensive due

diligence on the Introducers, including reviewing how the Introducers used the

questionnaires to obtain information from clients, or whether or not the Introducers

actually met directly with the clients. According to Ms Fox, beyond what was

contained in the questionnaires completed by the client, she did not know what the

Introducer would speak to the client about and she simply assumed that the

Introducers were doing a “proper job”. The questionnaires themselves contained

scant information on the personal circumstances of the client. Even in those cases

where there was a free text box for the client to explain their objectives, these were

usually restricted to a few short statements referring to “flexibility” or “death

benefits” but without there being any meaningful discussion of how these objectives

compared with other expectations and in particular with the expectation for the client

to have a livelihood in retirement.

4.29. Throughout the Relevant Period, COBS rules required CFP to take reasonable steps

to ensure that its clients understood its advice (COBS 19.1.2R(4)). However, the

Pension Transfer Model did not require Pension Transfer Specialists at CFP to consult

with Company B’s clients about the proposed Personal Recommendation. Instead,

clients would be sent a letter with an enclosed Suitability Report and asked to confirm

their objectives by way of a written response. This was no more than a tick box

exercise. The confirmation letter was prewritten by Company B and only required

the client to sign “on the dotted line”. Based on this, the Pension Transfer Specialist

had no way of making sure that the client understood the implications of the advice

and that with a view to those implications, the transfer was in the client’s best

interest. In some instances, this meant that the clients would become considerably

worse off financially in exchange for being able to achieve vague and/or very short-

term objectives.

4.30. When asked in interview how Pension Transfer Specialists at CFP would identify

vulnerable customers, or customers with a very low level of financial knowledge or

investment experience, Ms Fox stated that this would be established using the data

gathering forms submitted by the Introducer and that the client’s investments and

pensions give “a good indication” of their level of knowledge. CFP was therefore

heavily reliant on Introducers to identify those clients who might struggle to

understand CFP’s advice.

4.31. Throughout the Relevant Period, Ms Fox was aware that the Authority’s guidance

(COBS 19.1.6G) stated that a firm advising on Defined Benefit Pension Transfers

should start by assuming a transfer will not be suitable for its client and should only

consider a transfer to be suitable if it can be clearly demonstrated, on contemporary

evidence, that a transfer is in the client’s best interest. Ms Fox’s explanation in

interview for why the overwhelming majority of CFP’s clients were advised to transfer

was that they had already been through a “free screening triage process” with their

financial adviser before obtaining advice from CFP. However, Ms Fox knew that these

financial advisers were referring their clients to Company B because they were not

authorised to advise clients on Defined Benefit Pension Transfers. CFP’s duty to

ascertain whether a Defined Benefit Pension Transfer would be suitable for individual

clients could not be delegated to Introducers. It must have been obvious to Ms Fox

that referrals in themselves were not an indication that a recommendation to transfer

would be suitable for the clients concerned and that, amongst other things, the

Material Information Gaps in the information collected by the Introducers (see

paragraph 4.64 below) meant that the Pension Transfer Model presented a risk that

clients would receive unsuitable Pension Transfer advice as a result.

4.32. By August 2017, Company B had received referrals from 770 Introducers. Whenever

a client referred by an Introducer decided not to transfer, that Introducer would not

receive a fee. Similarly, CFP received a fee of £500 plus VAT whenever a client

decided not to transfer, compared with at least £1,500 (and up to £20,000) when a

recommendation to transfer was followed. There was therefore a risk that both the

Introducers and CFP would recommend a transfer due to the potential financial

rewards if that recommendation was followed. In these circumstances, the lack of

safeguards requiring CFP’s Pension Transfer Specialists to consult with Company B’s

clients meant those clients were exposed to an unreasonable risk that they would be

advised to transfer when a transfer was not in their best interests.

4.33. By creating and implementing a system whereby CFP’s Pension Transfer Specialists

were not required to consult with the recipients of their advice, Ms Fox oversaw an

accelerated advice process which maximised profits for CFP and the Introducers, at

the expense of having adequate safeguards in place to ensure that the advice given

to clients was suitable. This allowed Company B to process a large number of

transfers and resulted in CFP putting clients at risk of receiving unsuitable Pension

Transfer advice. This risk crystallised in a large proportion of the pieces of advice

given by CFP.

4.34. By May 2017, CFP’s target was to sign off 50 suitability reports per week. Given the

very high volume of Defined Benefit Pension Transfer advice provided by a limited

number of staff at CFP during the Relevant Period, it was important that CFP took

appropriate steps to check the quality of its advice. It was also important for CFP to

take appropriate action where the required standards were not being met. Despite

this, monitoring within the firm was very informal. Ms Fox told the Authority that

she, Mr Price and another Pension Transfer Specialist completed checks on each

other’s files, but the Authority has seen no evidence to suggest that any issues had

been identified in this manner. The third Pension Transfer Specialist told the

Authority that he only checked his colleagues’ cases when his workload permitted it,

and that he rarely received feedback on his own advice.

