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FSA/PN/039/2009
19 March 2009

The Financial Services Authority (FSA) has fined Blackburn insurance broker Aspray Limited £21,000 for failings in control of its appointed representatives (ARs), and for misleading its clients and the FSA.

Aspray, which specialises in managing insurance claims for property repairs, did not maintain appropriate systems and controls for the recruitment, training and monitoring of its ARs.

Aspray also misled clients by telling them:

• that its services were free of charge when in fact cancellation charges could be incurred and ARs had discretion to charge an insurance excess; and
• that all its contractors were screened and only quality local tradesman were used, when in fact most contractors were found using sources such as ‘Yell.com’ and were not properly vetted.

The firm also failed to inform customers about the Financial Ombudsman Service (FOS) and their right to refer complaints to FOS.  And it misled the FSA by claiming  that it had made compliance visits to all its ARs, had made financial checks on them and reviewed their files when it had in fact performed none of these procedures.

Jonathan Phelan, head of retail enforcement at the FSA, said:

"It is vital that principal firms maintain effective controls over the recruitment, training and monitoring of their Appointed Representatives.  And it is very important that the principal firm ensures that clients are not misled about the services provided and terms of business of the network, and firms must not provide false or misleading information to the FSA.  We will take disciplinary action, including issuing fines, against firms who fail in these regards.”

The FSA has taken into account the following mitigating factors.  Aspray has been open and cooperative with the FSA's investigation.  It has accepted there had been management and control failures and has appointed external compliance consultants.  It has implemented a series of remedial changes to its practices and procedures.  And there is no evidence that the firm sought to profit or avoid loss as a result of the identified failings.

The firm agreed to settle at an early stage of the FSA's investigation and has therefore qualified for a 30 per cent discount under the FSA's executive settlement procedures.  The FSA would have otherwise sought to impose a financial penalty of £30,000.

Notes for editors

 

1. The Final Notice for Aspray Limited sets out more information about the case.
2. Aspray is an insurance intermediary which provides claims management services, specialising in project managing insurance-related property repairs.  Its head office is in Blackburn, Lancashire.  It was authorised by the FSA from 19 July 2007 and currently has 24 registered ARs around the United Kingdom.  The ARs are responsible for sourcing their own business.  Head Office manages the central booking system, provides training and gives sales support.  As Principal, it is also responsible for its ARs’ compliance with FSA regulations.
3. A Principal firm is a firm that is directly authorised and accepts responsibility for its ARs' actions in a binding agreement.
4. An Appointed Representative is a firm or individual that has chosen to become an AR of a Principal authorised firm instead of becoming a directly authorised person.  Under this arrangement, the AR enters into an agreement with the Principal under which it accepts full responsibility for the AR's actions.
5. A network firm is one which has appointed five or more ARs.  A firm with less than five ARs will also be classified as a network if its ARs have, between them, 26 or more representatives.  The Principal firm in the network is the one that is authorised by the FSA.
6. The FSA has published a factsheet and examples of good and bad practice for Principal firms' relations with their ARs.
7. 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.
8. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.