The penalty is made up of £245,000 for failing relating to Keydata and £5,786,200 for systems and controls weaknesses.
All the problems related to the oversight of appointed representatives (ARs) which are individuals or firms that draw authorisation from a principal. The principal in this case is Sesame which must be held accountable for the poor practice.
Between July 2005 and June 2009, Sesame advised 426 customers to invest over £6.1m in Keydata settlement products.
However, the vast majority of Sesame's sales were flawed because:
• there was a mismatch between customers' stated investment objectives, attitude to risk and the product sold;
• the suitability letters provided to customers stated incorrectly that income or capital growth was guaranteed; and/or
• customers were advised incorrectly that the Keydata life settlement products were low risk. This was despite Sesame's own view that the Keydata life settlement products presented investors with "a considerable amount of risk". While it issued its ARs with this view, it failed to take any further steps to prevent and/or identify mis-selling.
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The FCA said that in every Keydata case it reviewed, Sesame had failed to explain to customers all of the key risks and failed to give a balanced view of the advantages and disadvantages.
As well as this, between July 2010 and September 2012, Sesame failed to take reasonable care to organise its affairs responsibly and failed to improve oversight of its ARs. The firm failed to monitor and identify sales of products and funds which were not suitable for most customers, had problems with record-keeping and file reviews were not suitably robust.
It also found language used internally within Sesame supported a view that customers were ARs rather than retail customers.
Tracey McDermott, FCA director of enforcement and financial crime, said: "Sesame is one of the largest and most well-known financial services networks in the UK responsible for the oversight of some 1,220 ARs. It describes itself as 'perfectly placed to deliver expert guidance and services' but the failings in this case fall far short of that. The weaknesses in Sesame's systems and controls show that there was an ongoing risk that unsuitable advice could be given by Sesame's ARs.
"By allowing ARs to use their regulatory permission to operate, Principals are effectively vouching for them. Therefore they must keep a close eye on what their ARs do and keep them up to date with the regulator's expectations. Critically, they must also act decisively when things go wrong. Sesame failed on all of these counts."
Sesame agreed to settle the case early which entitled them to a 30 per cent discount. Without this the fine would have been £8.6m.

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