4.35. CFP employed three more Pension Transfer Specialists during the Relevant Period

(bringing the total number of Pension Transfer Specialists to six), who were

responsible for checking all TVAS Reports, and preparing and checking all Suitability

Reports. Given the volume of business undertaken during the Relevant Period, the

Authority considers that this could only be achieved by the process minimising the

time a Pension Transfer Specialist spent on each case rather than ensuring that they

acted in the clients’ best interest.

4.36. Ms Fox told the Authority, in interview, that every file underwent a compliance check

in the form of a checklist that was retained on client files.

4.37. An external compliance consultant was appointed by CFP in January 2017, by which

point over 840 Suitability Reports had been issued. Ms Fox claimed that this

compliance consultant was engaged to conduct file reviews on a quarterly basis.

However, there is no evidence that any such reviews were conducted in the Relevant

Period after February 2017.

4.38. Ms Fox stated to the Authority that the reviews completed by the compliance

consultant, engaged in January 2017, were conducted over half a day across a

sample of around eight or nine files.

4.39. The compliance consultant reviewed the processes adopted by Company B and the

documentation issued to clients. They also assessed initial disclosure and checked

the Introducer and client agreements. Their reports do not explicitly consider the

suitability of the advice.

4.40. Given the short period of time within which these reviews were conducted, the

Authority considers it unlikely that they were robust enough to test compliance with

the Authority’s requirements regarding suitability and disclosure.

4.41. Each of the consultant’s file reviews stated that the file “was consistent with the

process adopted by the firm” and that the client had been provided with

“comprehensive Pension Transfer Reports… which detailed the benefits which will be

lost by transferring and, thus, the transfers would not be advisable but to meet [the

client’s] overall objectives a transfer would be in [the client’s] best interest.”

4.42. One of the files selected for review by the Authority had also been reviewed by the

compliance consultant (Client A, described at paragraph 4.63 below). The compliance

consultant’s review included the paragraph quoted above, with a recommendation

that no further action was required. This was contrary to the Authority’s own findings

in respect of that file, which was assessed as non-compliant due to Material

Information Gaps.

4.43. The Authority’s review established that one of the client’s objectives was to pay off

their mortgage and carry out home improvements, yet no information was obtained

regarding the mortgage repayments, the outstanding mortgage term and the cost of

home improvements. Despite these concerns, the compliance consultant’s review for

this file concluded that “the file was consistent with the process adopted by the firm”

and recommended that no further action was required.

4.44. The consultants did, however, identify the following key concerns:

(a)
the risk profile questionnaire and risk assessment process were not

considered to be sufficiently robust: reliance was placed on the risk profiling

tool rather than a detailed discussion with the client about their

understanding of risk and capacity for loss; and

(b)
Suitability Reports omitted important information: for example, they

neglected to include the potential for loss of income or growth in the event

of a rise in the markets while the Pension Transfer remained pending. Where

a recommendation was made to invest in a property fund, there were no

warnings that the client may not have immediate access to their benefits.

4.45. The Authority noted that there was little evidence that the compliance consultant’s

recommendations to address these concerns were followed.

4.46. The Authority reviewed a representative sample of 21 pieces of advice provided by

CFP to clients during the Relevant Period. The Authority undertook the File Review

to assess whether:

(a)
CFP had collected the necessary information to assess whether a Pension

Transfer was suitable for the client;

(b)
CFP’s advice to transfer was suitable;

(c)
The investment recommended by CFP was suitable; and

(d)
CFP had provided adequate disclosure to the client such that they could

make an informed
decision on
whether to proceed with
CFP’s

recommendation.

4.47. The File Review found that, across all 21 files, suitable advice was given in just two

instances (9%). Unsuitable Pension Transfer advice was given in 5 files (24%) and

the remaining 14 files (67%) could not be assessed due to material information

collection failings. Information collection was not compliant with the Authority’s rules

in 18 of the 21 files reviewed. The File Review therefore found that 19 files

(approximately 90%) contained either unsuitable Pension Transfer advice or Material

Information Gaps rendering an assessment of suitability impossible.

4.48. These results, coupled with the fact that over 99% of clients received a

recommendation to transfer, lead the Authority to conclude that there is a significant

risk that a substantial number of Company B’s clients transferred out of their Defined

Benefit Pension when it was not suitable for them to so do.

4.49. The overarching suitability requirement is for a firm to take reasonable steps to

ensure that a Personal Recommendation, which in this context includes a

recommendation to transfer or not transfer out of a Defined Benefit Pension Scheme,

is suitable for its client (COBS 9.2.1(R)).

4.50. A firm must obtain the necessary information regarding the client’s knowledge and

experience in the investment field relevant to the Pension Transfer, the client's

financial situation and the client’s investment objectives (COBS 9.2.2R(1)). If a firm

does not obtain the necessary information to assess suitability, then it must not

make
a
Personal
Recommendation
(COBS
9.2.6R).
Making
a
Personal

Recommendation without the necessary information increases the risk of providing

unsuitable advice.

