On February 1, 2016, the FCA banned Mr. Shay Reches from performing any function in relation to a regulated activity and fined him £1,050,000. Mr. Reches also agreed to pay £13,130,000 to three insurers, which amount, if he fails to pay to them, will be added to the FCA’s penalty. Mr. Reches was found to have undertaken regulated activities as a director at Coverall Worldwide Limited without being approved by the FCA and for recklessly directing insurance premium payments to parties other than the insurers or reinsures responsible for paying claims. His conduct contributed to the failure of several insurance schemes and to three insurers going into administration.

The FCA also took related action against four other individuals and two companies. The regulator fined Coverall, a UK insurance intermediary, £36,800 and revoked its authorization for failing to mitigate the risks to policyholders arising from the contracts entered into by its appointed representative, Aderia and for failing to establish and implement adequate controls over Aderia and to arrange adequate protection for client money. The FCA fined two directors at Coverall, Mr. Robert Bygrave and Ms. Andrea Sadler, and prohibited both of them from undertaking any FCA significant influence function.

A London based insurance broker, Bar (now in liquidation), which mostly provided solicitors’ professional indemnity insurance, was censured for negligently failing to conduct adequate due diligence on insurance arrangements for policyholders and inducing customers to enter contracts of insurance on materially inaccurate and misleading information. Mr Redgrave, a broker and director at Bar, was fined £36,800 for being personally responsible for the failings of Bar.

Milburn, a UK insurance company, which is now in administration, was fined £1,137,500 for failing to deal with the FCA in an open and cooperative way and for failing to disclose information of which the FCA would reasonably expect notice of. Mr McIntosh, the CEO of Milburn has had his approval withdrawn by the FCA and is banned from performing any controlled functions for failing to deal with the FCA in an open and cooperative way, failing to ensure that Coverall complied with regulatory requirements and failing to mitigate the risks to potential solicitors’ PII policyholders from contracts entered into by Aderia.

The PRA also banned Mr McIntosh from holding any controlled functions at any PRA-authorized firm and fined him £25,173 for failing to consider sufficiently the risks arising out of Millburn’s substantial expansion in late 2010. The PRA found that Mr McIntosh had not taken reasonable steps to establish appropriate systems and controls to monitor underwriting, technical provisions, capital, reinsurance and financial reporting properly, which resulted in policyholders not obtaining the protection they were reasonably entitled to. The PRA also fined Millburn £2,863,066 for failing to run the business with due skill, care and diligence between December 2010 and September 2013. This was further to Milburn changing its business strategy in late 2010 so that it could be marketed for sale.

The FCA press release and final notices are available at: http://www.fca.org.uk/news/fca-takes-disciplinary-action-against-fiveindividuals-and-three-firms and the PRA press release and final notice are available at: http://www.bankofengland.co.uk/publications/Pages/news/2016/027.aspx