Mortgage and insurance broker banned following fraud conviction

The Financial Conduct Authority (FCA) has announced that Graham Patrick Lockstone has been prohibited from carrying out any regulated activities, following his conviction for fraud and other offences.

Bristol-based Mr Lockstone was previously a director, and the individual responsible for insurance mediation, at Express Mortgage Solutions Limited. On April 13 2016, he was convicted at Birmingham Crown Court of one count of “conspiracy to dishonestly make false representation to make gain for self/another or cause loss/expose other to risk”, and of one count of “making/supplying articles for use in fraud.” A few days later, he was sentenced to 42 months in prison, but had this reduced to 33 months on appeal, and he was released from HMP Weyhill on licence on May 26 2017, having served just over one year of his sentence.

The convictions relate directly to his activities while a director of Express Mortgage Solutions. His misconduct included:

  • Dishonestly making false representations regarding the employment and income details of a third party
  • Dishonestly making false representations regarding the rental value of a property
  • Falsely representing that a third party firm had made a mortgage offer on the property
  • Creating false documents, whilst claiming that these had been created by third party firms, but while knowing that they were designed for use in connection with fraudulent activities

Following a conviction for offences as serious as this, the fact that the FCA has chosen to impose the ultimate sanction available to it, and to withdraw his authorisation to carry out any form of financial services activity, comes as no surprise.

The FCA’s Final Notice says that:

“Mr Lockstone is not a fit and proper person to perform any function in relation to any regulated activity … as his conduct demonstrated a serious lack of honesty and integrity, and that he poses a significant risk to customers.”

The Notice also makes reference to the Court of Appeal judgement by Judge Eyre QC. The FCA notes that:

“Those remarks stated that Graham Lockstone was a skilled and experienced professional in the financial world. He knew how financing operated and used his contacts. He had been involved in the fraudulent transaction, as well as being involved later in the production of false documents for use in fraud. His offending was viewed by the [sentencing] judge as a sophisticated abuse of his position and skills. It was deliberately dishonest behaviour.”

The FCA’s fit and proper’ person requirements require holders of key positions within authorised firms to display the highest standards of: honesty, integrity and reputation; competence and capability; and financial soundness.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.


MOJ issues bulletin covering several claims compliance matters

The December 2017 bulletin from the Claims Management Regulator at the Ministry of Justice (MoJ) makes reference to some very important compliance issues. All authorised claims management companies (CMCs) are advised to read this bulletin closely, and to take action where appropriate in response to the issues raised.

Firstly, CMCs are reminded that the implementation date for the General Data Protection Regulation is drawing ever closer. CMCs are urged to read the information on the website of the data protection regulator, the Information Commissioner’s Office (ICO), and to urgently make the required changes to their documentation, practices and procedures. Some of the key elements of GDPR, which comes into force on May 25 2018, include:

  • Privacy notices must clearly explain to clients what a firm’s legal basis for processing data is, together with how long the firm will retain the data for. Clients must also be informed that they have a right to complain to the ICO
  • Firms will have just one a month to comply with a subject access request, and in most circumstances won’t be able to charge clients for providing the information
    Where firms introduce new technology, or where processing is likely to significantly affect individuals, they may be required to carry out a Privacy Impact Assessment, considering the impact the change would have on the data protection rights of clients

Staff need to undergo training on GDPR and what it means for their role.

Companies that fail to comply with GDPR requirements can be fined up to 4% of annual turnover or €20 million, whichever is higher.

Any company that is unsure as to what GDPR means for them is advised to speak to their compliance consultant.

CMCs who offer clients the option of paying fees in instalments are urged to check whether they need consumer credit permissions from the Financial Conduct Authority in order to do this. To be exempt from the need to obtain this permission, the instalment agreement must be repayable by no more than 12 instalments within no more than 12 months, and must not involve the payment of interest or charges.

The MoJ also notes that a number of companies are assisting clients in making claims relating to cavity wall insulation. It says that in most cases these companies will not need to be authorised, but that some will need authorisation if their work concerns housing disrepair (i.e. claims brought by tenants against their landlords), personal injury caused by cavity wall insulation issues, or mis-selling of a finance agreement linked to the sale of the insulation.

The Financial Guidance and Claims Bill continues its passage through Parliament. CMCs should still expect that, from April 1 2018, they will be unable to charge upfront fees for any financial claim, or for any claim where it is demonstrated that the consumer does not have a relationship with the lender. The Bill also requires CMCs to ensure that all cancellation charges are reasonable and to provide consumers with an itemised bill setting out details of what the cancellation charges relate to.

The bulletin also alerts CMCs to a number of training courses offered by the Legal Ombudsman. The Ombudsman is the professional body that considers complaints concerning CMCs where the client and the company cannot reach agreement.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.


ICO executes search warrants related to millions of nuisance calls

Data protection regulator the Information Commissioner’s Office (ICO) has revealed that it has searched two company premises in Nottingham as it continues its battle against organisations that make nuisance calls.

ICO enforcement officers joined forces with the Claims Management Regulator and Nottinghamshire Police to execute a search warrant, where computer equipment and documents were seized. The ICO says that the network it is investigating is “suspected of making hundreds of millions of nuisance calls,” all apparently concerning personal injury claims.

Andy Curry, the ICO’s Enforcement Group Manager, said:

“People are sick and tired of receiving nuisance calls. The evidence we had already gathered prior to these warrants suggests this network, operating both in the UK and overseas, is responsible for making hundreds of millions of them.

