The FCA has decided to ban and fine three individuals involved in running SVS Securities Plc (SVS), a discretionary fund manager.

SVS was responsible for managing investments on behalf of its customers. According to FCA regulations, the firm was obligated to act in its customers’ best interests and avoid any conflicts of interest that could affect its responsibilities.

Kulvir Virk, the former CEO and majority shareholder, recklessly led SVS to adopt a complex business model designed to channel customer funds into high-risk, illiquid bonds. These bonds were controlled by SVS directors and a close business associate of Mr. Virk. The model included inducements to SVS and unauthorized introducers, offering undisclosed commissions of up to 12% of customers’ investments. This approach created systematic conflicts of interest and prioritized SVS’s income over the best interests of its customers.

A total of 879 customers invested £69.1 million. The bonds they were directed to by SVS have since defaulted, leaving customers unlikely to recover more than a fraction of their investments.

The FCA found that, as Head of Compliance, David Stephen failed to ensure SVS adhered to the rules. Demetrios Hadjigeorgiou, SVS’s former finance director and later CEO, also failed to manage conflicts of interest and ensure proper due diligence.

The FCA concluded that these three individuals acted recklessly by marking down customers’ valuations when they disinvested from fixed income assets, allowing SVS to retain 10% of customer funds. This generated £359,800 in income for SVS at the expense of its customers.

Consequently, the FCA has fined Mr. Virk £215,500, Mr. Hadjigeorgiou £84,600, and Mr. Stephen £52,100. Mr. Virk has been banned from working in financial services, and both Mr. Hadjigeorgiou and Mr. Stephen have been barred from holding senior management roles.

Therese Chambers, Joint Executive Director of Enforcement and Market Oversight, stated:

“These three individuals and SVS were at the heart of a scheme that hid the fact that customers’ pension money was being invested in high-risk bonds. Customers deserved to trust that SVS would act in their best interests, but the firm repeatedly prioritized its own income and that of its associates.

“The actions of those in charge jeopardized their customers’ ability to enjoy a secure and comfortable retirement. This kind of behavior has life-changing consequences for consumers.”