The FCA has published a First Supervisory Notice imposing restrictions on the activities of London Court Limited for failings relating to the ‘My Investment Hub’ platform.
Under the terms of the Supervisory Notice dated 22 August 2023, London Court Limited is prohibited from conducting regulated activities for either new clients or new investments. Specifically, it is no longer able to offer any new investments on its platform or any other investment platform, undertake bond administration or ISA Manager responsibilities in respect of any new investments or facilitate any new funds being invested into existing investments listed on the platform (whether those funds originate from new or existing investors). However, it may continue to provide ongoing bond administration or ISA Manager activities solely in relation to investments that had been made before the requirements took effect.
The FCA's concerns
The first reason for the FCA's action was serious concerns that the firm did not have appropriate systems and controls in place to determine the target market for investments offered on the platform, to assess the compatibility of the investments offered with the needs of the clients to whom they are distributed or to ensure that it is in the best interests of the firm's clients to distribute investments to them.
The second reason was serious concerns over the adequacy of the firm's resources, and specifically a concern that the firm's non-financial resources may not be sufficient to enable it to understand or comply with its obligations under the regulatory system.
The Supervisory Notice will be of interest to platform operators as it underlines the importance of due diligence undertaken on investments offered on a platform, including by specific reference to the requirements on distributors under PROD 3. The firm confirmed that it had not undertaken any due diligence in connection with investments it offered on the platform. The firm was also found to have presented materials to investors about investment opportunities where there was a significant risk that those materials were insufficient for an investor to make an informed decision whether to purchase the investment, were inaccurate and/or were potentially misleading.
The Supervisory Notice also emphasises the importance of responding effectively to regulatory intervention, given the FCA found the issues to be similar to concerns previously raised with the firm regarding its approach to communicating and approving financial promotions (leading to the imposition of an initial set of requirements in 2019).
How we can help
Due diligence on investments remains a hot topic for the FCA, in respect of both SIPP operators and platform providers. Burges Salmon's expert financial services lawyers have extensive experience in advising on such matters. If we can help, do contact me, Anna Davis, Matthew Kaltsas-Walker or your usual Burges Salmon contact.
... for the Firm to comply with its obligations... it should carry out due diligence on investments it offers on the Platform to ensure it understands the investments that it is distributing, is able to assess the compatibility of the investments with the needs of its clients and only distribute investments where this is in the best interests of the client.