The UK financial services regulator the Financial Conduct Authority (FCA) has banned a husband and wife working as financial advisers for what it called “a lack of integrity”.
The FCA said that it had fined and bannned Mrs Colette Chiesa and banned Mr John Chiesa from working in financial services for “integrity failings”. Mrs Chiesa was also fined £50,000 for attempting to mislead the FCA during an FCA interview.
The husband and wife team were founding partners of Westwood Independent Financial Planners (Westwood), a firm authorised by the FCA to provide personal investment advice.
Following action taken by the Financial Conduct Authority in May 2011 over mis-selling of geared traded endowment policies (GTEP products), Westwood became insolvent and went into sequestration, the term used in Scotland to describe bankruptcy, the FCA said.
Westwood, and therefore Mr and Mrs Chiesa as partners with unlimited liability in Westwood, had significant liabilities arising from numerous valid claims filed with the Financial Ombudsman Service relating to the advice offered on GTEP sales.
However, instead of making the correct payments to compensate clients, the pair funded a lavish lifestyle and also funnelled cash into offshore accounts for their own benefits, paying just a small fraction to fund payments to their creditors, the regulator said.
In late 2011, a Trustee was appointed to establish the value of the Chiesas’ assets and liabilities, so an assessment could be made which would allow them to pay creditors.
‘Inadequate, incomplete and misleading’
Mr and Mrs Chiesa made “inadequate, incomplete and misleading” disclosures to their Trustee about their financial situation during their sequestration, in order to avoid the Trustee inquiring into, and potentially recovering, assets for the benefit of their creditors.
For example, the couple failed to disclose their continued beneficial interest in an unregulated company that was capable of paying over £1m per year into an off-shore remuneration trust for their benefit, the UK regulator pointed.
This trust paid to Mr and Mrs Chiesa a total of approximately £2.6m between April 2012 and December 2014, at an average of over £84,000 per month. The payments were in the form of loans which, in the FCA’s view, were never intended to be repaid.
The couple also failed to disclose that the unregulated company regularly paid significant personal and living expenses on their behalf, including rent on a London address of around £5,000 per month. Between October 2011 and July 2013 Mrs Chiesa spent on average £6,000 per month on clothing, jewellery, interior design, cosmetic dental treatment, travel and her Porsche car.
Between August 2011 and December 2014 Mr Chiesa spent on average £12,000 per month on flying lessons, tennis tickets, football tickets and club membership.
During the sequestration process the Chiesas each paid only £200 per month out of their average monthly dividends of £84,000, towards their creditors.
Customers who lost significant sums due to Westwood’s mis-selling received compensation from the Financial Services Compensation Scheme (FSCS). By late 2016 the FSCS had paid out over £3.8m. Westwood’s liabilities to these customers were therefore borne by the financial services industry, the regulator said.
Mark Steward, executive director of Enforcement and Market Oversight, at the FCA said: “The Chiesas misled their creditors, especially the FSCS, in a calculated way. Their misconduct demonstrates a serious lack of integrity.”
The FCA added that Mr and Mrs Chiesa agreed to settle the case on 15 September 2017. No settlement discount applies to the financial penalty imposed on Mrs Chiesa. The Tribunal issued a decision dismissing Westwood’s reference on 22 November 2013.
The FCA then issued a Final Notice to the firm on 17 December 2013.
On 13 July 2017, the Tribunal issued a decision dismissing Mr and Mrs Chiesa’s application for disclosure of materials within the FCA’s possession evidencing the internal decision-making of the Enforcement Division in commencing and then pursuing regulatory investigations, and, thereafter, regulatory proceedings against Mr and Mrs Chiesa.