Mr Davis fell well below acceptable standards in the way he carried out his duties as a director of his firm. His misconduct led to considerable consumer detriment. This is the first occasion on which the FSA has disciplined a senior manager of a mortgage and general insurance broker.
Mr Davis was both chief executive of and the director responsible for the accounts and finance functions at Essential Mortgages Limited (EML). He failed to ensure there were adequate systems and resources in place for processing, accounting for and monitoring customers' applications in respect of payments for accident sickness and unemployment (ASU) insurance policies.
At least 350 customers' ASU policies (worth £500,000) were not placed on risk because EML failed to pass on their insurance premiums as a direct result of its inadequate systems and resources. This left clients without any cover and exposed them to the risk of significant financial loss if they needed to make a claim. At least one customer needed to make such a claim on his policy, which had not been placed on risk.
Jonathan Phelan, head of retail enforcement at the FSA, said: "Senior managers of authorised firms should take note that the FSA will hold them to account where they fail to act appropriately when carrying out their regulatory responsibilities. The failures in this firm could have been avoided if the director had taken reasonable care to organise and control the accounting functions of the business. This case is very serious because customers who placed their trust in the firm to put in place their insurance policies were exposed to considerable risk."
The FSA would normally issue a significant financial penalty in instances of serious misconduct. The FSA decided instead to publish a statement of Mr Davis’ misconduct having taken into account his ability to pay a fine and the impact any fine would have had on his ability to pay back his creditors.
EML ceased trading on 6 January 2005 and entered into a Creditor's Voluntary agreement on 24 February 2005. Consumers who were affected by the firm's failings have already been contacted directly by the liquidator of the firm.
