ROYAL Liver has been ordered to repay almost £8m to customers after a stern censure by industry regulator the Financial Services Authority.
The public rebuke comes at a time when the Pier Head-based financial services company is locked in talks with fellow-mutual society Royal London to rescue the business formed in Liverpool 160 years ago.
It follows an FSA investigation of Royal Liver subsidiary Park Row, which concluded that it was guilty of a number of serious failings, including a failure to ensure its advisers were giving customers suitable advice “despite the real risk of customer harm.”
Peter Sprung, former chief executive of Park Row, was also fined £49,000 by the FSA and effectively banned from holding significant positions with any company for five years.
Mr Sprung left the firm at the end of January.
The FSA also revealed that it would have fined Park Row £2.4m, had it not been in the process of being wound down by its parent group.
Royal Liver bought Park Row, a firm of independent financial advisers (IFAs), in 2003.
It provided advice on a range of financial products to customers, but, after a group-wide review launched last September, it is now being wound down towards closure after recording losses of £2.17m in the six months to June, 2008.
In its report, the FSA revealed that, between January, 2007, and January, 2009, a number of serious failings by Park Row were identified in relation to the suitability of its customer advice.
These included a failure to ensure its advisers offered suitable advice to customers at all times and for all products and failing to ensure its systems and controls were adequate.
The FSA added that Park Row, based in Leeds, consistently failed to take action to rectify these failings, despite the fact that concerns were highlighted to the firm on a number of occasions.
It also condemned Mr Sprung, saying his conduct “fell short of what was expected of a senior manager of an authorised firm.”
He was criticised for allowing advisers to sometimes provide advice in relation to certain products on which they were not authorised to advise.
It was also found that there was a danger that some advisers may have selected products based on the fact that they would receive higher commission.
Margaret Cole, FSA director of enforcement, said: “Park Row failed to take adequate action to address failings in systems and controls to ensure its advisers were giving customers suitable advice, despite the real risk of customer harm.
“The FSA has secured funding estimated at between £5m and £7.8m to ensure that where customers were not given suitable advice, or where Park Row can not demonstrate suitable advice, they will receive redress.”
She added: “As chief executive, Peter Sprung was responsible for ensuring that there were appropriate systems and controls at the firm and that it treated its customers fairly.
“He failed to do this despite being given the opportunity to do so on a number of occasions.”
The FSA also confirmed that Mr Sprung would have been fined £70,000, but as he co-operated fully with the regulator and settled at an early stage he qualified for a 30% discount.
A Royal Liver spokesman said: “Prior to the FSA’s final notice, Park Row initiated a series of reviews to determine the number of incidents in which the suitability of sales and IFAs’ record keeping should be addressed. These reviews will continue throughout Park Row’s wind-down process which began in autumn 2009 and which saw the transfer of its advisers to other firms begin at the end of last year.”
He added: “While Park Row continues with the winding down of its operational business, it, along with Royal Liver, remains in dialogue with the FSA around the issues raised and is committed to contacting customers who may have been affected and taking remedial actions where appropriate.”
He confirmed: “Peter Sprung stepped down as Park Row chief executive on January 31, 2010.”
