The FCA have imposed a fine against One Call and its CEO in respect of their inadvertent failure to protect client money, which acts as a stark reminder to us of the importance of thorough auditing and risk transfer practices.
The Doncaster based firm were fined more than £1million. The firm are restricted from charging customer renewal fees for 121 days to which will further cost the company approximately £4.6 million.
The FCA have fined CEO John Radford and have prohibited him from having any responsibility for client and/or insurer money in relation to regulated activity in financial services due to them having breached Principle 10 of the FCA’s Principles for Businesses and the Client Money Rules.
The direct activity involved in this FCA breach was predominantly the company not providing an effective risk transfer system and failing to operate its client money account in accordance with the Client Money Rules.
In addition to this, One Call “failed to treat funds advanced by a third party premium finance provider in respect of years two and three of an annual motor policy with a subsequent two-year renewal price guarantee as client money”.
With this, One Call had inadvertently spent client money that resulted in a substantial client money deficit of £17.3 million and subsequently exposed customers to a significant risk of loss.
The FCA also noted that Radford failed to ensure that One Call established robust systems and controls for assessing whether effective risk transfer agreements with insurers were in place so that if any client money shortfalls arose as a result of One Call’s failure, insurers rather than customers would bear this risk.
In response to this, One Call admitted liability and implemented changes within their procedures so as to receive an early settlement and lesser fine from the FCA.
Although this case may seem to be upon the extreme end of the spectrum with it relating to a significantly large account, this case demonstrates the importance of all brokers (regardless of size) to regularly review risk transfer processes to ensure client monies are safeguarded.
Credit: Sam Hickman, Brunel Wholesale