by Susan Edmunds
In announcing their recent merger, Lifetime and Camelot said they had created one of the country's "largest independent financial advisories."
Camelot is 29% owned by Booster and it will have a 15% holding in the new organisation.
Financial adviser Sonnie Bailey, a former financial services lawyer, said he had complained to the Financial Markets Authority about the claim of independence, which he said was misleading and deceptive.
"If we see individuals and companies doing inappropriate things, and we don't take action, to an extent we're complicit and helping to put the industry into disrepute. Sunlight is the best disinfectant."
Camelot chief executive Peter Cave said it provided full disclosure of supplier relationships, inclusive of any conflicts of interest, to all clients as part of standard disclosure requirements.
"Camelot has no production requirements and/or sales quotas with any product or service supplier. Camelot is a DIMS license holder, with Booster being one supplier of investment administration and management services."
A Financial Markets Authority spokesman said: "Through our ongoing monitoring and supervision activity we can review disclosure statements and also promotional materials to ensure they meet the relevant requirements and engage with participants to correct any issues we may find. Under the fair dealing provisions of part 2 in the FMC Act statements cannot be misleading or give a false impression."
Gavin Austin, founder of ABC Compliance, said the claim risked being a breach of section 34 of the Financial Advisers Act, which prohibits a financial adviser from engaging in conduct that is misleading or deceptive, or likely to mislead or deceive.
It is also a code breach - Code standard three of the code of conduction for advisers also requires that advisers do not imply or state that they are independent if a reasonable person would consider they or the services provided were not.
"The code of conduct only applies to authorised financial advisers but the Financial Advisers Act applies to everyone," Austin said.
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I can think of five issues that might need to be untangled. No doubt there are more.
1. DIMS is not financial advice under FAA; I think I am right in saying it's specifically excluded from FAA. It comes under a different part the FMCA already
2. While independence is defined in the Code of Professional Conduct for AFAs, I don't think it is actually defined for DIMS.
3. The Code applies to individuals giving financial advice, not their corporate entities. So prima facie the entity is not subject to the independence clauses of the Code.
4. Going forward there will be a new Code. But certainly I haven't seen anything from them about the issue of independence to date.
5. When the new regime is in place, the entity will be the licence holder and so there may be some different rules that will apply.
My intuitive view is as at today a Camelot AFA who asserted she was independent would have a problem under the Code.
With respect to the firm itself, there may be no specific rules that prevent the entity saying it's independent, but there might be issues around Fair Trading or some other general law, but presumably there would need to be a successful prosecution to make that stick - the courts decide these breaches, not the regulator.
Buy in the popcorn and settle in a comfy armchair - let the games begin in earnest.