4.51. The File Review established that there were Material Information Gaps in 14 of the

21 files reviewed, which prevented an assessment of suitability from being made.

4.52. Where Material Information Gaps were identified, these included failures to:

(a)
collect sufficient detail regarding the client’s income and expenditure, both

at the time the advice was provided and in relation to projected needs in

the future;

(b)
collect personalised investment and retirement objectives;

(c)
obtain financial circumstances regarding the client’s spouse;

(d)
obtain state pension income forecasts;

(e)
collect the level of other pension entitlements;

(f)
confirm the clients’ retirement age and instead proceeding on an

assumption; and

(g)
obtain sufficient detail regarding clients’ health, where this was connected

to their objectives.

4.53. This information is essential to ensure that a recommendation meets a client’s

investment objectives and is appropriate for the client’s level of knowledge and

experience of investments. It is also essential to ensure the client is able to financially

bear any risks associated with the proposed investment (COBS 9.2.2R(1)).

4.54. The Pension Transfer Specialists at CFP were reliant on the information provided to

them in the client information gathering forms and attitude to risk questionnaires

obtained by the Introducers. These documents failed to capture all the information

required to enable Company B to provide a suitable Personal Recommendation. The

client information, as evidenced in the majority of files, was basic in nature, with

very little by way of detailed information relating to the clients’ needs, circumstances

and financial arrangements.

4.55. According to Ms Fox, Pension Transfer Specialists at CFP would not routinely make

explicit requests to clients regarding important matters, such as the reason(s) behind

the clients’ objectives, their likely expenditure in retirement or their spouses’

provisions for retirement. It is essential for a Pension Transfer Specialist to obtain

this information before making a Personal Recommendation (COBS 9.2.1R(2)). Ms

Fox failed to ensure this information was collected, with the result that the clients’

capacity for loss was insufficiently assessed.

Unsuitable Advice to Transfer

4.56. Of the 21 files reviewed as part of the File Review, 14 could not be assessed for

suitability of advice due to Material Information Gaps (67%). Of the remaining seven

files, the File Review found that five contained unsuitable advice to transfer (71%).

4.57. The File Review found the following instances of unsuitability:

(a)
clients being advised to transfer out of their Defined Benefit Pension

Schemes despite being reliant on that income and not having the capacity

for loss;

(b)
clients being advised to transfer even if the transfer analysis did not support

the recommendation;

(c)
clients being advised to transfer despite wanting the guaranteed income

afforded to them within their Defined Benefit Pension Scheme; and

(d)
failure to explore alternative options to a transfer, which may have been

sufficient to meet the client’s objectives. For example, a life insurance policy

may have been appropriate where a client identified lump sum death

benefits as being one of their objectives, but instead Ms Fox recommended

that the client transfer out of their Defined Benefit Pension Scheme.

4.58. There is little evidence that Pension Transfer Specialists at CFP made their

recommendations based on an overall assessment of the advantages and

disadvantages of transferring, or that they provided clients with adequate

comparisons between the benefits likely to be paid under a safeguarded Defined

Benefit Scheme and the benefits afforded by the proposed personal pension scheme.

They placed undue reliance on their clients’ stated desire to transfer and meet their

objectives, even where their objectives were either vague or not realisable and the

transfer would be to their detriment.

Failure to provide advice that was fair, clear and not misleading (COBS

4.2.1R)

4.59. In addition, the File Review established that in 17 of the 21 files, CFP did not provide

Company B’s clients with sufficient information to enable them to understand the

risks of transferring out of their Defined Benefit Pension Scheme in a way that was

fair, clear and not misleading. This was the case even in the two files in which the

advice to transfer was assessed as suitable.

4.60. In particular, some of the Suitability Reports stated: “it is very important to

understand that DB benefits are not guaranteed.” Without further explanation and

appropriate context this was potentially misleading. This sentence appeared in six

Suitability Reports and evidenced the largely templated nature of those reports.

4.61. The Authority also identified Suitability Reports that initially appeared to recommend

against a transfer, based on an analysis of the existing benefits from the Defined

Benefit Pension Scheme compared to proposed pension plans, yet within the same

report made a recommendation to transfer.

4.62. As a result of these failures, Pension Transfer Specialists at CFP failed to take

reasonable steps to ensure their Personal Recommendations in respect of Pension

Transfers were suitable for their clients.

Examples From Client Files

Client A

4.63. Client A was 56 years old and married with three children. He worked as a bus driver

for a city council. He earned around £21,000 per year, had £2,000 in savings and a

£7,000 mortgage. Client A had no or very little investment experience and low

capacity for loss. His objectives stated that he wished to: obtain a lump sum to clear

his mortgage and pay for home improvements; maximise death benefits; and have

flexibility of income.

