Adviser banned from finance industry

Monday 24 May 2021

A financial adviser, who showed a "persistent lack of transparency", has been barred from working in Jersey’s finance industry, after taking loans totalling over £1m from his own clients.

Gufur Hussain was banned from the industry after the Jersey Financial Services Commission found that he repeatedly failed to disclose conflicts of interest, and knowingly provided the Commission with false information.

The JFSC’s first investigation of Hussain dates back to 2016, when they launched a probe into unauthorised financial service business being carried out.

Following this, Hussain was found not to have done anything unauthorised, but it was considered that he failed to act in a “transparent” way with the JFSC during the investigation. 

In 2019, the JFSC launched another investigation into Hussain’s conduct as an Independent Financial Adviser of a company, which they have not named, focusing on his “integrity, competence and financial standing.” 

The investigation found that he repeatedly failed to disclose conflicts of interest arising from his “long-standing” friendships with four clients at the company, each of whom had appointed him in his role.

He had also made unsecured personal loan arrangements either personally, or this through his own company - HFZ Property Developments Limited - with those same four clients. The total agreements with the four clients amounted to approximately £1,190,000 for the purpose of off-plan property development.

The JFSC ruled that, as he had declared one conflict of interest in regards to a single friend at the company, he understood its Conflicts Policy.

Pictured: JFSC Director General Martin Moloney warned financial advisers "make sure they keep their own financing entirely separate from the investment choice of those they advise.”

Although he declared his friendships with the four clients once the 2019 investigation began, he still did not disclose the existence of the four loan arrangements to the company, or the “true extent” of his person arrangements with the clients.

The JFSC also criticised how he “repeatedly” failed to show transparency during the 2019 investigation.

In one instance, they said how they had ordered Hussain to stop dealings with clients from the company, following concerns an 86-year-old client had attempted to pay money into Hussain’s personal bank account in fulfilment of a loan agreement with HFZ Limited.

However, two days later they noticed that the client had again tried to pay proceeds to Hussain, but this time via his company.

On the one hand, the JFSC said that Mr Hussain’s company had technically fallen outside of the precise wording of their directions.

However, they found that he understood the purpose of the directions was to restrict him from taking monies from the client, and that he concealed his knowledge that his company was due to receive these funds.

Concluding, the JFSC said that Hussain had dealt with both the JFSC and the anonymous company with “a persistent lack of transparency, and that his individual actions demonstrate of a lack of integrity and formed part of a series of actions lacking integrity.”

On his sanction, they decided to “prevent Mr Hussain from performing any function for, engaging in any employment by, or holding any position in, any business licensed to conduct financial services business in Jersey without the prior written approval of the JFSC.”

JFSC Director General Martin Moloney said: “Mr Hussain failed in his obligations to disclose conflicts of interest. 

“Becoming a beneficiary of a client’s investment decisions while being their adviser is the underlying source of the conflicts of interest in this kind of case. 

“Being someone’s financial adviser is a huge responsibility. It is vitally important to be open and frank with your employer and the JFSC.

“The smart thing for financial advisers to do is make sure they keep their own financing entirely separate from the investment choice of those they advise.”