Losses of £106.5 million. FSCS payout £55.6 million

TailorMade Independent (TMI) was an unregulated company based in Cheshire and run by Alistair Burns who was fined and banned by the Financial Conduct Authority back in December 2016 for failure to provide suitable advice to clients and for failing to ensure effective management of conflicts of interest.

As of 25 April 2018, the Financial Services Compensation Scheme received and accepted 1,371 claims against TMI, with compensation totalling over £55.6 million. However, because of the £50,000 compensation limit, the FSCS was unable to cover all the losses, which totalled over £106.5 million.

In a recent court judgement it was recorded there were ‘serious concerns regarding the advice model and the manner in which it was established without proper scrutiny and then operated with an absence of proper systems and controls.’

‘Those failings are the primary reason why the consumer detriment has occurred, and the conflict of interest failings are secondary to those concerns.’

Why a conflict of interest? Alistair Burns, along with others involved, also ran a fully regulated financial service firm alongside TMI.

A tribunal recently upheld the prohibition order against Burns, banning him from performing any FCA senior management function, noting: ‘We are therefore not satisfied that it would be disproportionate or irrational to make a full prohibition order against Mr Burns in respect of senior management and significant influence functions.

‘Mr Burns’s failings and his failure at the present time to demonstrate that he has learned from them are of such a nature that in our view there is a clear risk that they would be repeated were he in the foreseeable future to perform a senior management or significant influence function within a regulated firm.’

Mark Steward, executive director of enforcement and market oversight at the FCA, said: ‘Mr Burns failed to ensure that TMI managed its conflicts of interest, benefiting financially from his role as shareholder and director at an unregulated introducer alongside his regulated role, to the detriment of his customers. Our action sends a strong message that failing to manage conflicts of interest fairly and disclose them clearly is completely unacceptable.’

Between 2010 and 2013, TMI provided advice over Sipps, which included unregulated investments such as green oils, biofuels and overseas property.

Over this period 1,661 customers invested over £112 million in alternative investments, many of which were not permitted by their existing pension schemes. A number of customers were also invested in overseas property developments run by Harlequin.

Cases like this highlight the vital importance of having proper due diligence undertaken before an investment is made. Extreme care is required to ensure the people and investments you are being offered are genuine. IYE Global offer a due diligence service that not only checks the validity of the investment but accesses intelligence and watch reports on those involved. If you’d like to ensure the investment you’re considering is genuine, please call us on: +44 (0)20 8914 7923 or use our contact form on the IYE Global website.