4.64. Ms Fox advised Client A to transfer out of his Defined Benefit Pension Scheme into a

flexible benefits arrangement. The file contained significant Material Information

Gaps such that Ms Fox would have been unable to reasonably provide compliant

advice. Specifically:

(a)
Ms Fox failed to gather adequate information regarding Client A’s financial

situation. The file contained no information on the client’s mortgage

repayments or the outstanding term remaining on the mortgage, despite

one of the client’s objectives being to clear his mortgage;

(b)
Although the client had sought a lump sum of money from the transfer to

enable him to make home improvements, the amount required for these

improvements was not recorded on the file;

(c)
State pension forecasts had not been obtained, nor had details of Client A’s

spouse’s income, employment or assets; and

(d)
Ms Fox failed to gather adequate information regarding Client A’s estimated

expenditure throughout retirement.

4.65. In addition, the Suitability Report did not make clear the risks associated with a

transfer, including the fact that the client would be giving up guaranteed income

under the scheme.

Client B

4.66. Client B was 53 years old, married and earning a salary of £14,000 per year. She

had worked for the NHS for 12 years and at a bank for 24 years before that. The

client had no prior knowledge or experience of investments. Her objectives stated

that she wished to have flexibility and improve death benefits. The Fact Find also

stated that she wanted options to access the capital.

4.67. Client B was advised to transfer out of her Defined Benefit Pension Scheme and into

a personal pension. According to Ms Fox, she read the draft Suitability Report

prepared for Client B by another member of staff and checked it before sending it.

The Authority has assessed this advice as unsuitable for the following reasons:

(a)
Client B was likely to be reliant on the income from the Defined Benefit

Pension Scheme;

(b)
Ms Fox did not obtain details of the client’s income in retirement needs; nor

did she ascertain the client’s current expenditure. It was therefore

impossible to determine whether the client’s income needs in retirement

could be met by reference to the existing pension and any additional state

pension;

(c)
The file contained generic client objectives, such as maximising death

benefits, accessing flexible benefits and early withdrawal of the pension

commencement lump sum. There was no evidence that these objectives had

been discussed with the client, nor was there anything to demonstrate why

the fulfilment of these objectives, when balanced with the benefits of

remaining in the scheme, was in the client’s best interests;

(d)
The client stated that she would prefer a guaranteed income, and specifically

asked for consideration of a future guaranteed income option. This

guaranteed income would have been afforded by the Defined Benefit

Pension Scheme she had, but not by the personal pension into which she

was advised to transfer;

(e)
Despite Client B’s stated preference for guaranteed income rather than

investment uncertainty, the Suitability Report stated that Client B had an

“average” attitude to risk. Based on the responses given by Client B, the

Authority considers that the client was categorised as having a higher

attitude to risk than she would have been comfortable with;

(f)
The transfer analysis on file did not support a recommendation to transfer

out of the Defined Benefit Pension Scheme, noting a required Critical Yield

of 8.77%, which would be difficult to achieve even for a high-risk investor;

(g)
In the Fact Find, Client B indicated that she was looking for an option to

access the capital. Despite this, there was no evidence on the file that details

regarding the available Pension Commencement Lump Sum were obtained.

Similarly, there was no evidence on file that the client was informed of the

possibility of accessing a lump sum while taking benefits under the scheme;

(h)
The TVAS did not calculate any potential Critical Yields based on Client B

taking a PCLS and a reduced income from the Ceding Scheme, nor were any

estimated figures obtained from the Ceding Scheme;

(i)
Client B did not have the necessary knowledge or experience of investments

to understand the risks involved in transferring out of her Defined Benefit

Pension.

4.68. In Client B’s Suitability Report Ms Fox advised that on the basis of the financial

analysis of pension benefits alone, she was hesitant to recommend a transfer;

however, she nonetheless concluded that the only way to meet the client’s objectives

would be to transfer, and accordingly advised Client B to transfer out of her Defined

Benefit Pension.

4.69. The advice to Client B stated: “To sum up, your objective was to have greater control

over your fund and flexibility as to how in time you draw upon it and for it to be

possible in the event of your death for the fund to be passed on. This objective can

only be met by transferring your retained pension benefits in [the Defined Benefit

Pension] to a personal pension plan”. There was no discussion of these objectives,

or why the client felt they were sufficiently important to warrant a transfer and the

relinquishing of the guaranteed income afforded by the Defined Benefit Pension. Nor

was there any consideration of alternative means of meeting these objectives, such

as life insurance.

4.70. Client B’s Suitability Reports stated: “it is very important to understand that DB

benefits are not guaranteed.” Without further explanation and appropriate context

this was potentially misleading, particularly as Client B had already stated a

preference for guaranteed income.

4.71. Client C was 59 years old, divorced with one child dependant, and earning £24,000

per year at a supermarket. Her objectives were to release tax free cash for home

improvements and reduce her mortgage. She also wanted the balance of her pension

to go to her children upon her death and to consolidate her pension with her existing

employer’s Defined Contribution Pension. Client C had no or little investment

experience and no capacity for loss.

