Release Date: 1st February 2016
To access the original FCA document, click here.
Summary
Robert John Bygrave was fined £37,400 by the FCA and prohibited from performing any significant influence functions in relation to any regulated activities. This penalty was imposed due to his failure to exercise due skill, care, and diligence in managing the business of Aderia UK Limited, while he was CF1 (Director(AR)) at Coverall Worldwide Ltd.
Summary of Reasons:
- Negligent Handling of Client Money: Bygrave failed to determine if the insurance premiums received by Aderia should be treated as client money and relied on unverified information provided by an unapproved individual, Shay Reches.
- Mismanagement of Insurance Premiums: Instead of paying £11.1m of insurance premiums to the insurer, Balva, Bygrave redirected £9.8m to third parties under instructions from Reches, leading to a significant risk for policyholders.
- Failure to Verify Risk Transfer Agreements: Bygrave did not confirm the existence of a risk transfer agreement which would have dictated the handling of the premiums, thereby failing to segregate client money as required by CASS rules.
- Inadequate Investigation and Oversight: Even after becoming aware of inconsistencies and concerns, Bygrave continued to rely on explanations from Reches without conducting further investigations.
Key Takeaways for Other Firms:
- Thorough Due Diligence: Ensure that all financial and operational arrangements, especially those involving client money, are properly documented and verified.
- Clear Separation of Client Funds: Adhere strictly to CASS rules regarding the segregation of client money to protect client assets.
- Independent Verification: Do not rely solely on internal assurances, especially from unapproved individuals. Always seek independent verification of critical arrangements.
- Proactive Risk Management: Regularly review and update risk management practices to identify and mitigate potential risks.
- Responsibility and Accountability: Senior management must take full responsibility for compliance and ensure they are fully informed about all aspects of the business.
In conclusion, the FCA’s action against Robert John Bygrave highlights the critical importance of due diligence, proper management of client money, and the need for rigorous oversight and accountability in financial operations. Firms must learn from these failures to avoid similar penalties and ensure the protection of consumers and market integrity.
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