THE EU is to investigate an ‘alarming number’ of shoddy and unregulated financial advisors working in southern Spain.
The European Commission is to consider setting up an ombudsman to help expat victims reclaim against ‘rogue’ financial firms.
It comes after a local pressure group, that represents over 1,000 victims, sent a strong dossier of information to Brussels.
The Costa del Sol Action Group demanded action against the ‘cowboy’ advisors who, it claims, have lost their clients over 120 million euros.
“It is good news as something has to be done about this bunch of rogues,” group founder David Klein told the Olive Press.
“The current Spanish regulatory system is totally inadequate and ineffective,” he continued.
“Dealing with the authorities is a constant game of ping-pong.
“Anyone can come to Spain and be a financial advisor, they could have been selling fish before they came here for all anyone knows,” he added.
This situation could soon be coming to an end, after the Commission confirmed it was to begin ‘a preliminary investigation of the problem.’
It has asked for more information and the action group has called on all victims to write to the European Parliament outlining their experience.
“This problem is causing untold stress and heartache in the expatriate community and it cannot be allowed to continue,” explained Klein.
The European Commission is to study how investors would be able to make an official complaint against so-called IFA, or Independent Financial Advisors.
At present, there is no effective means for victims to make a complaint against product providers who work with unregistered IFAs.
The group also slammed the willingness of the local media to accept adverts from unregulated financial firms in a bid to maximise advertising revenue.
In particular it mentioned a company Offshore Investment Brokers in Estepona, which it claims is ‘not regulated or registered’.
It insisted the company was able to trade ‘collecting unsuspecting clients who are soon relieved of their money’. It gave two case studies (see one below).
The Olive Press has long been careful not to take advertising from such firms, and insists on advertisers providing a full business address, registration numbers and contact details.
“We try really hard to only work with genuine businesses and would really welcome the introduction of an ombudsman,” said publisher Jon Clarke.
“We fully support the efforts of the Costa del Sol Action Group as there are too many grey areas and not enough regulation.”
Under current legislation, UK-based IFAs can apply for a ‘passport’ from the Financial Services Authority (FSA) to operate in EEA countries, including Spain.
However, this is only an indication that the firm is operating to FSA standards and does not mean that the firm is regulated, with complaints being the responsibility of the Spanish regulator.
This has led to some IFAs abusing the passporting scheme by misleading investors into believing that they are FSA regulated.
One financial advisor, Richard Alexander, told the Olive Press he was pleased with the moves.
“Bring on the review,” he said.
“I have seen too many sad stories of people being turned over, badly advised or grossly over-charged.
“It is the reason why I decided to set up my business here having got proper authorisation from the FSA in the UK.
“It is entirely possible to provide professional, quality advice without the client losing out.”
CASE STUDY: We’re in danger of losing home
“My wife and I are in danger of losing our home after being sold a product known as a ‘turnkey mortgage’ on our 450,000 euro property.
“We were never informed of the risks, only that it would help negate inheritance tax, provide a small annual income and a lump sum after five years, even though the ‘mortgage’ was for 10 years.
“When I tried to back out the advisor said it would be a big mistake, but now, the value of the investment has dropped significantly in the last five years and if it doesn’t return in value over the next five it will be disastrous.