4.72. Client C was advised to transfer out of her Defined Benefit Pension Scheme and into

a Defined Contribution Pension Scheme. The Authority assessed this advice as

unsuitable for the following reasons:

(a)
Client C was reliant upon an income from her Defined Benefit Pension

Scheme and the Pension Transfer Specialist had assessed the client as

having no capacity to lose the guaranteed income. The Authority assessed

that there was a high risk that if Client C transferred out of her Defined

Benefit Pension Scheme, she may run out of income in retirement;

(b)
The TVAS did not support the recommendation to transfer, and the critical

yield necessary to match Client C’s Defined Benefit Pension Scheme benefits

in her circumstances was unattainable;

(c)
Whilst Client C’s objectives included access to a lump sum and death

benefits, the Pension Transfer Specialist did not demonstrate that Client C

was able or willing to compromise her retirement income to access these

options in a Defined Contribution Pension Scheme. The Pension Transfer

Specialist also did not demonstrate that they had considered alternatives

that could have met the client’s objectives without having to transfer out of

the scheme;

(d)
Client C would ultimately be unable to make the income she wanted in a

flexible scheme without taking high risks with her investments. No

alternative pension arrangement was guaranteed or even likely to produce

comparable or better returns than Client C’s Defined Benefit Pension

Scheme.

4.73. In addition, the Suitability Report did not make clear the risks associated with a

transfer, including the fact that the client would be giving up guaranteed income

under the scheme.

Benefit Derived by Ms Fox

4.74. During the Relevant Period, Ms Fox received £473,289 by way of salary, dividends,

and pension contributions from CFP.

5.
FAILINGS

5.1.
The statutory and regulatory provisions relevant to this Notice are referred to in

5.2.
By reason of the facts and matters set out above, Ms Fox breached Statement of

Principle 1.

5.3.
The Authority considers that Ms Fox failed to comply with Statement of Principle 1

during the Relevant Period in that she failed to act with integrity in carrying out her

controlled functions as CF1 (Director) and CF10 (Compliance Oversight) at CFP. Ms

Fox’s actions in relation to the design and operation of the Pension Transfer Model

were reckless. Specifically, Ms Fox recklessly designed, implemented and oversaw

an advice process that:

(a)
lacked the requisite safeguards to ensure that CFP’s Pension Transfer

Specialists only provided Defined Benefit Pension Transfer advice when they

had gathered sufficient information to do so;

(b)
enabled CFP’s Pension Transfer Specialists, including Ms Fox, to issue

Suitability Reports without having properly considered their clients’ financial

circumstances and objectives, attitude to risk and capacity for loss. In

particular, CFP’s Pension Transfer Specialists:

i.
failed to give due consideration to whether clients could financially

bear the risks involved in a Pension Transfer;

ii.
placed undue reliance on their clients’ stated objectives regardless

of whether they were realistic or financially viable. They failed to

weigh those objectives against the benefits of remaining in the

clients’ Defined Benefit Pension Scheme, and failed to investigate or

determine whether those objectives could be met by remaining in

the current scheme;

iii.
advised clients to transfer even if the transfer analysis did not

support the recommendation; and

iv.
advised clients to transfer even when those clients had stated that

they wanted the guaranteed income afforded to them within their

Defined Benefit Pension Scheme; and

(c)
permitted CFP’s Pension Transfer Specialists, including Ms Fox, to issue

Suitability Reports that were unclear or misleading. The Authority identified

Suitability Reports that:

i.
contained inadequate information about the possible disadvantages

of transferring out of a client’s Defined Benefit Pension Scheme,

when considering the client’s specific circumstances and objectives;

ii.
contained warnings that contradicted the Personal Recommendation

to transfer, with no explanation; and

iii.
contained the prominent and misleading statement: “It is very

important to understand that DB benefits are not guaranteed,”

without sufficient further explanation or context.

5.4.
These failures resulted in Pension Transfer Specialists at CFP, including Ms Fox,

routinely providing unsuitable or otherwise non-compliant advice to clients. As a

qualified Pension Transfer Specialist with 35 years of experience in the pensions

industry by the start of the Relevant Period, Ms Fox must have been aware of the

unacceptably high risk that the Pension Transfer Model would result in the provision

of unsuitable advice. However, Ms Fox recklessly disregarded this risk. She did not

implement safeguards to ensure that Pension Transfer Specialists had consulted

properly with their clients in the course of making a Personal Recommendation. She

did not adequately review management information or due diligence records.

6.
SANCTION

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

In respect of conduct occurring on or after 6 March 2010, the Authority applies a

five-step framework to determine the appropriate level of financial penalty. DEPP

6.5B sets out the details of the five-step framework that applies in respect of financial

penalties imposed on individuals in non-market abuse cases.

6.2.
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. Where the success of a firm’s entire business model is dependent on

breaching the Authority’s rules or other requirements of the regulatory system and

the individual’s breach is at the core of the firm’s regulated activities,

the Authority will seek to deprive the individual of all the financial benefit he has

derived from such activities.

6.3.
Ms Fox was paid £473,289 by way of salary, dividends, pension contributions and

other benefits which the Authority considers Ms Fox derived from her employment

at CFP during the Relevant Period.

