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Fines regarding lack of competence:

Focus on Fines – Case Study

The Financial Services Authority (FSA)  banned and fined a North East based mortgage broker after finding he had exposed about 500 of his firm’s customers to the risk of receiving unsuitable advice.

The Managing Director was banned for lacking competence and capability and for failing to ensure his firm had proper systems and controls in place for the nature of the business it conducted.

The FSA also fined the Managing Director £17,500 for failing to organise the firm’s affairs effectively and responsibly and failing to ensure the firm met required standards in recommending mortgage contracts. Jonathan Phelan, Head of Retail Enforcement at the FSA, said:

"The Managing Directors failings were particularly serious as they exposed about 500 of the firm’s customers to the risk of receiving unsuitable advice. We are continuing to find instances where mortgage brokers are unwilling or unable to maintain the standards we require and where we come across this we will use our regulatory powers to ban these individuals and where appropriate impose a financial penalty on them as well."

The FSA found that the firm’s advisers recommended mortgage contracts which were not suitable taking into account clients' needs and circumstances, including cases where sub-prime mortgages contracts were recommended in circumstances where it appeared that prime mortgage contracts may have been available.

Also, he failed to ensure that the firm adequately disclosed to customers the amounts of fees payable and to ensure that the firm made and retained adequate records about why it considered recommended mortgage contracts were affordable and suitable.

Were it not for the Managing Directors current personal financial difficulties, the FSA would have sought to impose a more significant financial penalty on him as well as a financial penalty of £60,000 on the firm.

The trading permission of the firm has also been withdrawn.

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