Page last updated at 17:13 GMT, Wednesday, 24 February 2010

Record repayment for bad financial advice

FSA headquarters
The FSA discovered errors between January 2007 and January 2009

An independent financial advice business is being ordered to repay customers a record amount after a catalogue of failings.

Park Row, based in Leeds, has been told to repay up to an estimated £7.8m.

The Financial Services Authority (FSA) found that the firm recklessly failed to ensure proper advice was given on pensions, mortgages and investments.

Park Row, which had 24,000 customers during the two years of failings, is now being wound down.

Failure to act

The FSA found that customers of Park Row Associates were at risk of receiving unsuitable advice about pensions, investments, bonds, mortgages, structured products and annuities.

Where customers were not given suitable advice, or where Park Row can not demonstrate suitable advice, they will receive redress
Margaret Cole, Financial Services Authority

The City watchdog discovered a catalogue of errors between January 2007 and January 2009, including advisers giving advice based on the commission they would receive rather than whether this was suited to the customers' needs.

The net commissions and fees generated by Park Row during that two-year period reached approximately £10.3m.

The firm then consistently failed to take action to rectify the problems despite the fact that concerns were highlighted to the firm on a number of occasions.

As a result, customers could now be in line for redress - some of whom might never have realised that there was ever an issue with Park Row. They will now be contacted by an external examiner.

Customers who have any concerns about advice they received should contact Park Row.

Those affected will be paid a refund or have money put into their policies. The FSA estimates the payments could total between £5m and £7.8m.

This is potentially higher than the previous record redress ordered by the FSA. In October, mortgage lender GMAC-RFC was told to repay £7.7m, plus interest, to 46,000 of its borrowers after it was found to have levied unfair charges on borrowers who fell behind with their repayments.

Repayments secured

"Park Row failed to take adequate action to address failings in systems and controls to ensure its advisers were giving customers suitable advice, despite the real risk of customer harm," said Margaret Cole, head of enforcement at the FSA.

[Park Row] is committed to contacting customers who may have been affected and taking remedial actions where appropriate
Royal Liver spokeswoman

"The FSA has secured funding estimated at between £5m and £7.8m to ensure that where customers were not given suitable advice, or where Park Row can not demonstrate suitable advice, they will receive redress."

The watchdog found that advisers sometimes gave advice on products without authorisation.

The FSA said that the firm would have been fined £2.4m but it would have been unable to pay it.

The business is being wound down. No new business has been taken on since November and staff only remain in place to deal with customers' enquiries

However, the FSA said it had been able to secure the repayments to customers with the support of the firm's parent company, Royal Liver Assurance Limited.

A spokeswoman for Royal Liver said that Park Row was conducting a review to find out how many incidents needed to be addressed.

"[It] is committed to contacting customers who may have been affected and taking remedial actions where appropriate," she said.

The FSA has also handed down a fine of £49,000 to Peter Sprung, the firm's former chief executive. He has also agreed not to perform a significant function at any firm for five years.



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