Former chief executive Peter Halpin banned from running financial services firms
The FCA has fined Swinton’s former chief executive, finance director and marketing director £928,000 and banned them from holding senior roles in financial services firms.
The action comes a year after the regulator fined Swinton £7.4m after an investigation found an aggressive sales strategy had resulted in the mis-selling of add-on policies.
Former chief executive Peter Halpin has been fined £412,700. He is banned from acting as chief executive of a financial services firm because of a lack of competence in his FCA approved role.
Former finance director Anthony Clare has been fined £208,600 and former marketing director Nicholas Bowyer £306,700. Both have been banned from holding a position of significant influence at an FCA authorised firm because of lack of competence as FCA approved directors.
Halpin, Clare and Bower were sacked by French parent Covéa in 2011 over concerns that the board had put their short term interests ahead of the company’s long term interests.
The FCA’s investigation found that directors participating in Swinton’s share scheme stood to gain bonuses of £90m if operating profits reached £110m in 2011. Halpin, Clare and Bowyer would have benefited significantly under the scheme had these results been achieved.
Halpin failed to recognise the risk that the potentially lucrative incentive scheme for Swinton’s executive directors could give rise to a culture within Swinton that increased the risk of mis-selling, the FCA found.
It said Clare and Bowyer encouraged the sales-focused culture that was designed to increase the firm’s profits in 2011. The three former directors did not recognise the risk of this culture developing or take reasonable steps to prevent it.
FCA director of enforcement and financial crime Tracey McDermott said: “A culture was allowed to develop within Swinton that pushed for high sales and increased profit without regard to the impact on the firm’s customers. We expect firms to put customers at the heart of their business.
“These three directors should have recognised the risk to customers and redressed the balance so that the drive to maximise profits did not jeopardise the fair treatment of customers.
“Those with significant influence within firms are responsible for setting the tone and the culture; they set the example that others will follow. Today’s enforcement action should serve as a timely reminder to those at the very top of firms that the FCA is determined to hold individuals to account where they fall short of the standard we require.”
“Lack of competence”
The FCA found that Halpin failed to ensure that Swinton’s management information was adequate for the firm to identify compliance issues with the sales of the monthly add-ons and to ensure its customers were being treated fairly. He also failed to respond to warning signals about those sales and, when he did act, his actions did not go far enough.
Halpin said in a statement: “I sincerely regret any possible unintended detriment suffered by customers. I acted in good faith at all times and it is of some significant comfort that the regulator did not impugn my integrity, nor find that my conduct was improperly motivated by incentive arrangements”.
Clare also missed warnings of compliance problems with the monthly add-on products and failed in his responsibility to ensure Swinton’s compliance department was producing accurate and representative management information, the FCA said. He was also was involved in specific decisions concerning the development of Swinton’s breakdown and home emergency insurance policies and did not recognise the risk to customers that arose from these decisions.
As finance director, Clare was instrumental in the creation and implementation of a business strategy to maximise Swinton’s operating profits in 2011. Clare should have seen the risk that this strategy was leading to a sales-focused culture that acted to the detriment of the fair treatment of customers. Despite his responsibilities, he missed the warning signs, the FCA said.
As marketing director, Bowyer played a central role in the development and launch of the monthly add-on policies and was responsible for their design, development and marketing. He was involved in a number of decisions which were not fair to consumers, the FCA said today.
Bowyer was also integral to the successful delivery of the directors’ strategy to maximise Swinton’s profits in 2011 and encouraged a culture to develop within Swinton that prioritised sales to the detriment of customers. Crucially, Bowyer did not appreciate that - although he was not part of Swinton’s compliance framework - he still had a personal responsibility as an FCA approved director to consider the fair treatment of customers in every decision he took in performing his role.
All three former directors settled at an early stage of the FCA’s investigation and therefore qualified for a 30% discount on their fines.
A Swinton spokesman said: “Swinton Insurance notes that the Financial Conduct Authority (FCA) has fined three individuals who were employed as executive directors until December 2011.
Swinton Insurance continues to cooperate fully with the FCA in all matters.”