Watchdog fines Sesame £6m for advice failings

THE Financial Conduct Authority (FCA) has fined investment firm Sesame £6m for selling life insurance settlement products known as death bonds to customers without spelling out the risks.

The regulator said Sesame advised 426 customers to invest over £6.1m in life settlement products provided by investment company Keydata between July 2005 and June 2009, with the vast majority of sales unsuitable for consumers.

Sesame told customers incorrectly that income or capital growth was guaranteed and that the Keydata products were low risk even though Sesame itself thought they presented a considerable amount of risk, the FCA said in a statement.

Keydata, which went bust in June 2009, had promised steady returns on the bonds linked to second-hand U.S. life insurance policies.

Tracey McDermott, FCA director of enforcement, said weaknesses in Sesame’s systems and controls showed there was an ongoing risk that unsuitable advice could be given by its representatives.

“Sesame is one of the largest and most well-known financial services networks in the UK responsible for the oversight of some 1,220 appointed representatives,” McDermott said.

“It describes itself as ‘perfectly placed to deliver expert guidance and services’ but the failings in this case fall far short of that,” McDermott said.

She said Sesame failed to supervise its representatives properly or act when things went wrong.

Sesame said it regretted these past issues and had undertaken a review to ensure that any customer that received unsuitable advice on Keydata products had been compensated.

“We are working hard to ensure lessons are learnt and corrective actions implemented,” Sesame Bankhall Group CEO George Higginson said.

Sesame qualified for a 30 per cent discount on its fine because it agreed to settle at an early stage in the case.