Charterhouse pays £122,500 for lack of discretion

Charterhouse Consulting Wealth Management Ltd, a small multi-tied financial adviser has been fined £122,500 for switching clients between funds in a bond product without permission to carry on discretionary portfolio management. An enforcement investigation found that approximately 160 clients were contacted regularly by email to advise them that the firm was about to make a mass transfer into a different fund. Charterhouse’s practice was to send emails before 6.30am indicating the intention to switch funds. Clients were only expected to respond if they objected to the change but normally this had to occur by 8am the same day. The time was “unreasonably short” says the Final Notice and no negative replies were received. There was no system in place to monitor if clients did email back and the absence of a need for clear instructions before making any switch meant Charterhouse was in effect taking a discretionary role in managing investments. Risk warnings about the proposed fund switches in the emails to clients were either limited or not included. Each email should have set out the risk profile of the prospective funds for purchase with detail on how they corresponded to the client’s own risk preference.