The Financial Conduct Authority (FCA) has today revealed that it will fine an insurance intermediary £684,000 and its chief executive £468,600, following what it called a “failure to arrange adequate protection” and “inadvertent spending” of client money.
One Call Insurance Services Limited, also known as One Call, will also be restricted from charging renewal fees to its customers for 121 days – a move which the FCA said is expected to cost the firm approximately £4.6 million.
CEO and majority shareholder of the firm, John Lawrence Radford, will also be prohibited from having any responsibility for client money and/or insurer money in relation to regulated activity in financial services, the FCA revealed.
The regulatory body said that between January 2005 and September 2014, One Call received money in the course of its activities as an insurance intermediary which it was required to protect. The company failed to arrange adequate protection for the client money, which breached Principle 10 of the FCA’s Principles for Businesses and the Client Money Rules.
“In the FCA’s view, it failed to do so because, firstly, it failed to appreciate that certain Terms of Business Agreements it wrote business under did not provide effective risk transfer and failed to operate its client money account in accordance with the Client Money Rules,” the FCA said in a statement today.
“Secondly, from December 01, 2009, One Call failed to treat funds advanced by a third-party premium finance provider in respect of years two and three of an annual motor policy with a subsequent two-year renewal price guarantee as client money.”
As a result, One Call “inadvertently spent client money,” resulting in a substantial deficit of £17.3 million – which has since been repaid – and exposing customers to a significant risk of loss, the financial regulator went on to say.
Radford, who was responsible for client money between January 2005 and September 2011 and was personally responsible for ensuring One Call complied with regulatory requirements in this context, “failed to carry out his responsibilities with due skill, care and diligence,” the FCA said.
This included failing to keep himself informed of changes to regulatory requirements for handling client money and failing to investigate or ensure that One Call acted on warnings that were handed down by the company’s auditor.
The FCA said it also believes that Radford failed to ensure that One Call established “robust systems and controls for assessing whether effective risk transfer agreements with insurers were in place, so that if any client money
shortfalls arose as a result of One Call’s failure, insurers rather than customers would bear this risk.”
As a result, it said that Radford had been deemed not “fit and proper” to have any responsibility for client money or insurer money in the context of regulated financial services, due to what it described as a “lack of competence.”
Both One Call and Radford agreed to settle at an early stage of the investigation and, as a result, qualified for a 30% discount which is reflected in the fines.
A connected company to One Call, One Insurance Limited (OIL), has challenged the FCA’s findings and referred the case to the Upper Tribunal.
The Tribunal will then determine the appropriate action for the FCA to take, which may or may not result in amendments to the decision notices revealed today, which the FCA said are therefore provisional.