Christopher Ollerenshaw and Thomas Reeh, the chairman and chief executive respectively, challenged the decisions in the tribunal but the tribunal agreed with the FSA and imposed fines reduced from £100,000 to £50,000 after financial hardship for Ollerenshaw and a fine of £75,000 reduced to £10,000 for Reeh.
The FSA also asked for both individuals to be banned. The Tribunal imposed a ban on Ollerenshaw, but decided against this for Reeh in the light of mitigating circumstances.
Adrian Childs, the former chief operating officer, has also been banned from holding a senior position in regulated financial services because he did not understand, or take steps to understand, how to perform his role. Childs would have been fined £50,000 but was declared bankrupt in 2009.
Tracey McDermott, the FSA’s director of enforcement and financial crime, said: “The failings of Ollerenshaw, Reeh and Childs are serious. The way in which they ran B&W led to customers being treated unfairly. Both the incentive scheme and the culture at the firm encouraged staff to focus on sales rather than suitability.
“We expect firms to put customers at the heart of their business. Getting sales incentives right is critical to that. Firms that fail to do so can expect us to take action against them.”
Black and White primarily advised on and arranged mortgage contracts for many of its customers which were ‘sub-prime’ with low or impaired credit ratings.
The firm had a panel of over 20 mortgage lenders and purported to consider all of them when advising on a mortgage.
Instead the FSA said Ollerenshaw and Reeh encouraged sales advisers to sell a particular lender’s mortgages without considering whether the particular lender’s products were the best for customers.
Black and White also had a £1 million loan facility from the particular lender. In 2007 when Black and White had difficulty making repayments on the £1 million loan, it offset outstanding repayments on this loan against commissions due from the increased mortgage business with the particular lender.
The FSA said Black and White also put undue pressure on advisers to sell PPI to its customers. Reeh imposed a target for sales without proper regard to the suitability of the product for its consumers.
This was driven by an incentive scheme that meant greater commission could be earned by selling single premium policies over regular premium policies.
The FSA has censured the firm for operating in a way that created a very high risk of unsuitable sales and customers not being treated fairly.
Had the firm not been liquidated in 2008 the FSA would have fined it £2.2 million.