6.4.
CFP generated revenue of £9,047,430 during the Relevant Period. This revenue was

almost entirely derived from the flawed Pension Transfer Model that Ms Fox

recklessly designed, implemented and oversaw (see paragraph 4.23 above).

6.5.
The Authority considers that the success of CFP’s business model during the Relevant

Period was dependent on breaching regulatory requirements. The Authority further

considers that Ms Fox’s breach of Statement of Principle 1 was at the core of CFP’s

regulated activities. As a result, the Authority considers it appropriate to deprive Ms

Fox of all the financial benefit she derived from her employment at CFP during the

Relevant Period, amounting to £473,289.

6.6.
The Authority will ordinarily also charge interest on the financial benefit that an

individual derives directly from the breach. The Authority considers it appropriate to

apply interest at 8% per annum on Ms Fox’s financial benefit of £473,289, from the

end of the Relevant Period to the date of this Notice, amounting to £208,247.

6.7.
Step 1 is therefore £681,536.

Step 2: The Seriousness of the Breach

6.8.
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.

6.9.
The period of Ms Fox’s breach of Statement of Principle 1 was from 21 April 2015 to

31 October 2017. The Authority considers Ms Fox’s relevant income for this period

to be £473,289.

6.10. 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%

6.11. 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. DEPP 6.5B.2G(12) lists factors likely to be considered

‘level 4 or 5 factors’. Of these, the Authority considers the following factors to be

relevant.

Impact of the Breach

6.12. By creating and implementing a system whereby CFP’s Pension Transfer Specialists

were not required to consult in a meaningful way with the recipients of their advice,

Ms Fox oversaw an accelerated advice process at CFP which, in the Authority’s view,

resulted in CFP putting its clients at risk of receiving unsuitable pension transfer

advice. This risk crystallised in that a large proportion of the advice given by CFP

was unsuitable. CFP (and therefore Ms Fox) benefited from the fees gained from the

increased number of customers which CFP could accommodate as a result of her

breach of Statement of Principle 1 (DEPP 6.5B.2G(8)(a)).

6.13. Ms Fox’s breaches of Statement of Principle 1 caused a risk of loss to a large number

of clients who transferred out of their Defined Benefit Pension Schemes as a result

of CFP’s, and in many cases Ms Fox’s, advice (DEPP 6.5B.2G(8)(b) and (c)).

Nature of the breach

6.14. Ms Fox’s failings occurred over a sustained period (over 2.5 years) and resulted in a

significant risk of loss for a large number of clients (DEPP 6.5B.2G(9)(b)).

6.15. Ms Fox failed to act with integrity because she acted recklessly throughout the

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

6.16. Ms Fox was responsible for the matters that gave rise to CFP’s non-compliance with

the COBS rules (DEPP 6.5B.2G(9)(l)) because as CF10 she had overall responsibility

to ensure that adequate systems and controls were in place to monitor the advice

being provided. She held a senior position within CFP as a director (DEPP

6.5B.2G(9)(k) and was also an experienced Pension Transfer Specialist who had

worked in the pensions industry for 35 years by the start of the Relevant Period

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

Whether the breach was deliberate and/or reckless

6.17. Ms Fox’s breach of Statement of Principle 1 was as a result of her reckless acts (DEPP

6.5B.2G(11)).

Level of seriousness

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

the Authority considers the following factors to be relevant:

(a)
Ms Fox’s breaches caused a significant risk of loss to individual consumers,

investors or other market users (DEPP 6.5B.2G(12)(a));

(b)
Ms Fox failed to act with integrity (DEPP 6.5B.2G(12)(d)); and

(c)
Ms Fox committed the breach recklessly (DEPP 6.5B.2G(12)(e).

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

Authority considers that none of these apply.

6.20. 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 £473,289.

6.21. Step 2 is therefore £141,987.

Step 3: Mitigating and Aggravating Factors

6.22. 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.

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

(a)
On 18 and 24 February 2016, the Authority issued alerts to firms advising

on Pension Transfers and provided examples of good and poor practice when

dealing with insistent clients. The alert on 24 February 2016 gave the

following example of poor practice: “The language used to describe the

recommendation left the client to decide between various options. For

example, the suitability report recommended that the client stay in the

scheme but that the client should transfer if any other objectives were more

important to them than maximising their income at retirement.”

(b)
Notwithstanding that the Authority had publicly called for an improvement

in standards in relation to ambiguous Suitability Reports, CFP routinely

issued Suitability Reports that initially appeared to recommend against a

transfer and subsequently made a recommendation to transfer within the

same report.

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

6.25. Having taken into account the aggravating factors, the Authority considers that the

Step 2 figure should be increased by 10%.

6.26. Step 3 is therefore £156,185.

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 £156,185 represents a sufficient

deterrent to Ms Fox and others, and so has not increased the penalty at Step 4.

6.29. Step 4 is therefore £156,185.

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

to be imposed agree the amount of the financial penalty and other terms, DEPP 6.7

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

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

reached agreement. The settlement discount does not apply to the disgorgement of

any benefit calculated at Step 1. No settlement discount applies.

