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FSA/PN/096/2005
16 September 2005

The Financial Services Authority (FSA) has banned Idris Nagaty, formerly a director of Young Ridgway & Associates Limited (in liquidation), for failing to ensure that the firm was organised so that its customers' interests were safeguarded.

The FSA concluded that Mr Nagaty's failings constituted breaches of its Statements of Principle for Approved Persons and has prohibited him from undertaking any significant influence function in any authorised firm until at least 1 September 2007.

The FSA found that Mr Nagaty:

• failed to ensure that the firm was properly organised and managed;
• failed to ensure that sales of precipice bonds made by the firm's advisers were sufficiently scrutinised;
• in practice relied on the firm's sales advisers to select the customer files which he reviewed and conducted compliance visits to advisers in hotels rather than visiting them at their offices, and
• failed to ensure that the firm's complaints handling process was of an adequate standard and that customers who complained were treated fairly as a matter of course.

Margaret Cole, FSA Director of Enforcement, said:

"One of the FSA's statutory objectives is to secure the appropriate degree of protection for consumers and in doing so we have a responsibility to ensure that the senior management of authorised firms adhere to our rules. Our investigations concluded that Idris Nagaty is not a fit and proper person to manage a regulated firm and we took the necessary enforcement action of prohibition as a consequence.

"This case shows that the FSA is not prepared to tolerate senior management failures. Ultimately it is the responsibility of senior staff to ensure that the firm complies with our rules and high level principles of Treating Customers Fairly."

Young Ridgway & Associates Limited, which went into voluntary liquidation in May 2004, provided financial advice to over 10,000 individuals through a team of approximately 30 financial advisers. The firm's principal activity was the sale of investment products to retired individuals with a low or low to medium risk profile. However from 1999 there was a clear pattern of precipice bonds being sold by its advisers, many of which sales generated customer complaints.

Mr Nagaty breached a number of the FSA's Statements of Principle for Approved Persons and failed:

• to act with due skill, care and diligence in carrying out his controlled functions;
• to take reasonable steps to ensure that the business of the firm was organised so that it could be controlled effectively;
• adequately to supervise and monitor the members of the firm's sales force and to take appropriate action to ensure that a member of the firm's investment staff in respect of whom complaints had been received was complying with his obligations, and
• to take reasonable steps to ensure that the business of the firm complied with the relevant requirements and standards of the regulatory system. He failed to ensure that adequate and appropriate systems and controls were in place, particularly with regard to ensuring the suitability of sales and the firm's procedures for the handling of complaints.

Notes for editors

1. On 23 April 2004, at the firm's request, the FSA cancelled Young Ridgway & Associates Limited's Part IV permission to carry on regulated activities, on the ground that the firm's financial resources did not meet the requirements of Threshold Condition 4. On 20 May 2004, the firm entered into voluntary liquidation.
2. The firm's Liquidator may be contacted c/o Vantis plc of Torrington House, 47 Holywell Hill, St Albans, AL1 1HD.
3. The firm has been declared in default by the Financial Services Compensation Scheme (FSCS), the UK’s statutory fund of last resort for customers of authorised financial services firms. Any customer who considers that he or she has a claim against the firm should contact the FSCS: Customer Services on 020 7892 7300. Further information about FSCS can be found on its website: www.fscs.org.uk .
4. From 1 December 2001 until 20 May 2004 Mr Nagaty was approved by the FSA in respect of the following controlled functions: CF1 (director), CF8 (apportionment and oversight), CF10 (compliance oversight) and CF11 (money laundering reporting).
5. The full text of the Final Notice may be found on the FSA website.
6. This is the latest case with an element involving precipice bonds. Others include David M Aaron Ltd in September 2004, Capita Trust Company Ltd in October 2004, and Chase de Vere and Bradford & Bingley in December 2004.
7. 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; the appropriate degree of protection for consumers; and fighting financial crime.
8. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.