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FSA fines insurance broker £20,000

The FSA has fined insurance broker AIF Limited director Richard Holmes £20,020 for control failings in relation to an appointed representative firm.

The regulator says in September 2006, Holmes appointed an AR without carrying out the necessary checks, using only assurances from two business contacts. The individuals were subsequently banned by the FSA on November 2, 2006.

The following February, an insurance underwriter advised Holmes that the AR had premiums outstanding. Instead of following up the matter he relied on assurances from the AR that the premiums had been brought up to date.

The FSA says on another occasion when the AR appeared to have problems paying insurance premiums promptly to AIF, Holmes failed to increase his monitoring and did not investigate the way the AR was carrying out its business.

Holmes terminated the AR’s status following a complaint made by a client of the AR in September 2007, regarding its failure to put insurance in place.

The FSA says Holmes 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.

The FSA says it is satisfied that 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.

FSA head of retail enforcement Jonathan Phelan says: “Senior management at firms are responsible for the standards and conduct of the businesses they run – this applies to all firms both large and small. In particular, senior managers should ensure that their appointed representatives are appropriately overseen.

“As a director of the firm, Richard Holmes failed to carry out sufficient initial checks and then failed to monitor adequately the activities of the AR over a period of almost a year despite identifying a number of concerns early on during the AR agreement – this falls below the standards that FSA expects of firms. Directors who fail to discharge their personal responsibilities, including monitoring ARs properly, give rise to a risk of consumer loss and we will take action against them.”

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