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FSA/PN/055/2008
10 June 2008

The Financial Services Authority (FSA) has fined Andrew Jeffreys (trading as Chepstow Financial Services) £10,500 for failures in the sales process he used for self certification mortgages.

Mr Jeffreys relied too heavily on customers’ declarations that they could afford the mortgage contracts and did not satisfy the FSA that he had assessed the affordability of recommended mortgage contracts.  These failures arose because he did not put in place adequate procedures to counter the risk of his business being used by customers to commit mortgage fraud.

He was also not able to demonstrate to the FSA's satisfaction how he carried out the training, supervision and monitoring of advisory staff and in some instances he failed to disclose adequately to clients the additional fees payable as a result of his use of packagers to source products.

Jonathan Phelan, FSA Head of Retail Enforcement, said:

“Mortgage brokers are entitled to rely on information provided by customers about their incomes, but asking customers to sign a declaration that they can afford the mortgage repayments does not absolve brokers from taking steps to assess and record whether the recommended contracts are affordable and suitable. 

"In all of the client files we reviewed we found that the customers had made false declarations about their incomes, and Mr Jeffreys simply accepted this information at face value.  Consequently his business was more at risk of being used to commit mortgage fraud.”

These failings were found during a series of visits to mortgage brokers last year by the FSA which focused in particular on self certification mortgages and affordability of mortgage advice.  By agreeing to settle at an early stage Mr Jeffreys qualified for a 30% discount under the FSA's executive settlement procedures – without the discount the fine would have been £15,000.

Notes for editors

1. Chepstow Financial Services is based in Chepstow, Monmouthshire.  The Final Notice for Andrew Jeffreys includes the background to the case, the relevant statutory provisions and the regulatory requirements contravened and the factors taken into account when settling the level of the fine.
2. FSA Press Notice 120/07 describes the findings of the FSA’s thematic work which examined the assessment of affordability, self-certification (self-cert) mortgages, training and competence standards, and the effectiveness of senior management controls.
3. 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.
4. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.