Lloyd's tribunal bans broker for misconduct

A director of Fenchurch Insurance Brokers Limited (FIBL), John Michael Pexton, has been found guilty by Lloyd's of 12 charges of misconduct and has been banned from Lloyd's, fined £50,000, censured and ordered to contribute to Lloyd's costs.

Between 1988 and 1997 Fenchurch Insurance Brokers, through the actions of Pexton, made secret profits of more than $500,000 (£303,000).

The secret profit was taken by concealing from a US client the true level of package credit being offered by underwriters and certain increases in brokerage offered by underwriters.

A further consequence of Pexton's dishonesty was that the client overpaid its producing broker. In addition, Pexton received a quotation from an insurer which was lower than the quotation being offered by the London Market. This quotation was not disclosed to the client.

At no time was it part of Council's case against Pexton that he benefited personally from his actions.

Lloyd's Disciplinary Tribunal said that the extent of the fraud, unchecked for nine years, amounted to misconduct on the part of the company as well as that of its director. FIBL admitted 12 charges of misconduct and has been fined £150,000.

In addition, FIBL has been censured and ordered to pay costs of £68,500. Lambert Fenchurch Group, which acquired FIBL in April 1997, reported the matter promptly to Lloyd's. In fixing the penalty, the tribunal took into account the fact that Lambert Fenchurch promptly paid nearly $1million (£606,000) compensation, including interest, to the affected policyholder and co-operated with Lloyd's throughout its formal inquiry.

The fraud required the preparation of false documentation, which was forwarded to the producing broker. Pexton involved two other employees at FIBL to help him prepare and submit the necessary false documentation. Both of these employees - Paul Docherty and David Fairlie - were also banned from Lloyd's.