Sesame: Advisers creating own portfolios contributed to £6m FCA fine

George Higginson

Sesame chief executive George Higginson says the network’s systems and controls and misselling failings were partly caused by advisers being allowed to create their own investment portfolios.

The Financial Conduct Authority fined Sesame £6m yesterday for failing to ensure investment advice was suitable and for failings in the systems and controls that governed the oversight of its appointed representatives.

Speaking to Fundweb sister publication Money Marketing, Higginson says many of the network’s problems were caused in part by advisers being allowed to construct their own portfolios.

He says: “We cannot have advisers building their own portfolios completely of their own choosing, it is something the industry has driven and it is absolutely ridiculous. It is about time we as an industry grew up about this and put a stop to it.

“We have a centralised investment proposition because I would rather have an investment expert in charge of that than an individual adviser who thinks he is a fund manager.”

Higginson says he noticed systems and controls issues in the business as soon as he arrived in January 2011, something he claims he has spent the last two years trying to address.

He says: “I have been very clear on this since I came in that we need proper systems and controls in but you cannot change that overnight. If the FCA did not believe I was doing this it would not let me be here.

“There are some things that have been done in the past that I was not in agreement with and they will not be done on my watch.”

Since January, Sesame has applied stricter controls over investments permitted for use by appointed representative firms.

The firm now operates a three-tier list of investment solutions – an approved list which ARs are permitted to use freely, a banned list which ARs cannot use and a third list which requires individual compliance clearance on a case-by-case basis.

Around £5.8m of Sesame’s fine was related to business carried out between July 2010 and September 2012. Higginson refused to comment on whether any previous Sesame management changes came as a result of the regulatory failures.