FCA bans and fines three individuals over SVS Securities Plc collapse
The Financial Conduct Authority (FCA) has decided to ban and fine three individuals who were involved in running SVS Securities Plc, a discretionary fund manager which went into administration five years ago. The individuals are Kulvir Virk, the former chief executive and majority shareholder of SVS, David Stephen, head of compliance, and Demetrios Hadjigeorgiou, SVS’s former finance director then CEO.
The FCA found that the three individuals acted without integrity and/or without due skill, care, and diligence. SVS managed investments held on behalf of its customers and slumped into administration in 2019. Under FCA rules, the firm was required to act in the best interests of its customers and not let conflicts of interests interfere with its obligations to them.
The FCA said that Kulvir Virk recklessly caused SVS to use a complex business model intended to maximize the flow of customer funds into high-risk illiquid bonds. The bonds were operated by directors of SVS and a close business associate of Mr. Virk. The model involved inducements to SVS and unauthorized introducers with undisclosed commissions of up to 12% of the customers’ investments. Some 879 customers paid in a total of £69.1m, and bonds into which they were invested by SVS have since defaulted.
David Stephen and Demetrios Hadjigeorgiou also failed to fulfill their responsibilities to ensure SVS was following the rules. The FCA found that the three individuals acted recklessly in deciding to mark down customers’ valuations when they disinvested from fixed income assets.
FAQs
What were the charges against the three individuals?
The FCA found that the three individuals acted without integrity and/or without due skill, care, and diligence. They were involved in running SVS Securities Plc, which went into administration in 2019.
What was Kulvir Virk’s role in the collapse of SVS?
Kulvir Virk was the former chief executive and majority shareholder of SVS. The FCA found that he recklessly caused SVS to use a complex business model intended to maximize the flow of customer funds into high-risk illiquid bonds.
What penalties were imposed on the individuals?
The FCA decided to fine Mr. Virk £215,500; Mr. Hadjigeorgiou £84,600; and Mr. Stephen £52,100. Mr. Virk was banned from working in financial services, and Mr. Hadjigeorgiou and Mr. Stephen were banned from holding senior management roles.
Conclusion
The collapse of SVS Securities Plc and the subsequent investigation by the FCA have highlighted the importance of acting in the best interests of customers and following regulatory rules. The actions of the three individuals involved in running SVS have had severe consequences for customers who invested in high-risk illiquid bonds. The penalties imposed by the FCA serve as a warning to others in the financial services industry to uphold integrity and diligence in their practices.