The Financial Conduct Authority has fined Towergate Underwriting Group Limited £2.63m for failings in relation to its protection of client and insurer money.
The FCA has also fined former Towergate client money officer and director Timothy Philip £60,000 and banned him from having direct responsibility for client and insurer money.
Mark Steward, director of enforcement and market oversight at the FCA, said: “We have issued repeated warnings to the industry on the importance of complying with client money rules which are designed to ensure that client money is adequately protected in the event of a firm failing.
“There can be no excuses given these warnings and the stakes involved. In addition, the firm’s failings placed insurer money at risk of loss.
There can be no excuses given these warnings and the stakes involved. In addition, the firm’s failings placed insurer money at risk of loss.
“Senior management are ultimately responsible for ensuring that firms are following our rules and it is very clear that Mr Philip failed in that regard, falling well below the standards we require.”
The FCA found on four occasions sums totalling £10.5m were transferred from Towergate’s client money and insurer money bank accounts to the office bank account of an intermediate parent company.
However, Towergate failed to properly consider the implications of these transfers which resulted in accumulated deficits of £5m in the client money bank accounts and £5.5m in its insurer money bank accounts.
As part of its arrangements with clients Towergate is permitted to retain all interest on balances held on client money bank accounts.
Any interest earned on client money is therefore Towergate’s money and should be removed from client money bank accounts.
Towergate’s banking practices should have meant that interest did not accrue on these accounts; however on a number of occasions from June 2005 to October 2011, it did, and this was not identified by the firm until 2013.
This resulted in there being a total of £1.45m of interest belonging to Towergate that was not removed from client money bank accounts.
In October 2007 the firm transferred £2.13m from a client money bank account to an insurer money bank account.
That transfer was not reflected accurately in the accounting records which led to the sum being transferred again in January 2009 creating a £2.13m shortfall in its client money bank account.
From December 2008, in breach of its agreements with insurers, Towergate changed the basis upon which it removed commission owed to it by insurers from its insurer money bank accounts…Read more at FT Adviser