The Financial Services Authority (FSA) has fined Richard Holmes, a director of insurance broker AIF Limited, £20,020 for control failings in relation to an appointed representative firm (AR).
ARs do not need to be authorised for the role they carry out as an appointed representative. However, any regulated firm which appoints an AR, must accept full responsibility, including for any liabilities that arise, for ensuring that its ARs comply with FSA regulation. The Supervision Handbook makes it clear that the responsibility for the control and monitoring of the activities of ARs lies with the senior management of the regulated firm (SUP 12.6.7 G). The FSA's fine of Mr Holmes is an example of the FSA enforcing this rule.
Mr Holmes control failings were:
- when appointing the AR in September 2006, he failed to carry out the necessary checks, instead relying on assurances from two business contacts who were later banned by the FSA;
- in February 2007, an insurance underwriter advised Mr Holmes that the AR had premiums outstanding, instead of checking he relied on assurances from the AR that the premiums had been brought up to date; and
- when the AR appeared to have problems paying insurance premiums promptly to AIF, a failure to increase monitoring or investigate how the business was run.
Following a complaint made by a client of the AR in September 2007 regarding its failure to put insurance in place, Mr Holmes terminated the AR’s status. He subsequently became aware that the AR had received clients’ premiums but failed to pass them on to the underwriter, leaving the clients uninsured. In addition, the AR had also instructed AIF to arrange insurance policies on behalf of clients but had failed to pass on the client premiums to AIF.
Mr Holmes ensured that AIF took steps to arrange alternative insurance for the clients who had been left uninsured and also ensured that cover was maintained where AIF had already provided instructions to the insurer. The cost to AIF of ensuring clients remained on cover was approximately £27,000. This remedial action, Mr Holmes' co-operation and the fact Mr Holmes did not deliberately set out to contravene the FSA requirements were all taken into account by the FSA in its decision making process.