FCA imposes restrictions on investment firm

FCA has published a first supervisory notice to Pello Capital Limited imposing various requirements on it with immediate effect (from the date of its publication on 15 November), as a result of concerns about the firm’s ability to meet the Threshold Conditions. The firm is a limited licence firm with permission to carry out a range of investment related activities, including managing investments. :

• banning it from carrying out any regulated activities except those that facilitate transfer of clients to other firms until it has both satisfied FCA that is has appropriate financial and non-financial resources and that it has implemented and embedded all the recommendations of a skilled person’s report from July;
• banning it from doing anything to deplete its resources other than the disposal of assets of low value in the ordinary course of business;
• requiring it to secure and keep all books and records relating to its regulated activities in a way that they can be provided promptly to the FCA on its request;
• requiring it to display a form of the notice on its website;
• requiring it to write to all relevant clients, their agents, platforms it uses, exchanges of which it is a member and custodians of all assets it manages; and
• requiring an SMF of the firm to confirm to FCA on a weekly basis that the firm is complying with the requirements.

FCA is concerned that the firm is breaching Principles 3, 4 and 11 in several respects. The firm had undergone a s166 review that identified material and wide ranging issues with its risk management controls and governance arrangements and led to a significant number of recommendations which the firm has not made demonstrable progress in implementing. It is now seeking more funding and additional s166 support to carry out the necessary remedial work.  FCA is concerned that its lack of controls are leading to risks of financial crime or poor market conduct.  It is also concerned that the firm’s agreement with its current custodian is shortly to end, there is no identified replacement and the firm does not have permission to hold client money and assets. Additionally, the firm owes money to the skilled person and appears to have failed to provide FCA with key information or provided misleading information.