Sesame Limited

FCA action

fines

4

in fines

£8.25m

most recent

October 2014

• Fined £1.6m on 29 October 2014

  On 29 October 2014, the FCA imposed on Sesame Limited (Sesame) a financial penalty of £1,598,000 (discounted from £2,282,902 for early settlement) in respect of breaches of Principle 8 of the FCA's Principles for Businesses, and 2.3.1R of the Conduct of Business Sourcebook rules by failing to manage fairly a conflict of interest between its commercial interests and its customers' best interests. The FCA has found that during the Relevant Period (namely 1 January 2012 to 31 January 2014) Sesame: (a)Effectively set up a 'pay to play' arrangement which undermined the objectives of the Retail Distribution Review; (b)failed to manage fairly a conflict of interest between its commercial interests and its customers' best interests; and (c)failed to conduct its selection process for its Restricted Advice Panels in accordance with its duty to act in its clients' best interests. A copy of the Final Notice is displayed on the FCA's website.

• Fined £6.03m on 26 June 2013

  The Financial Conduct Authority (the FCA) has issued a Final Notice against Sesame Limited of Independence House, Holly Bank Road, Huddersfield, HD3 3HN which imposed a financial penalty of £6,031,200. The FCA's action took effect on 5 June 2013. A copy of the Final Notice is displayed on the FCA's web site and can be accessed using the following link: http://www.fca.org.uk/your-fca/documents/final-notices/2013/sesame-limited The reason for this action is that the Firm breached Principle 9 and Principle 3 of the FSA's Principles for Businesses and certain Conduct of Business and Conduct of Business Sourcebook rules in failing to ensure that investment advice given to its customers was suitable; and a failing in the systems and controls that governed the oversight of its appointed representatives.

• Fined £330,000 on 19 April 2007

  On 19 April 2007 the FSA imposed a financial penalty of £330,000 on Sesame in respect of breaches of: 1. Principles 2 and 6 of the FSA's Principles for Businesses (FSA Principles); and 2. FSA rules 1.2.1, 1.2.16 and 1.2.22 in the part of the FSA Handbook entitled Dispute Resolution: Complaints (DISP). These breaches occurred between March 2003 and October 2004 in respect of Structured Capital at Risk Products (SCARPs) complaints handling. Sesame acted in contravention of FSA's Principle 2 by failing to conduct its SCARPs complaints handling with due skill, care and diligence in that: 1. Sesame's complaints department failed consistently to conduct adequate investigations or make further enquiries and rejected SCARPs complaints without sufficient evidence; 2. Although two dedicated SCARPs complaint handlers were appointed, Sesame failed to provide appropriate guidance and training to complaints handlers to ensure that SCARPs complaints were handled fairly and consistently; and 3. Sesame failed to monitor that its complaints handlers were following its procedures consistently. Sesame has acted in contravention of FSA's Principle 6 by failing to pay due regard to the interests of its customers and treat them fairly during the relevant period, in that: 1. complaints of approximately 350 customers who had been mis-sold SCARPs by Sesame's legacy networks and had lost nearly £5.9 million were rejected by Sesame without sufficient evidence; and 2. Sesame did not take adequate action (e.g. to review its internal complaints procedures, provide appropriate guidance and training to its complaints handlers and monitor that procedures were followed) when it became aware of the increased risk of receiving a significant number of SCARPs complaints; not least, as a result of being made aware that that different parts of the group had applied different risk ratings to SCARPs. Sesame's failings are viewed by the FSA as being particularly serious for the following reasons: 1. in many cases SCARPs are highly complex investment products carrying a high level of investment risk. Such products would not have been suitable for customers who were either averse to risk or had a low tolerance to risk; 2. SCARPs customers whose complaints were rejected inappropriately were exposed to the risk that they would not receive appropriate compensation; 3. some of Sesame's SCARPs sales were made to retired customers who were not in a position to replace capital lost due to stock market downturns. Complaint handlers failed to take this into consideration when assessing whether customers had been mis-sold SCARPs; 4. Sesame was aware that SCARPs carried a risk of capital loss and that differences in the risk ratings applied by its legacy networks could result in SCARPs complaints being handled inconsistently. However, Sesame failed to take appropriate steps to ensure that appropriate guidance was given to the complaints handlers to ensure that these risks were taken into account so that complaints were handled fairly and consistently; and 5. the failings occurred during a period when there was a high level of industry awareness of the importance of fair and adequate complaint handling. Despite a number of regulatory publications which detailed the risks associated with SCARPs Sesame failed to ensure that it handled SCARPs complaints consistently and fairly. Sesame's failings in relation to SCARPs were identified by the FSA as a result of its thematic work on SCARPs. If the FSA had not identified these failings there was a material risk that the problems would not have been identified and appropriate compensation would not have been paid. While the failings in this case merit a financial penalty, the FSA recognises that they have been mitigated by the following: 1. Sesame conducted a prompt review of all SCARPs complaints in order to identify complaints where the complaint handling had not been conducted in an adequate manner. Sesameid compensation to customers where the complaints handling process was inadequate and the original SCARP was mis-sold; 2. Sesame co-operated fully with the FSA during the course of the investigation; 3. Following the FSA's report on its SCARPs thematic review Sesame, promptly and on its own initiative, engaged leading firms of accountants and solicitors to advise it on its procedures for handling SCARPs complaints and to train its complaint handlers in the handling of SCARPs complaints. Sesame organised a team of complaint handlers dedicated to SCARPs complaints; and 4. Immediately upon receipt of the findings of the FSA's thematic review in August 2004, Sesame established a specialist complaints handling team for SCARPs complaints. Sesame has satisfied the FSA that its current complaint handling procedures in relation to SCARPs are of satisfactory quality. Without this level of co-operation or mitigation, the financial penalty would have been substantially higher.

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