The Guernsey Financial Services Commission (GFSC) has imposed financial penalties on two former directors of Criteria Wealth Management.
Mark Penney, former managing director, and Marc Roxby, former director, have been fined £40,000 ($49,754, €45,540) and £20,000, respectively.
Criteria was forced to shut down at the end of January 2019, as it had no funds available to repay unsecured creditors.
The GFSC said that it would have been appropriate to fine the firm £50,000 but it decided against it.
Penney and Roxby, however, have also been handed six- and a four-year bans, respectively, as the regulator said they failed to fulfil the minimum criteria for licensing and that they were not fit and proper people to hold senior managerial positions within the wealth management business.
Timeline of events
Criteria Wealth Management was set up in 2012, but as early as 2013 the GFSC had concerns regarding the firm’s processes and procedures.
In 2015, the Guernsey regulator warned the wealth company against switching clients “without proper consideration of rebalancing risks within existing products” and had set out its expectations on how the business should have amended its processes.
A follow-up visit was conducted in 2016, where the GFSC found issues including, lack of evidence on the recommendation that surrender or withdrawal was in the client’s best interests, ineffective peer review of financial advice provided, and operations outside the firm’s licensing remit by performing the “restricted activity of management”, for which it was not authorised for.
Criteria agreed to implement a risk mitigation plan as a result.
But in May 2017, the regulator received a complaint by an unnamed local entity on behalf of one of its clients – a former customer of Criteria – where it provided evidence showing Penney selling Criteria shares to the former client.
Additionally, the evidence showed that the customer was advised to surrender long-term insurance bonds. The regulator said this created a pattern of advice which raised concerns over widespread similar practices of unsuitable advice.
This prompted the Commission to review a sample of the firm’s files.
The GFSC found that Criteria was advising clients on, and promoting, structured notes, an activity outside its licence.
Roxby resigned in June 2018; while Penney and an unnamed non-executive director unsuccessfully tried to sell the firm’s book of business, which resulted to the shutting down of the wealth management company.