6.31. Step 5 is therefore £156,100 (rounded down to the nearest £100 in accordance with

the Authority’s usual practice).

6.32. Pursuant to DEPP 6.5D.1G, the Authority will consider reducing the amount of a

penalty if an individual produces verifiable evidence that payment of the penalty

would cause them serious financial hardship. Ms Fox has produced verifiable

evidence to the Authority that payment of a penalty of £837,636 (i.e. the total of the

Step 1 figure of £681,536plus the Step 5 figure of £156,100) would cause her serious

financial hardship. The Authority considers it appropriate to reduce the Step 5 figure

to £0 for serious financial hardship but does not consider it appropriate to allow Ms

Fox to retain the financial benefit that she derived directly from her breach (DEPP

6.5D.2G(7)(a)). Therefore, the Authority does not consider it appropriate to reduce

the Step 1 figure of £681,536.

6.33. The Authority therefore has decided to impose a total financial penalty of £681,536

on Ms Fox for breaching Statement of Principle 1.

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

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

prohibit individuals under section 56 of the Act.

6.35. The Authority considers that Ms Fox’s reckless conduct throughout the Relevant

Period demonstrates a lack of integrity. As a result, the Authority considers that Ms

Fox is not a fit and proper person and that it is appropriate and proportionate in all

the circumstances to prohibit Ms Fox from performing any function in relation to any

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

professional firm.

6.36. In light of Ms Fox’s lack of integrity and her lack of fitness and propriety, the

Authority also considers that it is appropriate and proportionate in all the

circumstances to withdraw Ms Fox's SMF 3 (Executive Director) and SMF 16

(Compliance Oversight) senior management functions at CFP.

7.
REPRESENTATIONS

7.1 Annex B contains a brief summary of the key representations made by Ms Fox in

response to the Warning Notice and how they have been dealt with. In making the

decision which gave rise to the obligation to give this Notice, the Authority has taken

into account all of the representations made by Ms Fox, whether or not set out in

Annex B.

8.
PROCEDURAL MATTERS

8.1.
This Notice is given to Ms Fox under sections 57(3) and 67(4) and in accordance with

section 388 of the Act.

8.2.
The following statutory rights are important.

Decision Maker

8.3.
The decision which gave rise to the obligation to give this Notice was made by the

RDC. The RDC is a committee of the Authority which takes certain decisions on

behalf of the Authority. The members of the RDC are separate to the Authority staff

involved in conducting investigations and recommending action against firms and

individuals. Further information about the RDC can be found on the Authority’s

committee

The Tribunal

8.4.
Ms Fox has the right to refer the matter to which this Notice relates to the Tribunal.

Under paragraph 2(2) of Schedule 3 of the Tribunal Procedure (Upper Tribunal) Rules

2008, Ms Fox has 28 days from the date on which this Notice is given to her to refer

the matter to the Tribunal. A reference to the Tribunal is made by way of a signed

reference notice (Form FTC3) filed with a copy of this Notice. The Tribunal’s contact

details are: The Upper Tribunal, Tax and Chancery Chamber, Fifth Floor, Rolls

Building,
Fetter
Lane,
London
EC4A
1NL
(tel:
020
7612
9730;
email

fs@hmcts.gsi.gov.uk). Further information on the Tribunal, including guidance and

the relevant forms to complete, can be found on the HM Courts and Tribunal Service

8.5.
A copy of the reference notice (Form FTC3) must also be sent to the Authority at the

same time as filing a reference with the Tribunal. A copy of the reference notice

should be sent to Kingsley Moore at the Financial Conduct Authority, 12 Endeavour

Square, London, E20 1JN.

8.6.
Once any such referral is determined by the Tribunal and subject to that

determination, or if the matter has not been referred to the Tribunal, the Authority

will issue a Final Notice about the implementation of that decision.

Access to Evidence

8.7.
Section 394 of the Act applies to this Notice.

8.8.
The person to whom this Notice is given has the right to access:

(a)
the material upon which the Authority has relied in deciding to give this

Notice; and

(b)
the secondary material which, in the opinion of the Authority, might

undermine that decision.

8.9.
This Notice is being given to CFP as an interested party in the withdrawal of Ms Fox's

approval under section 63(4) of the Act. CFP has the right to:

(a)
have access to evidence pursuant to section 394 of the Act, as described

above; and

(b)
refer to the Tribunal the decision to withdraw Ms Fox’s approval, pursuant

to section 63(5) of the Act.

Confidentiality and publicity

8.10. This Notice may contain confidential information and should not be disclosed to a

third party (except for the purpose of obtaining advice on its contents). In

accordance with section 391 of the Act, a person to whom this Notice is given or

copied may not publish the Notice or any details concerning it unless the Authority

has published the Notice or those details.

8.11. However, the Authority must publish such information about the matter to which a

Decision Notice or Final Notice relates as it considers appropriate. The persons to

whom this Notice is given or copied should therefore be aware that the facts and

matters contained in this Notice may be made public.

