Interdependence Ltd pays £125,000 for poor supervision

The FSA fined Interdependence Ltd, an intermediary which operates an IFA network, £125,000 last month for “serious failings” in its supervision of appointed representatives (ARs) who advised customers on early vesting of pension benefits in the period 1999 to March 2002. During this interval about half of the firm’s ARs wrote some pension fund withdrawal (PFW) contracts, which allowed customers to take up to 25% of the fund as a cash sum and to defer purchase of an annuity. In 1996, in response to PIA guidance, Interdependence had set up a system that required its ARs to submit prospective PFW business to its pension specialists for prior approval. However, the corresponding checking mechanism was not implemented effectively. Up until July 2000, the ARs provided only basic information about the transactions and oversight concentrated on the likely critical yield. From July 2000 to March 2002 supervision by Interdependence was deemed inadequate. The pre-approval system does not appear to have been subject to any efficiency review during the period and there was no method to guarantee that ARs put their PFW cases forward for sign-off or to register cases that were not submitted. In 90% of all PFW cases in the period at issue, evidence that the appropriate transactions were put forward for pre-approval was missing. In a number of cases that were refused approval, the AR wrote the business anyway. Interdependence’s monitoring was not sufficiently close to pick up such behaviour and its Business Assessment Team (BAT) judged individual AR risk incorrectly. Its Professional Standards Visit Team (PSV) failed to supply senior management with details on problem ARs and sometimes overlooked significant regulatory weaknesses, including non-compliance with the pre-approval procedure.