Insolvent trust firm would have been fined

A TRUST COMPANY which helped to manage some armed forces pensions has been found to have failings in relation to its compliance and competence.


Certes Capital Limited, formerly Marlborough Pension Trustees Limited, has gone into voluntary liquidation and is insolvent.

The Guernsey Financial Services Commission, which investigated the company’s failings, said it would have fined the business £30,000 if it was still operating.

The trust was working with corporate and private clients to provide pensions and savings options and in October 2016 Certes became a managed trust company of another licensee under the fiduciaries law.

The licensee then commissioned a review of investments held by pension schemes administered by Certes, which raised a number of concerns between August 2009 and October 2016.

They centred around pension scheme members, introduced by one introducer, who were mainly former UK military personnel and who had transferred their UK Government defined benefit pension scheme to a defined contribution scheme administered by Certes.

Certes, at the prompting of the licensee, reported these concerns to the commission in May 2017.

The GFSC report found that Certes had appointed the introducer as the investment manager for the scheme members’ accounts, despite not being regulated.

A Certes file note stated that the introducer had considerable UK pension experience, but there was little evidence for this.

‘Given that Certes was aware that the introducer was not regulated, it is not clear, on the evidence that was provided to the commission, how Certes reached the conclusion that the introducer was suitably qualified and competent to be appointed as investment manager,’ the GFSC report stated.

‘Certes subsequently removed the introducer as investment manager for scheme members’ accounts. The commission was informed that the introducer was not performing in a sufficient way as investment manager and Certes felt it needed to appoint a qualified investment house.’

The introducer was replaced with an Isle of Man regulated investment management firm, on the recommendation of the introducer.

There was no evidence to demonstrate whether any compliance checks or due diligence was undertaken into the new investment manager.

‘Certes failed to demonstrate that appropriate consideration or investigation was undertaken in respect of the new investment manager’s qualifications and competence,’ the GFSC report stated.

The situation raised due diligence concerns.

The due diligence forms and compliance checks on the introducer were not completed prior to the acceptance of the introducer and were still being completed after it had been accepted.

Certes also did not check whether the introducer was suitable or competent for the role.

Concerns were raised that Certes’ annual pension fund valuations were not accurate, as some funds had been suspended.

‘The suspended funds had been given a full market value and not all assets had been revalued on a regular basis,’ the report stated.

‘Accordingly, the annual valuations were potentially misleading and suggestive that the investments were performing better than they were.’

A review also found that underlying investments appeared to be in high risk investments, despite most members requesting a low or medium risk strategy.

‘Certes therefore failed to ensure that the investments were managed professionally and responsibly,’ the report stated.

The GFSC noted that Certes had received a number of complaints from former members of the UK Government pension schemes about the performance of their pension.It had then made minor efforts to rectify the issues identified, although it did not take sufficient steps to effectively remedy the issues.

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