The regulator has also banned its client money officer Timothy Philip, who was responsible for the day-to-day management of Towergate’s central finance department and client money arrangements has now been banned and fined £60,000.
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 is ultimately responsible for ensuring that firms are following our rules and it is very clear that Philip failed in that regard, falling well below the standards we require.”
The FCA found that Towergate failed to comply with CASS Rules and Principles 3 and 10 of the FCA’s Principles of Business. Principle 3 requires firms to take reasonable care to organise and control their affairs responsibly and effectively and with adequate risk management systems. Principle 10 requires firms to arrange adequate protection for clients’ assets when it is responsible for them.
The failings by Towergate took place between June 2005 and December 2013.
Weak systems and other failings meant on four occasions sums totalling £10.5m were transferred from Towergate’s client money and insurer money bank accounts to the office bank account of an intermediate parent company. However, Towergate failed to properly consider the implications of these transfers which resulted in accumulated deficits of £5m in the client money bank accounts and £5.5m in its insurer money bank accounts.
Towergate first identified there was a shortfall in its client money and insurer money bank accounts in May 2013. However, it took until October and November of that year to make good the shortfall despite CASS Rules requiring any shortfall to be corrected on the day the firm performed its client money calculation. Towergate also failed to report the shortfall immediately to the FCA.
Despite the failures there was no actual loss of client or insurer money and Towergate did in time rectify the shortfall. However, had the firm become insolvent during the period when the shortfall existed, insurers were at risk of losing money and may have experienced complications in recovering their money.
The FCA has found that Philip failed to exercise due skill, care and diligence in managing the business for which he was responsible.
Philip was a director at Towergate and the finance director of one of its intermediate parent companies between October 2005 and June 2012 and was Towergate’s client money officer.
The FCA found that on four occasions in late 2010 and early 2011 Mr Philip instructed or approved withdrawals of money from Towergate’s client and insurer money bank accounts without following processes and procedures which were in place for making such withdrawals. As a result, Towergate did not accurately calculate the levels of monies held and ultimately this led to a shortfall in the client and insurer money resource of £10.5m.
Ultimately, the FCA found that Mr Philip failed to meet the minimum regulatory standards in terms of competence and capability and that he is not a fit and proper person to have direct responsibility for either client or insurer money.
John Tiner, Towergate’s chairman said the company failed to live up to the high standards it expected of itself and deeply regreted the fact it had 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.”
Mortgage advice firm John Charcol was part of Towergate until its sale to Palatine Private Equity for £8.62m in March 2015.
