The Financial Conduct Authority (FCA) has fined three former senior executives of Swinton Group Limited (Swinton) £928,000. 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.
Peter Halpin (former chief executive) is also banned from acting as chief executive of a financial services firm, while Anthony Clare (former finance director) and Nicholas Bowyer (former marketing director) are banned from performing significant influence functions at financial services firms.
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, Clare and Bowyer would have benefited significantly under the scheme had these results been achieved.
Details of the findings against the three individuals are as follows.
Peter Halpin Halpin has been fined £412,700 in addition to a ban from acting as a CEO of an FCA authorised firm because of a lack of competence in his FCA approved CEO role. The FCA found that Halpin failed to ensure that 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. 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.
Anthony Clare Clare has been fined £208,600 and is now banned from holding a position of significant influence in an FCA authorised firm because of a lack of competence as an FCA approved director. In addition to his role as finance director, Clare had oversight for the firm’s compliance department and a particular responsibility for ensuring that Swinton treated its customers fairly.
Similarly to Halpin, Clare also missed warnings of compliance problems with the monthly add-on products and failed in his responsibility to ensure Swinton’s compliance department was producing accurate and representative management information. Further, Clare was involved in specific decisions concerning the development of Swinton’s breakdown and home emergency insurance policies and did not recognise the risk to customers that arose from these decisions.
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. Despite his responsibilities, he missed the warning signs.
Nicholas Bowyer Bowyer has been fined £306,700 and banned from performing any significant influence function at an FCA authorised firm, again because of a lack of competence as an FCA approved director.
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.
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 per cent discount on their fines.