Tyser & Co has been fined £65,000 plus £40,000 costs by Lloyd's Disciplinary Tribunal for breaching umbrella arrangements.

In 1990, the Lloyd's brokers made an agreement to do business with Keith Samengo-Turner, who was an executive director of non-Lloyd's brokers Frederick Henderson at the time. This was formalised in a written shareholders' agreement the following year and the two companies worked together until 1996.

But the Lloyd's disciplinary board has ruled Tyser breached its umbrella arrangements, which permits non-Lloyd's brokers into the market.

It also ruled the firm failed to exercise any control or supervision over Frederick Henderson's activities, resulting in premiums in excess of £900,000 being paid to Frederick Henderson by one of its clients.

These payments were not forwarded to the underwriters and other claims were only paid after “very great delay, trouble and not inconsiderable expense for the client”.

“Frederick Henderson was not, and was never intended to become a Lloyd's broker,” said the disciplinary board. “It was an essential feature of the contractual arrangements that Tyser would provide Frederick Henderson with access to Lloyd's and, in particular, permit Frederick Henderson to place risks with the use of Tyser slips.

“The conclusion and implementation of the contractual arrangements involved plain and obvious breaches of the umbrella arrangements by-law.

“This would have been obvious to Tyser if any of its partners had given any proper thought to the matter and indeed (which they had not) ever read the by-law.”

Arthur Leeks, a former partner in Tyser, has also admitted allowing Samengo-Turner and Mark Winwood, also a former executive director of Frederick Henderson, passes into Lloyd's “for the purpose of placing business with underwriters as if they were employees”.

Although the tribunal disclosed a “lamentable state of affairs and serious misconduct”, the board ruled Tyser had not acted deliberately but decided “the culpability on its part derived from ignorance and indifference to regulatory compliance coupled with extreme gullibility”.

Samengo-Turner and Winwood have been permanently barred from Lloyd's and must pay £58,600 and £32,400 respectively towards Lloyd's costs. Leeks faces combined fines of £8,800.

Samengo-Turner's appeal was overturned by Lloyd's Appeal Tribunal, which directed he should also pay Lloyd's appeal costs of £40,500.

Roger Marsh, chairman of Tyser, said: “We take some comfort from the fact that the tribunal said there was no deliberate attempt to try and circumvent Lloyd's' by-laws.

“We obviously regret the whole unhappy affair.”