Nexus Independent Financial Advisers and Nexus Investment Managers, two business arms the Financial Conduct Authority placed restrictions on, were flagged by Nucleus and 7IM to the regulator over ad hoc fees.
FTAdviser understands ‘Platform N’ in the FCA’s supervisory notice is Nucleus, and ‘Platform S’ is 7IM.
While both Nexus IFA and Nexus IM used 7IM, just the IFA arm used Nucleus, according to the notice.
FTAdviser understands Nexus also used Standard Life in a smaller capacity, but the FCA did not reference this platform in its notice.
Earlier this week, the FCA restricted both Nexus IFA and Nexus IM. It told both to immediately cease carrying on all regulated activities and to stop onboarding new customers.
The regulator said it appeared around £2mn was withdrawn from client investment accounts held with either Nucleus or 7IM and transferred to Nexus’s IFA and IM business accounts between September 2021 and December 2022.
There is also evidence, the City watchdog said, which suggests the firms’ sole director transferred £1.4mn from one of the business accounts to their personal bank account.
On Companies House, chief executive Kerry Nelson is listed as the only active director at Nexus Independent Financial Advisers Limited.
Nelson was appointed to the Nucleus advisory board by the old management team, but she left mid-last year. It was an unpaid voluntary role, with no governance oversight.
'Risk of mis-use'
In the FCA’s notice, there are references to steps taken by both Nucleus and 7IM which flagged the ad hoc fees the director allegedly took.
To deduct ad hoc fees, the regulator said a client will typically be asked to provide signed instructions to confirm the fee, or will otherwise be sent a letter referring to the deduction of the ad hoc fee to the client’s correspondence address on file.
Under conduct principles, platforms are required to monitor the fees they facilitate between clients and their advisers.
The regulator told FTAdviser: "The FCA expects all platforms to monitor and mitigate any harm arising from the services they provide, including any adviser charging service.
"They should understand the risk of mis-use of those services, including potential fraud or over-charging, and have appropriate systems and controls to prevent consumer harm arising from them."
Investigations and 'high-level reviews'
On December 19, 2022, Nucleus sent the FCA a report summarising an investigation it had conducted following concerns about funds being transferred from one of their client’s accounts to Nexus IFA.
The investigation concluded that £1,895,040 in ‘ad hoc’ adviser fees were transferred to Nexus IFA from accounts held by an individual client.
The fees were deducted in round amounts, with a number taken across a succession of days within the same month. For example, in July 2022, fees of £180,000 had been deducted across three separate days.
