FSA to ban directors for avoiding Pension Review liabilities

The Tribunal considered that these actions demonstrated that Mr Rayner and Mr Townsend were not fit and proper to act as approved persons, and they should be prohibited from carrying out any controlled function in relation to any regulated activity carried on by any authorised person.

In October 2000, Mr Rayner and Mr Townsend sold the assets including the client base of TRAL to another IFA firm. They took profits of 370,000 from that sale leaving TRAL with inadequate resources to meet its Pension Review obligations and entered into consultancy agreements with a subsidiary of the Group to which the other IFA firm also belonged. The sale took place despite concerns raised by the FSA with the individuals that TRAL was not complying with its Pension Review obligations.

In October 2003, the FSA took disciplinary action against Mr Rayner and Mr Townsend, however the individuals referred the FSA's decision to prohibit them to the Tribunal. The Tribunal's decision, published today, confirmed the FSA's decision to prohibit them.

Ian Mason, Head of Department in the Enforcement Division, at the FSA, said:

"This is a warning to other individuals who asset strip regulated firms with outstanding obligations to consumers - they will face enforcement action and are not welcome in this industry.

"When Mr Townsend and Mr Rayner sold the business and took the profit, they did so without any proper regard for the Pensions Review and without disclosing their actions openly and honestly to us at the time. Prohibition orders against these two individuals are the most effective way to ensure that consumers are protected in the future. "

TRAL was required to review its priority cases (Phase 1) between 1995 and 1998. By 21 January 1999, Phase 1 of the review was not adequately completed and the FSA continued to discuss the review with TRAL during 1999 and 2000. On 9 August 2000, Mr Townsend and Mr Rayner were told that the failures in the Pensions Review would be referred to the FSA's Enforcement Division.

In 2000, Mr Rayner and Mr Townsend made arrangements to sell the assets of TRAL, including its client base to another IFA firm. On 20 October 2000, only a week after a FSA visit, the Asset Purchase Agreement disposing of these assets to this firm for 400,000 was completed by Mr Townsend and Mr Rayner, leaving the liabilities from the Pension Review behind. The individuals then entered into consultancy agreements with a subsidiary of the Group to which the other IFA firm also belonged.

Mr Townsend and Mr Rayner claimed that the proceeds of sale belonged to them rather than TRAL and they received the proceeds, leaving TRAL with insufficient resources to complete the Pensions Review.

Although some work on the Pension Review continued, TRAL ceased trading in October 2000. On 24 May 2001, Mr Rayner confirmed to the Pensions Review Unit of the Personal Investment Authority (PIA) that the company had no resources to continue to meet its Pension Review obligations.

Although Mr Townsend and Mr Rayner were in regular contact with the FSA at the time, the regulators were not told about the sale until a letter was received on 15 November 2000 from the firm with which Mr Townsend and Mr Rayner had entered into consultancy agreements.

The FSA began its investigation on 14 June 2002 and, in the course of that investigation, the directors were requested to make the monies available to TRAL to enable it to complete its Pension Review. The directors declined to do so. The FSA concluded that by their actions the individuals had placed their own interests above those of their clients and demonstrated a willingness to disregard their obligations to the regulator and to consumers.

Notes for editors

1. The full text of the Tribunal's decision dated 6 August 2000 is available on the Finance and Tax Tribunals website.

2. Townsend Rayner Associates Ltd (TRAL) was established in 1989 when the business of Townsend & Bugg Financial Services was transferred to a limited company formed for that purpose. The company changed its name to Townsend Rayner Associates Ltd in 1996. The business provided Independent Financial Advice, selling investments, pensions and life assurance. Mr Townsend and Mr Rayner were directors of the company and were registered with the Personal Investments Authority as Registered Individuals.

3. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection of consumers; and fighting financial crime.

4. The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.