Signatures in the Adviser's Handwriting: A Paraplanner's Dilemma
Nadia is a paraplanner at a twelve-adviser IFA, Fairview Financial Planning Ltd. While preparing for a file review she notices that, in nine of the last twenty new client files, the risk-tolerance questionnaire and the fact-find are dated the same day but completed in the adviser's handwriting, and three client signatures look identical. The adviser, Ray, says the clients 'gave their answers over the phone and were happy for me to write it up', and that the compliance officer 'knows I do this'. Nadia checks and finds no file notes of those calls, and two of the nine clients are over 80 with significant pension pots. Fairview's file review is due in three weeks and Ray is the firm's second-highest earner. Nadia is a certification employee, has just passed R01, and is worried about her own position. The compliance officer is also Ray's brother-in-law.
1. What rules and conduct obligations are engaged by Ray's practices, and what are the risks to the firm?
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Suitability and record-keeping. The firm must obtain the information necessary to assess suitability, including the client's attitude to risk and capacity for loss. Completing questionnaires in the client's place, with no contemporaneous call notes, means the firm cannot demonstrate that the recorded risk profile is the client's own. That breaches the suitability rules and the record-keeping requirements, and it undermines the Consumer Duty outcome on consumer understanding.
Conduct rules. Ray's conduct engages the duty to act with integrity, to act with due skill, care and diligence, and to pay due regard to customers' interests and treat them fairly. Apparent copying of client signatures, if that is what has happened, goes beyond poor administration and may amount to falsifying records - potentially a criminal offence and, at the least, a serious fitness and propriety issue.
Risks to Fairview:
- Clients may have been placed in unsuitable investments on the basis of an invented risk profile, creating redress liabilities and potential Financial Ombudsman complaints.
- The firm's notification obligations to the FCA, and possible restrictions on the firm's permissions.
- The compliance officer's family relationship with Ray undermines the independence of the oversight function and may mean the firm's systems and controls are not effective.
- Reputational damage and possible loss of professional indemnity cover if the conduct is not reported.
2. What should Nadia do, in what order, and what protection does she have?
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Nadia should act promptly and in a documented way, but she should not alter, complete or destroy any file.
Sequence:
- Preserve the evidence: keep a factual note of what she has seen, with file references and dates, and take copies of what she is entitled to access.
- Raise it in writing with the compliance oversight senior manager. Given the family relationship, she should state the concern about independence and ask for it to be escalated to another senior manager or the governing body.
- If no adequate response is received within a short, reasonable period, use the firm's whistleblowing channel. Firms are required to have internal arrangements for employees to raise concerns, and Nadia should ask for her report to be logged.
- If the firm still does not act, she can report directly to the FCA. She should not discuss the matter with clients unless instructed to by the firm or advised otherwise.
- She must not sign off any suitability report or client file that relies on the questionable records, and she should decline if asked to do so.
Protection: as a worker making a protected disclosure she has protection against detriment and dismissal. As a certification employee she may also be asked to attest to her own fitness and propriety; raising a genuine concern and refusing to participate in falsification supports her position rather than damaging it.
3. What should the firm do once the issue is confirmed?
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Immediate steps:
- Suspend further business from Ray pending investigation, and appoint an investigator independent of him and of the compliance officer.
- Review all twenty files, not just the nine, and reconstruct the clients' actual risk profiles by contacting each client directly - especially the two clients over 80 with large pension pots.
- Stop any pending transactions and check whether any switches or transfers have already been executed on the basis of the questionable information.
Remedial steps:
- Where a client's true risk profile differs from the one recorded, reassess the suitability of the advice and offer to put the client back in the position they would have been in, with interest where appropriate. Notify affected clients clearly.
- Assess Ray's fitness and propriety and whether he should remain certified; consider whether the matter is reportable to the FCA and make the notification promptly and openly.
- Review the compliance oversight arrangement, including the family relationship, and consider whether the SMF16 function needs to be held differently.
- Consider disciplinary action and, if the signatures were copied without authority, whether to involve the police or the firm's insurers.
- Record all decisions and the rationale, so the firm can demonstrate to the FCA that it identified, escalated and remediated the issue.