The Blackburn-based insurance broker was fined £21,000 for failings in control of its appointed representatives (ARs), and for misleading its clients and the FSA. Aspray, which specialises in managing insurance claims for property repairs, did not maintain appropriate systems and controls for the recruitment, training and monitoring of its ARs.
Aspray also misled clients by telling them:
* that its services were free of charge when in fact cancellation charges could be incurred and ARs had discretion to charge an insurance excess; and
* that all its contractors were screened and only quality local tradesman were used, when in fact most contractors were found using sources such as ‘Yell.com’ and were not properly vetted.
The firm also failed to inform customers about the Financial Ombudsman Service (FOS) and their right to refer complaints to FOS. And it misled the FSA by claiming that it had made compliance visits to all its ARs, had made financial checks on them and reviewed their files when it had in fact performed none of these procedures.
Jonathan Phelan, head of retail enforcement at the FSA, said: "It is vital that principal firms maintain effective controls over the recruitment, training and monitoring of their Appointed Representatives. And it is very important that the principal firm ensures that clients are not misled about the services provided and terms of business of the network, and firms must not provide false or misleading information to the FSA. We will take disciplinary action, including issuing fines, against firms who fail in these regards.”
The FSA has taken into account the following mitigating factors. Aspray has been open and cooperative with the FSA's investigation. It has accepted there had been management and control failures and has appointed external compliance consultants. It has implemented a series of remedial changes to its practices and procedures. And there is no evidence that the firm sought to profit or avoid loss as a result of the identified failings.
The firm agreed to settle at an early stage of the FSA's investigation and has therefore qualified for a 30% discount under the FSA's executive settlement procedures. The FSA would have otherwise sought to impose a financial penalty of £30,000.
