John Blake, former managing director at Welcome Financial Services, submitted ‘false and misleading statements’ in his firm’s annual report at the end of 2007. Blake has been banned from the industry and fined £100,000 by the FSA.
Welcome issued secured and unsecured loans to sub-prime borrowers at high interest rates.
The FSA stated that £2.1bn of Welcome’s £3bn loan book was not disclosed as being in arrears, which created the impression that more of the firm’s customers were repaying their loans on time than was actually true.
The regulator said £445m of Welcome’s loan book was over 120 days in arrears but was listed as unimpaired.
If the firm’s accounts had been correctly reported £1.5bn of the book should have been noted as in arrears, compared to the £900m the report stated. This would have seen Welcome record a pre-tax loss of £94.9m rather than the £130m pre-tax profit they reported.
During August 2007 and February 2009 Welcome was a subsidiary of sub-prime lender Cattles, with this incorrect information published as part of a Cattles rights issue in April 2008.
The FSA said it had imposed a £100,000 fine on Blake due to his personal circumstances. It said the fine would have been around £400,000 otherwise.
The regulator said: “By approving the Welcome’s 2007 annual report in the knowledge that the information in it would be disseminated to the market, you committed market abuse.
“By failing to discharge your duty to ensure the accuracy of the credit quality of Welcome’s loan book, you were knowingly concerned in Welcome’s breach of Principle 3.
“The FSA concludes that you are not a fit and proper person to perform any function in relation to any regulated activity and that it should make a prohibition order accordingly.”
