The Financial Conduct Authority has banned and fined a sole trader almost £1m over sale and rent bank failings, the largest-ever fine of its kind.
Birmingham-based Gurpreet Singh Chadda, who traded under the names Red2Black Homes and B&L Homes, has been fined £945,277 and banned from working in the financial services industry.
The FCA investigated Chadda’s involvement in seven sale and rent back transactions between June 2009 and January 2010. Homeowners, including some in arrears and facing repossession, were told by Chadda he was the one buying their homes, when the properties were actually being bought by other people.
Sellers were not told that the people buying their homes were not authorised or regulated by the FCA, leaving them without the protection of the Financial Ombudsman Service or the Financial Services Compensation Scheme.
They were also told that the market value of their homes would be determined by an independent valuation. In six of the seven cases, the FCA could not find any evidence of valuations being carried out.
Chadda helped the buyers obtain mortgages totalling £885,500, based on mortgage applications that stated the properties were being bought on buy-to-let or residential basis. The FCA estimates Chadda was paid £695,277 in total in relation to the sale and rent back transactions.
Chadda failed to disclose relevant information to the FCA, created misleading documents, and also arranged for people to impersonate his customers in order to mislead the FCA.
Chartwell Funding managing director Robert Winfield says: “The sale and rent back market used to be rife for opportunities for people to take advantage of vulnerable customers. I am glad the FCA has cleaned up the sector. He is certainly a disgrace to financial services.”