FSA fines Northern Rock director £320,000 for misreporting arrears

26 July 2010 0:00 am | Updated: 27 July 2010 10:13 am | By Natalie Holt

The FSA has fined former Northern Rock finance director David Jones £320,000 for continuing to misreport arrears for almost a year.

Jones has also been banned from performing any function in relation to any regulated activity.

Jones’s misconduct started in mid January 2007 when he agreed, along with David Baker, former Northern Rock deputy CEO, to allow false mortgage arrears figures to appear in text published alongside the 2006 annual accounts. Reporting correct figures would have either increased arrears by over 50% or possessions figures by approximately 300%.

For nearly a year, Jones was responsible for the continued misreporting of arrears and possessions figures on a monthly basis to Northern Rock’s assets & liabilities committee and on a quarterly basis to the Council of Mortgage Lenders.

FSA director of enforcement and financial crime Margaret Cole says: “Even though other senior directors within the firm were involved in the misreporting of arrears and possessions figures, as a senior director himself and as an FSA authorised person, Jones had a duty to reveal the true position to the public and to important internal committees. He had numerous opportunities to put things right, but failed to do so.  

“This is a message to all FSA approved persons, that they must take their individual responsibilities seriously at all times, or suffer the consequences.”

Jones left Northern Rock in April to concentrate on the FSA’s investigation into the bank’s failure to correctly report its arrears prior to the lender being nationalised.

Prior to Jones’ departure, Baker and ex-managing credit director Richard Barclay were fined £504,000 and £140,000 respectively for misreporting mortgage arrears figures.

During the FSA’s investigation the regulator found that from 2005, Northern Rock staff were under pressure to report arrears figures at half the CML average.

To meet these targets, in cases where a possession order had been made against a property, but actual possession had not taken place, were excluded from all arrears and possessions figures. Although Jones was not directly involved in these arrears being omitted from official records, by January 2007 1,917 such cases had been omitted.

During January 10 2007 and February 1 2007 Jones was finance director designate at the bank. Baker told Jones that pending possessions had been left out of the arrears figures, but Jones believed that the bank’s bad debt provisions were still adequate and agreed not to reveal the pending possession cases.

As finance director from February 1 2007 to February 22 2008, Jones was responsible for the debt management unit and the credit management information unit at Northern Rock. These units were responsible for reporting arrears.

In a statement Jones says he co‐operated fully with the FSA’s investigation, and says he ensured there was no impact on future provisioning due to the pending possessions.

He says: “I accept that I did not ensure that information on residential arrears prepared and presented by others was corrected to include certain accounts known as ’pending possession cases.’

“However, I consider that the FSA’s conclusions and imposed penalty are both unfair and disproportionate. I will now put this matter behind me and move on. I intend to pursue opportunities either in an advisory or full time basis building on over 30 years’ experience in finance.”

 

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