Brokers Banned By The FSA
The FSA had a number of issues with Mr Wright
Firstly, he acted as a Director of the firm, without prior FSA approval, only his wife was in fact approved.
The firm’s capital resources were consistently lower than those demanded by the rules and the RMAR contained a number of errors.
Mr Wright advised the FSA that the capital position would be rectified via the issue of more shares and he produced “evidence” to this effect to the FSA, however, when they checked with Companies House, no new shares had been issued.
Then, when questioned by the FSA about the creditor/debtor position, Mr Wright advised that another firm had taken over some of the activities of his own company, a fact that the FSA were not aware of, not had FSA approval been obtained for the change.
In the FSA Final Notice, the FSA stated that they had been misled by the broker who had acted dishonestly and that he had a cavalier attitude to compliance. It is interesting to note that this is not the first time this individual has faced the wrath of the FSA, In a previous insurance life, he was banned from all Lloyd’s premises and suspended from conducting any business at the firm, after it emerged he had been diverting premiums and client money from his firm for his own use.
The tribunal also found that Mr Wright’s actions while working at Moorgate suggested he had learned little from his experience at Lloyd’s.
Tom Spender, head of retail enforcement at the FSA, said: “This case graphically illustrates the dishonesty and lack of integrity that some brokers will exercise if it suits their purposes.
“Wright dishonestly sought to hide his past and rehabilitate himself by posing as someone authorised to carry out regulated functions for Moorgate, when he was not.”
This serves to illustrate very well the fact that the FSA are intensely interested in a brokers financial position and this can be closely aligned with Threshold Condition Four relating to having sufficient resources at all times, not just when the RMAR is submitted. Given the FSA’s current activities surrounding Business Risk, it is an area that will only attract more and more attention.
It also reminds us that the FSA have numerous resources available to them, such as checking returns at Companies House.
Also, consider the case of Donald McKee Morgan, a partner in Ayrshire-based Donald Morgan Insurance Services, who has recently been fined £335,204 and banned from carrying out any regulated financial services activity in the future.
The FSA found that Mr Morgan falsified monthly reports and manipulated the computer systems at his brokerage and he then used the premiums paid by clients to pay staff salaries and to fund his own lifestyle.
Mr Morgan’s wife was also banned. She did not take any active role in the business, but was a partner and an approved person. Although she did not take part in the fraud, she failed to spot her husband’s fraudulent activities.
This serves to remind all approved person that even if they take no active part in the running of the business, they can still be held accountable for the conduct of the firm, so they must ensure that they take a more active view of the firm’s activities.
Again, Tom Spender said “Insurance brokers must adhere to our rules, ensure customers are treated fairly and that trust in the industry is maintained. However, Donald Morgan’s actions left much to be desired and that is why he has incurred a significant fine.”
So, client money is very much a focus at the FSA and whilst the rules are onerous and can appear to be very completed, nevertheless, brokers must adhere to them or face enforcement action and possible bans from the industry.