Authority contact

8.12. For more information concerning this matter generally, contact Kingsley Moore

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

Elizabeth France
Deputy Chair, Regulatory Decisions Committee


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 63 of the Act provides that the Authority may withdraw an approval issued

under section 59 if it considers that the person in respect of whom it was given is

not a fit and proper person to perform the function to which the approval relates.

1.4.
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 64A 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 64A of the Act.

2.2.
Throughout the Relevant Period, Statement of Principle 1 stated:

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

functions.”

2.3.
‘Accountable functions’ include controlled functions and any other functions

performed by an approved person in relation the carrying on of a regulated activity

by the authorised person to which the approval relates.

2.4.
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.

Conduct of Business sourcebook

2.5.
The following rules and guidance in COBS (as were in place during the Relevant

Period) are relevant to the suitability of Pension Transfer advice given to clients.

2.6.
COBS 2.1.1R states that a firm must act honestly, fairly and professionally in

accordance with the best interests of its client.

2.7.
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.

2.8.
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.

2.9.
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 9.2.6R states:

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.

2.11. COBS 19.1.2R (as in force during the Relevant Period) stated that a firm must:

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

Defined Benefit Pension Scheme or other pension scheme 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 Benefit 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)
gives 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.

2.12. 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.

The Fit and Proper Test for Approved Persons

2.13. 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.

2.14. 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 Enforcement Guide

2.15. The Enforcement Guide (“EG”) sets out the Authority’s approach to exercising its

main enforcement powers under the 2000 Act.

2.16. Chapter 7 of the Enforcement Guide sets out the Authority’s approach to exercising

its power to impose a financial a penalty.

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

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

2.18. 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

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

imposition and amount of financial penalties under the Act.

ANNEX B

REPRESENTATIONS

1. A summary of the key representations made by Ms Fox, and the Authority’s conclusions
in respect of them (in bold), is set out below.

2. Ms Fox’s representations in respect of the Warning Notice were made solely in relation
to the level of financial penalty which the Authority proposed to impose upon her. No
representations were made to the Authority by Ms Fox regarding the misconduct
described within this Notice.

Serious Financial Hardship and disgorgement

3. Ms Fox does not dispute the principle of disgorgement, nor that there should be some
form of penalty imposed. However, she cannot afford to pay the disgorgement figure.
A penalty of that amount would push her into poverty and bankruptcy.

4. Ms Fox does not believe that it is the intention of the Authority to make her destitute.
She therefore submits that the penalty should be reduced to £20,000, which is the
amount she can afford to pay.

5. Ms Fox does not consider that either of the precedent cases referred to by the Authority
in the course of these proceedings in support of its view that the disgorgement figure
should not be reduced are sufficiently similar to justify adopting such an approach in
this case. In the case of Ford1, Mr Ford, unlike Ms Fox, did not cooperate with the
Authority and did not raise a serious financial hardship claim. In respect of Sapien2,
the case relates to a company, not an individual.

6. The Authority acknowledges that Ms Fox has produced verifiable evidence that
payment of a financial penalty of £837,636 (i.e. the total of the Step 1 figure
of £681,536 plus the Step 5 figure of £156,100) would cause her serious
financial hardship, and so has reduced the Step 5 figure to £0. The verifiable
evidence produced by Ms Fox also demonstrates that payment of the Step 1
figure of £681,536 would cause her serious financial hardship. However, for
the reasons set out below, the Authority has decided that it is not appropriate
to reduce the Step 1 figure.

7. As a matter of principle, the Authority considers that the disgorgement
element of the penalty should not be reduced even if it would cause Ms Fox
serious financial hardship. The disgorgement element of the financial penalty
is distinct from the punitive element. The Authority considers that the
principle of disgorgement (that an individual should not benefit from any
breach – DEPP 6.5.2G) applies regardless of whether those funds are still
available to use to pay the penalty. The Authority also considers that to allow
an individual to not pay the disgorgement sum on the basis that the money
has already been spent, runs contrary to this principle. This approach has
been endorsed by the Upper Tribunal in the case of Stewart Ford.

1 Stewart Owen Ford and Mark John Owen v The Financial Conduct Authority [2018] UKUT 0358 (TCC)

8. The Authority considers that it is reasonable to have regard to the approach
taken to disgorgement in previous cases, and that the cases of Ford and Sapien
are particularly relevant. The Authority acknowledges that in the case of Ford,
no evidence was provided by Mr Ford that the penalty would cause him serious
financial hardship. However, in this case the Authority has not ignored the
evidence provided by Ms Fox, as it has decided to reduce the Step 5 figure to
£0. Further, the Upper Tribunal stated that even if Mr Ford had produced
evidence of serious financial hardship, it would not be appropriate to reduce
the disgorgement figure. In respect of the case of Sapien, although it relates
to a company, it is another example of the Authority applying the principle
that the disgorgement element of the penalty should not be reduced because
it would result in serious financial hardship.