Sesame fined £6m over failings with investment advice, systems and controls

The FCA said that Sesame should pay a £5,786,200 penalty to account for "systems and controls weaknesses across its investment advice business" and a further £245,000 over "advice failings" in relation to the sale of some life settlement products.

The regulator said that between July 2005 and June 2009 the "vast majority" of sales Sesame's appointed advisers made of Keydata life settlement products were "flawed". During the period 426 customers bought such products from Sesame at a total value of over £6.1m, it said.

The sales were flawed because Sesame failed to ensure that the products sold were aligned to investors' objectives and attitude to risk, the company incorrectly stated that income or capital growth was guaranteed, and/or that the products being invested in were "low risk" despite Sesame itself holding the view that investing in the products carried with it "a considerable amount of risk", the FCA said.

The regulator said that Sesame did not have measures in place to either prevent or identify mis-selling of the products by its appointed advisers.

"Sesame failed to take reasonable care to ensure the advice given by ARs (appointed representatives) and the decisions they made on behalf of customers were suitable," the FCA said. "In fact in every case reviewed by the FCA Sesame had failed to explain to customers all of the key risks and had failed to give a balanced view of the advantages and disadvantages of the Keydata life settlement products."

In a review of Sesame's operations between July 2010 and September 2012, the FCA found that the company did not monitor for or identify sales of financial products or funds which were unsuitable to retail investors. The regulator said checks done by Sesame's internal compliance team were "not always suitably robust". Amongst its others concerns was that the culture within Sesame promoted the view that appointed advisers, and not retail customers, were the customers of the firm.

The FCA said that the Sesame had agreed to settle the case early and pay a final penalty that had a 30% discount applied.

"Sesame is one of the largest and most well-known financial services networks in the UK responsible for the oversight of some 1,220 Ars," Tracey McDermott, the FCA’s director of enforcement and financial crime, said. "It describes itself as ‘perfectly placed to deliver expert guidance and services’ but the failings in this case fall far short of that.  The weaknesses in Sesame’s systems and controls show that there was an ongoing risk that unsuitable advice could be given by Sesame’s ARs."

"By allowing ARs to use their regulatory permission to operate, Principals are effectively vouching for them. Therefore they must keep a close eye on what their ARs do and keep them up to date with the regulator’s expectations. Critically, they must also act decisively when things go wrong. Sesame failed on all of these counts," she said.