FCA fines Sesame Ltd for ‘pay-to-play’ arrangements 

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Sesame Ltd, the UK’s largest network of financial advisers, has been fined £1,598,000 by the Financial Conduct Authority (FCA) for setting up a pay-to-play scheme. Sesame’s arrangement effectively undermined the ban on commission payments brought in by the Retail Distribution Review (RDR). The pay-to-play scheme meant that the range of products recommended to Sesame clients under its restricted advice service was influenced by the amount of services Sesame had sold to product providers.

The FCA found that Sesame promoted its own commercial interests over the interests of its clients.

Tracey McDermott, director of enforcement and financial crime, said:

“Firms must place customers at the heart of their business. Our reforms were designed to ensure advice is based on what is best for the client not the adviser.

“Firms can have had no doubt about the outcomes we were looking for here. Sesame’s approach to inducements, in the face of a clear position from the regulator, undermined the rules in order to look after its own interests.

“If we are to move on in financial services we must see firms focussing on how they achieve the best outcomes for their customers – not adopting practices that avoid our rules.”

In December 2012, new rules, known as the Retail Distribution Review (RDR), were introduced to the financial advice market. Paying commission to advisers for selling a retail investment product was banned. The change was to ensure that customers receive advice which is not influenced by the amount of commission paid to advisers and that product providers compete on the price and quality of their products. This means that prospective investors pay for advice directly.

Additionally, advisory firms have to clearly disclose whether they offer independent or restricted advice and advisers are required to meet certain professional standards.

As a result of the reforms, Sesame decided that its network of advisers would offer a restricted service.

Sesame settled the case at the first opportunity and, as a result, qualified for a 30 per cent discount. Were it not for that Sesame would have been fined £2,282,902, which reflects the fact that this is the fourth time the regulator has had to fine the network.

 

Source: FCA- FCA fines Sesame Ltd for ‘pay-to-play’ arrangements

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