The Financial Conduct Authority said on 28 September it had fined and banned two financial advisers over switching retirement pots from safe to high risk unsuitable investments, in a case the regulator called "one of the worst" it has seen.
The UK regulator fined Darren Reynolds of Active Wealth more than £2.2m and banned him from working in financial services. His associate Andrew Deeney was also fined £397,400 and banned.
Reynolds "dishonestly" established, maintained, and concealed a business model which recommended products which produced the highest commission for the adviser rather than the best outcome for the client. Reynolds did this so he could receive £1m in prohibited commission payments.
The FCA confirmed these payments were funnelled via companies connected to Reynolds and were intentionally designed to disguise their true origins.
Reynolds advised more than 670 clients, including 150 British Steel Pension Scheme members who had no option but to decide about their pension, to put their money into investments that he knew were not suitable for them.
The watchdog added that Reynolds misled the FCA and allowed the destruction of evidence relevant to its investigation.
Meanwhile, Deeney made personal financial gains exceeding £200,000 by providing Active Wealth customers with unsuitable advice so that he could dishonestly receive banned commission payments.
This then continued at Fortuna Wealth Management, a firm Deeney established which purchased Active Wealth's goodwill and client database, where he aimed to mislead the FCA about his role in advising customers to invest in high-risk investments.
By June 2023, the Financial Services Compensation Scheme (FSCS) had paid compensation of more than £19.8m to 511 of Active Wealth's former clients. At least 270 clients suffered losses over the FSCS' compensation cap of £50,000. Were it not for this cap then the compensation amount would be over £42.3m.
Reynolds applied for privacy in relation to his notice, but the Upper Tribunal refused that application on 20 September 2023. Deeney settled his case with the FCA in May 2022.
Joint executive director of enforcement and market oversight Therese Chambers said: "This is one of the worst cases we have seen. Reynolds, who allowed evidence to be destroyed and who has consistently sought to evade accountability, and Deeney, lied and lied again.
"First, to dupe people into leaving safe pension schemes and placing money meant for their retirement in unsuitable, high-risk investments. Then to try and hide their misconduct from us.
"Their motivation was based on self-enrichment. Such people have no place in our industry."
