Integrity Product Provider?
Integrity Product Provider?
FCA Providers & Distributors
Providers and Distributors
What if the definition of
provider and distributor is not
The FCA is clear on responsibility here, saying that ‘Firms
should look at the roles they play in providing and distributing a
product, and work out which responsibilities apply. Ultimately,
responsibility flows from the role the firm undertakes – not the
label attached to it’
Its what a firm does that defines their role
(in accordance with article 3(1) of the Regulated Activities Order (Interpretation)) any
form of buying
, including acquiring for valuable consideration.
(1) (in accordance with the definition of 'qualifying contract of insurance' in article 3(1) of the Regulated Activities Order) a long-term insurance contract (other than a reinsurance contract and a pure protection contract); and
(a) a long-term care insurance contract; and
(b) (in COBS) a pension policy;
unless (2) or (3) apply.
(2) In PERG (other than in relation to a firm's permission - see Note 5B to Table 1 in Annex 2, PERG 2) and for the purposes of the financial promotion rules in COBS 4, life policy does not include a long-term care insurance contract.
(3) In relation to a firm's permission:
(a) (in accordance with the definition of 'qualifying contract of insurance' in article 3(1) of the Regulated Activities Order) a long-term insurance contract (other than a reinsurance contract and a pure protection contract);
(b) a long-term care insurance contract which is a pure protection contract; and
(c) a pension term assurance policy.
(in accordance with article 3(1) of the Regulated Activities Order (Interpretation)):
(a) a life policy (except a long-term care insurance contract which is not a qualifying contract of insurance);
(b) an option, future, contract for differences or funeral plan contract;
(c) rights to or interests in an investment falling within (a) or (b).
Absence of holding out etc.
Dealing in investments as principal
(1) Of particular significance is the exclusion in article 15 of the Regulated Activities Order (Absence of holding out etc). This applies where dealing in investments as principal involves entering into transactions relating to any security or assigning rights under a life policy (or rights or interests in such a contract). In effect, it superimposes an additional condition that must be met before a person's activities become regulated activities. The additional condition is that a person must hold himself out as making a market in the relevant specified investments or as being in the business of dealing in them, or he must regularly solicit members of the public with the purpose of inducing them to deal. This exclusion does not apply to dealing activities that relate to any contractually based investment except the assigning of rights under a life policy.
Integrity Maximiser Solutions Brochures
The brochures say "Integrity specialises in bringing solutions to the with profits market"
... "we arrange investment products"
"The Cash Maximiser is an innovative way to increase the growth and income potential from the cash invested by combining it with a portfolio of traded endowment policies"
"Your cash does not pass through Integrity"
"The cash Maximiser is a leveraged investment plan"
"Your Questions Answered"
"How long have geared traded endowment portfolios existed?"
"Approximately 15 years" "..... now the concept is widely available"
The brochure does not say Integrity was providing the GTEP.
HBOS did issue facility letters and had a TEP Loan Facility brochure.
Template Maximiser Solutions Suitability Letters
Letters to and from FSA Katrina Stamp CF10
FSA Final Notices
In the FSA Final Notices of the five IFA firms the FSA say GTEP Plan repeatedly, there is not one mention of an Integrity GTEP Product
Peter Yeldon Integrity Liquidator
The FSA asked Integrity in liquidation to pay a fine of £350,000, no fine was ever agreed to by the Integrity directors, if the firm was not in liquidation the matter would have been heard at the Upper Tribunal.
The fine was rejected by Peter Yeldon (the liquidator) who accepted that Integrity had breached COBS 7 & 9 and accepted a censure, the Integrity directors disagree with the |FSAs assertions.
HBOS NBS were offering GTEPs for 15 years before Integrity signed the HBOS SLA in 2003
Other GTEP providers were:
Bank of Ireland
Other GTEP introducers to HBOS and NBS
I P T C
Integrity) carried analysis
on the probability of asset share growth of TEP portfolios rolling up faster than a rolled up loan, the loan to assets at outset was circa 65%. The difference between the rolled up asset shares and loan balance I term as the differential, a 30 year analysis was carried out by me together with WL Consulting an actuarial firm. HBOS and NBS had never to my knowledge had GTEPs breach prior to 2003.
Integrity did not design the GTEP product
GTEPs had existed since 1990 via HBOS.
Integrity offered solutions that were offered to IFAs. the solutions relied on cash flows generated by the differential.
Some examples of the solutions
Cash flow for businesses
Fund care fees expenses
Fund mortgage interest costs
SLAs Other Agreements with HBOS
HBOS NBS were offering a Platform service as product providers
HBOS NBS had permissions
Arranging safeguarding and administration of assets
Integrity did not have these permissions
Product Build Phase
Investment capital was held by HBOS NBS appointed law firms on behalf of HBOS NBS which I consider to be the Product Providers who offered a platform account to hold TEPs and bond
FSA Product Provider definition
The FCA Handbook glossary as follows:
“a firm which is: (i) a long-term insurer; (ii) a friendly society; (iii) the operator of a regulated collective investment scheme or an investment trust savings scheme; or
(iv) the operator of a personal pension scheme or stakeholder pension scheme.”
Integrity did not provide any of these services described in the FSA handbook glossary
Westwood Upper Tribunal
The GTEP plan is a single product
Upper Tribunal held that the COB Rules and FCA Principles applied to the GTEP plan (see paragraphs 21-28 of the judgment).
I note that paragraph 25 of the Upper Tribunal’s decision made clear that (on the facts of that case) the GTEP plan was a single product and recommended as such and the gearing was an important and necessary part of the GTEP plan (this was in the context of whether Westwood carried out a regulated activity when it advised clients in respect of the GTEP plan)
The Integrity Final Notice
Was never challenged at the Upper Tribunal over the FSAs assertions that Integrity had breached COBS 7 & 9 as a product provider or had treated its direct customers unfairly.
Integrity had quarterly external compliance audits provided by IFA Professional, none of the compliance audits warned me as CEO that direct customers were being treated unfairly or that literature was misleading.
Integrity Introducing to HBOS NBS
Advice was given by IFAs
PERG 8.33 Introducing
There are excluded from article 25(2) arrangements where
There are excluded from article 25(2) arrangements where—
(a)they are arrangements under which persons (“clients”) will be introduced to another person;
(b)the person to whom introductions are to be made is—
(i)an authorised person;
(ii)an exempt person acting in the course of a business comprising a regulated activity in relation to which he is exempt; or
(iii)a person who is not unlawfully carrying on regulated activities in the United Kingdom and whose ordinary business involves him in engaging in an activity of the kind specified by any of articles 14, 21, 25, 37, 40, 45, 51, 52 and 53 (or, so far as relevant to any of those articles, article 64), or would do so apart from any exclusion from any of those articles made by this Order; and
(c)the introduction is made with a view to the provision of independent advice or the independent exercise of discretion in relation to investments generally or in relation to any class of investments to which the arrangements relate.
Integrity Maximiser Solution Brochures
Integrity acted as an "Independent Contractor"
"vicarious liability" does not apply as the Product Providers have breached COBS and treated their customers unfairly. Integrity was servant to their master, the Product Providers. But Integrity acted in good faith.
Arranging IFAs HBOS NBS
IFA Final Notices No Integrity GTEP Product
Patrick Green QC Product Provider
Notes Re Patrick Green