Key Insights
- UK financial watchdog has fined three former SVS Securities executives over £350,000 and issued bans for mismanaging customer pension funds totaling £69.1 million.
- Former CEO Kulvir Virk received the harshest penalties with a £215,500 fine and lifetime ban.
- The FCA’s investigation revealed that SVS channeled customer funds into high-risk illiquid bonds
LONDON (MarketsXplora) – Britain’s Financial Conduct Authority (FCA) has imposed fines exceeding £350,000 and issued bans on three former executives of SVS Securities Plc for alleged mismanagement of customer pension funds, marking a significant crackdown on misconduct in the financial services sector.
Kulvir Virk, the former CEO and majority shareholder of the now-defunct discretionary fund manager, faces the harshest penalties with a £215,500 fine and a lifetime ban from the financial services industry. The FCA accused Virk of implementing a complex business model designed to channel customer funds into high-risk illiquid bonds, many linked to SVS directors and Virk’s associates.
Former Finance Director and subsequent CEO Demetrios Hadjigeorgiou and ex-Head of Compliance David Stephen were fined £84,600 and £52,100 respectively, with both barred from senior management roles in financial services. The regulator cited Hadjigeorgiou’s failure to manage conflicts of interest and ensure proper due diligence, while Stephen was found to have neglected his regulatory compliance duties.
“These three individuals and SVS were a central part of a tangled web which concealed the fact that customers’ pension money was being invested into high-risk bonds,” said Therese Chambers, Joint Executive Director of Enforcement and Market Oversight at the FCA.
The regulatory investigation revealed that 879 customers had invested a total of £69.1 million through SVS. These high-risk bonds have since defaulted, leaving investors unlikely to recover more than a fraction of their investments.
SVS Securities entered administration in August 2019, ceasing all operations. The company officially moved from special administration to dissolution in March of the previous year, with the conclusion of its administration recently postponed following a court order.
The FCA’s findings also highlighted concerns about potential conflicts of interest in SVS’s business practices, including undisclosed commission structures and questionable valuation practices during client disinvestments. These practices allegedly generated significant revenue for SVS, totaling £359,800, potentially at the expense of client interests.
“The actions of those in charge threatened the ability of their customers to enjoy a secure and comfortable retirement. This kind of behavior has life-changing consequences for consumers,” Chambers emphasized.
While Virk’s penalties are final, Hadjigeorgiou and Stephen have referred their Decision Notices to the Upper Tribunal, where they will present their cases. Consequently, the findings against these two individuals remain provisional pending the Tribunal’s decision.