14 July 2016 Insurance

FCA fines Towergate £2.6m

The UK Financial Conduct Authority (FCA) has fined the insurance intermediary Towergate £2.6 million for breaching its rules and principles concerning the treatment of client and insurer money during the period of June 2006 to December 2013.

The FCA also fined Timothy Philip, the former client money officer and director of Towergate between October 2005 and June 2012, a total of £60,000 and banned him from having direct responsibility for client and insurer money.

The FCA ruled that Towergate had failed to adhere to the Client Asset Sourcebook (CASS) Rules and Principle 3 and 10 of the FCA's Principles of Business.

Principle 3 requires firms to take reasonable care to organise and affairs responsibly and effectively, and with adequate risk management systems.

Principle 10 requires firms to arrange adequate protections for clients' assets when it is responsible for them.

According to the FCA, there were several distinct failings on behalf of Towergate that led to the failure to comply with the rules.

On four occasions, sums totalling £10.5 million were transferred from Towergate’s client money and insurer money bank accounts to the office bank account of an intermediate parent company.

In this case, Towergate had failed to consider the implications of the transfers, resulting in accumulated deficits of £5 million in client money bank accounts and £5.5 million in its insurer money bank accounts.

In another instance in October 2007, a transfer of £2.1 million from a client money bank account was made to an insurer money bank account. This transfer was not reflected accurately in the accounting records which led to the sum being transferred again in January 2009 creating a £2.1 million shortfall in its client money bank account.

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.

“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.”

John Tiner, chairman of Towergate, commented: “While this issue is historic, isolated, and had no financial impact on any clients or insurer partners, it does not excuse the fact that the company failed to live up to the high standards we expect of ourselves at Towergate and we deeply regret it occurred.

“The company fully accepts the conclusions reached by the FCA, and the Board is pleased that the regulator has recognised the company’s transparency and assistance throughout the process. Since identifying the issue, we have made a number of fundamental changes to our governance and control environment.

"The FCA findings allow us to close the matter, and maintain our focus on continuing to build a better business.”

Already registered?

Login to your account

To request a FREE 2-week trial subscription, please signup.
NOTE - this can take up to 48hrs to be approved.

Two Weeks Free Trial

For multi-user price options, or to check if your company has an existing subscription that we can add you to for FREE, please email Elliot Field at efield@newtonmedia.co.uk or Adrian Tapping at atapping@newtonmedia.co.uk