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FSA/PN/060/2006
27 June 2006

The Financial Services Authority (FSA) has fined Rainbow Homeloans Limited (RHL) £35,000 for systems and controls failings which exposed around 1000 people to the risk of being sold unsuitable products.

The FSA found that RHL's management had not ensured that, as directors, they were approved to perform their regulated function and had not adequately monitored and controlled the business at all times. Instead, RHL's management relied to an inappropriate extent on an external consultant for overseeing compliance-related matters and ultimately for ensuring the fair treatment of customers.

The failings in RHL's sales process were considered serious as RHL failed to demonstrate product suitability, to provide customers with relevant Key Facts Illustrations at the right time and handle complaints properly.

FSA Director for Small Firms, Stephen Bland, said:

'RHL's management failed to take adequate responsibility for the business to ensure compliance with the FSA’s principles and rules and the fair treatment of its customers. Where and when appropriate the FSA will use its enforcement powers to ensure that management take seriously the requirement on firms to comply with regulatory requirements and treat customers fairly.'

In taking action, the FSA took into account RHL’s co-operation and its agreement to conduct a review of past business. RHL also agreed to settle at an early stage of the FSA’s investigation and therefore qualified for a 30% discount otherwise the penalty would have been £50,000. RHL has now ceased conducting all regulated business.

Notes to editors

  1. The full text of the Final Notice issued which includes the background to the case, regulatory requirements contravened and the full details of factors taken into account when setting the level of the fine is available on the FSA website.
  2. Rainbow Homeloans Limited (RHL) was a sub prime mortgage broker. Sub prime mortgages, sometimes also referred to as 'non conforming mortgages', are aimed at consumers with impaired or low credit ratings who may find it difficult to obtain finance from traditional sources.
  3. Details of the principles for business and rules breached by RHL are also available on the website.
  4. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
  5. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.

 

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