View more on these topics

Tribunal backing for FSA broker ban

The Upper Tribunal has backed the FSA’s decision to ban an insurance broker from working in the financial services industry on the grounds that he lacks honesty and integrity.

Derek Wright’s case was first made public last May. The publication of the decision notice against Wright was significant as, along with one other case, it marked the first time a decision notice that had been referred to the tribunal was published under powers given to the FSA in 2010.

The Government is pushing ahead with plans to take this power further through the Financial Services Bill, which sets out legislation for the new Financial Conduct Authority and the Prudential Regulation Authority.

Under the bill, the FCA will not only have the power to publicise decision notices against firms and individuals but also warning notices which are issued before the firm has had an opportunity to argue its case in front of the regulatory decisions committee, which decides whether there is a case to answer.

In the case of Wright, the tribunal has supported the FSA’s ban and effectively justified the FSA’s publication of the decision notice against him.

The tribunal published its judgment on the case last month. It says Wright referred the decision notice against him to the tribunal in March 2011. He argued that the FSA’s decision was unfair and disproportionate, that he was not a “fundamentally dishonest man” and he posed minimal risk to the financial system.

Wright accepted he did not have the necessary competence to have a governing role in a firm and said the ban should be limited to these activities.

Wright managed Essex-based Moorgate Insurance Agencies between 1997 and June 2008. However, it was Wright’s wife Dorothy who was listed as the only director and approved person at the firm, even though it was Wright who was running the business.

In September 2001, Wright was disciplined for misconduct by the Lloyd’s of London Disciplinary Tribunal after being found guilty of four charges relating to his previous role as director at an unnamed insurance broker.

The LDT found Wright arranged for premiums to be paid by cheque made out to him personally rather than the company he worked for. He kept more than £60,000 and arranged for the company to issue cover notes and pay the premiums to insurers.

Between 1994 and 1996, Wright also used the client account to pay over £15,000 in personal expenses without his co-director or company secretary knowing. He also made a computer operator erase entries totalling over £8,000 relating to money owed by a third party to the company and arranged for his own debts to the third party to be reduced by the same amount.

Following these offences, Wright was permanently suspending from the Lloyd’s trading room and from being connected with any Lloyd’s business.

Wright told the RDC he fell out with a fellow director and did not feel he was being fairly paid, so sought to redress the balance.

In 2004, Wright and his wife both applied to perform controlled functions at Moorgate, which includes responsibility for compliance. He disclosed his disciplinary history with Lloyd’s but then withdrew his application. He later admitted to the FSA he had withdrawn his application because he thought it might be turned down.

When the FSA raised concerns about the firm’s lack of capital, with a deficit of £14,909, Wright said this would be plugged by a share issue of 15,000 £1 ordinary shares. The share issue never took place.

In his judgment, tribunal judge Terence Mowschenson QC said: “The tribunal considers Mr Wright’s conduct demonstrates that he will act dishonestly and with a lack of integrity if it suits his purpose and that he has a reckless attitude to compliance with regulation.”

Timeline of Wright case

  • Between 1994 and 1996, Wright used the client account of an unnamed insurance brokerage where he was a director to pay more than £15,000 of personal expenses without the knowledge of his co-director or company secretary
  • In August 1996, Wright asked a computer operator to erase entries of more than £8,000 owed by a third party to the company and arranged for his own debts to the third party to be reduced by the same amount
  • Wright also arranged for premiums to be paid by cheque to be made out to him personally, then arranged for the firm to issue cover notes and pay the premiums to insurers. Wright kept over £60,000
  • In September 2001, Wright was disciplined for misconduct by the Lloyd’s of London Disciplinary Tribunal
  • In July 2004, Wright and his wife Dorothy each applied to the FSA to perform controlled functions at their firm Moorgate Insurance Agencies. Wright later withdrew his application
  • In February 2007, Wright told the FSA he would correct Moorgate’s capital deficit of £14,909 by issuing 15,000 ordinary £1 shares. These shares were never issued
  • In June 2008, Moorgate voluntarily varied its permissions so it was no longer able to conduct regulated activities
  • In February 2011, the FSA issued a decision notice to Wright which sought to ban him from carrying out any regulated activity. Wright referred the decision to the Upper Tribunal in March 2011
  • In May 2011, the FSA published its decision against Wright
  • In February this year, the tribunal upheld the FSA’s decision to ban Wright from carrying out any regulated activity

Recommended

Ex-Royal Liver FD gets FSA ban but escapes £1m fine

The FSA has banned and fined former Royal Liver Assurance finance director George McGregor £109,000 for signing off unauthorised payments to a former employee totalling approximately £3.6m. The regulator says McGregor’s misconduct merits a £1m fine but such a high penalty would cause McGregor serious financial hardship. McGregor was a member of RLA boards from […]

Out of context

“But people will think you’re talking about his knickers.”Sifa managing director Ian Muirhead reveals the reaction to his suggestion to call Sifa’s legal newsletter ’Bushell’s Briefs’ in honour of Sifa legal affairs director Stuart Bushell. “I have a day job to keep me from warming a park bench.”Hargreaves Lansdown’s Laith Khalaf politely rejects the chance […]

Is it time to throw caution to the wind?

Recent rounds of quantitative easing by the Bank of England and the European Central Bank’s long-term refinancing operations mean the case for a risk-on trade may be growing. With central banks maintaining their use of extraordinary monetary policy to avert recession or, worse, a deflationary spiral, the value of a cautious stance may continue to […]

Schroders chair and CIO to leave

Schroders chairman Michael Miles and chief investment officer Alan Brown are to step down as Schroders reports falls in inflows in 2011, particularly in the intermediary channel. Last week, Schroders reported profits were slightly up last year to £407.3m compared with £406.9m in 2010. There were net outflows of £3.8bn in the intermediary channel compared […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment