The Financial Conduct Authority has fined three former senior executives of Swinton Group £928,000 after they allowed a culture to develop within the insurer that pushed for high sales and increased profit without regard to the impact on the firm's customers.
The FCA has also banned Peter Halpin, Swinton's former chief executive, from acting as CEO of a financial services firm, and its former finance director Anthony Clare and marketing director Nicholas Bowyer are banned from performing significant influence functions at financial services firms.
The FCA’s action follows previous enforcement action taken against Swinton: in 2013 it was fined £7.4m after it adopted an aggressive sales strategy that resulted in mis-sales of monthly add-on insurance policies; and in 2009 the firm was fined £770,000 for failures in its sales of PPI.
Tracey McDermott, director of enforcement and financial crime at the FCA, 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.”
The FCA has found that a sales-focused culture in Swinton was encouraged by Clare and Bowyer driving a business strategy that was designed to boost 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.
Swinton’s participating directors (including these three directors) stood to gain a bonus of approximately £90million under the directors share scheme if operating profits reached £110million in 2011.
Halpin was fined £412,700 because of a "lack of competence in his FCA approved CEO role", the FCA said.
It found he failed to ensure 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, said the FCA.
"He should have stepped back and considered whether, when taken together, those warnings pointed to fundamental problems with Swinton’s sales of the monthly add-ons.
"Halpin also 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," said the FCA statement.
Clare was fined £208,600. 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, the FCA said.
Bowyer was fined £306,700. 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: "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.
As editor, Tim is responsible for the media content, planning and production of AM's multiple channels (AM print and digital magazines, website, social media and contributing to our events planning). He interviews and writes about as many franchised dealer groups and UK divisions of motor manufacturers as possible, to explore the issues facing UK motor retail and understand what solutions dealers and suppliers are using to overcome these.
max - 07/11/2014 15:36
‘’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’’ Headline - ‘’putting profits before customers’’ How many Motor Industry Approved Persons actually understand this? Could they articulate it, demonstrate it, provide the board minutes to explain…..?