The FCA has imposed a fine of £2,632,000 on insurance intermediary Towergate Underwriting Group Ltd for failings in its protection of client and insurer money.
The FCA found that between June 2005 and December 2013, Towergate failed to comply with rules in the Client Assets sourcebook (CASS), as well as breaching Principle 3 (which concerns management and control) and Principle 10 (which concerns clients’ assets) of the FCA’s Principles for Businesses.
In particular, the FCA found that:
- Towergate accumulated a shortfall of £12.6 million in its client and insurer money bank accounts.
- The shortfall went undetected for over eight years due to systems and controls weaknesses.
- The shortfall was first identified by Towergate in May 2013, but was not made good until October and November 2013, in contravention of CASS rules.
- Towergate also failed to report the shortfall immediately to the FCA.
Despite the failings, no client or insurer had in fact lost money, and the shortfall was eventually rectified. However, had Towergate become insolvent during the period of shortfall, insurers were at risk of losing money and may have experienced complications and delays in recovering it.
The FCA has also imposed penalties on Towergate’s former client money officer and director, in particular:
- Imposing a fine of for breach of Principle 6 (due skill, care and diligence in managing the business) of the FCA’s Statements of Principle for Approved Persons (APER).
- Banning the individual in question from having direct responsibility for client or insurer money in relation to any regulated activity carried on by any authorised or exempt person or exempt professional firm.
The penalties imposed by the FCA are a reminder of the importance for insurance intermediaries of dealing properly with client and insurer money and the serious consequences that can follow if the applicable standards are not met. This extends not only to the company itself but to its senior management. The final notice issued to Towergate’s former client money officer and director referred specifically to the “great deal of emphasis” that the FCA places on the responsibilities of senior management.