Michael Worthington and Darren Millington were the executive directors and main shareholders in sub-prime broker Lifestyle, which went into administration in May 2007.
The regulator found that the directors failed to ensure the firm put in place appropriate written sales and compliance procedures and operate in accordance with them.
They also did not complete a past business review within a reasonable timescale and therefore could not identify customers who might have been mis-sold mortgages.
The pair failed to ensure that their compliance department had sufficient experienced and qualified staff and did not properly control spending on staff salaries.
Worthington and Millington have agreed not to hold any job with significant management influence in the future.
FSA director of Enforcement Margaret Cole says: “It is the responsibility of a firm’s senior management to ensure that their business is meeting regulatory requirements. It is important that senior managers take the conduct of past business reviews seriously and this includes applying appropriate resources to them.
“Our action against Mr Worthington and Mr Millington should be a warning to others that approved persons will always be held to account whatever the status of their business.”