“We hope the material we have now recovered will help identify other organisations and individuals in a lengthy and complex investigation, and assist the ICO and our partners in taking enforcement action. It will have the added effect of disrupting these people’s activities, which cause so much annoyance and distress to the UK public.”

The ICO has issued a number of fines to companies who have broken the laws regarding unsolicited marketing calls. Many of these companies have been from the claims management sector, and the Claims Management Regulator at the Ministry of Justice has fined, or banned, a number of companies over this practice. Acting in this manner can also result in company directors being disqualified for several years.

Under section 22 of the European Union’s Privacy and Electronic Communications Regulations, automated marketing calls and marketing texts and emails can only be sent to people who have actively consented in advance to receiving such communications. Including an option to opt out of future texts within the message is not sufficient.

The consent wording used by companies must also be explicit in nature, and must make consumers aware that by signing their name, or ticking the box, they are agreeing to receive marketing communications of this nature.

Live marketing phone calls can in principle be made to the general public, but companies must take steps to ensure that they do not contact anyone who has registered with the Telephone Preference Service, or who has previously informed the company that they wish to opt out of receiving cold calls.

In its latest annual report, the ICO said it had fined 23 firms a total of £1,923,000 for breaches of the Privacy and Electronic Communications Regulations. The regulator also secured 21 criminal convictions against firms and individuals who breached data protection laws.

The maximum fine for breaches of the law will increase dramatically next year when the General Data Protection Regulation comes into force.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.


FCA publishes approach to authorisation and competition

The Financial Conduct Authority (FCA) has published documents explaining its approach to authorisation and its approach to competition.

The FCA links the two subjects by saying that reducing barriers to obtaining authorisation is vital to ensure effective competition in financial markets.

The approach to authorisation document asks if there is a widespread understanding amongst new firms of the Threshold Conditions for authorisation, and whether the regulator needs to provide additional support to new firms.

It also says that one of the FCA’s key considerations when assessing a firm’s authorisation application is its corporate culture. Has the firm been able to demonstrate that it has an appropriate approach for rewarding and managing people, and that it has effective governance arrangements?

The document reminds individuals applying for authorisation to carry out controlled functions that they must meet a series of tests regarding: honesty, integrity and reputation; financial soundness; and competence and capability.

The approach to competition document notes that, while the FCA is not a price regulator as such, it may intervene in areas such as exit charges or loan charges.

The FCA has conducted a number of market studies regarding the competitiveness of different financial sectors. Examples of recent studies include mortgages, credit cards, cash savings and asset management.

The regulator says it is most likely to intervene where the lack of competition could result in significant consumer detriment, or where vulnerable customers could be particularly badly affected.

The regulator says that lack of competition can cause detriment in a number of ways, including:

  • Concentration – where one or more firms enjoy significant market advantages
  • Barriers to entry and growth, preventing challenger firms from entering a sector
  • Barriers to switching between firms, such as prohibitive exit fees or unwieldy and bureaucratic switching processes
  • Complex products leading consumers to follow the ‘path of least resistance’ rather than make active choices

In the document, the FCA asks for proposals on additional tools it could use to tackle uncompetitive markets.

A consultation on the two documents runs until March 12 2018.

Andrew Bailey, FCA Chief Executive said:

“As part of our Mission, we committed to being more open and transparent about how we regulate and how we make decisions.

“Authorisation is the gateway for firms that want to operate in the financial services industry. We use it to prevent harm from occurring by ensuring that all firms meet our minimum standards before they are allowed to start doing business. It’s vital that we get it right to keep out firms that are not up to scratch and allow the right ones through.

“Effective competition in financial services benefits consumers and firms. We are one of the few financial regulators in the world with a core objective to promote competition and it applies to all the work we do.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.


FOS says it is receiving many more payday loan complaints than forecast

At different stages of the long-running payment protection insurance (PPI) mis-selling saga, the Financial Ombudsman Service (FOS) has consistently underestimated the number of complaints it is likely to receive about the sale of the product. In recent months, the Service’s predictions regarding PPI volumes have been more accurate, but now the organisation has revealed that it has underestimated the number of payday loan complaints for the current financial year – actual complaint volumes here are 45% higher than first expected.

The FOS believes that by the time the current financial year ends in March 2018, it will have received 4,500 more complaints than forecast concerning short-term lending (payday loans and instalment loans). The FOS now expects 14,500 complaints in this area, compared to the original forecast of 10,000. It also adds that six out of ten complaints it handles in this area are being upheld.

On the other hand, the FOS says it has overestimated the volume of packaged bank account complaints for the 2017/18 financial year by 2,500. The original PPI forecast of 180,000 new complaints in 2017/18 remains unchanged.

Unveiling its ‘plans and budget’ for 2018/19, the FOS says it expects to receive 410,000 complaints in the next financial year, and that more than half of these (250,000) will concern PPI, as the deadline for making a claim relating to this insurance draws closer. It also predicts 20,000 short-term lending complaints during the next financial year.

The report comments on the examples of irresponsible lending the FOS has seen from short-term lenders, commenting:

“Many people who contact us have taken out a number of loans over an extended period of time – during which, at some point, their borrowing became unsustainable. On average, the number of loans involved is into double figures – and we’ve seen complaints involving over 100 loans.”

Regarding PPI, the report comments on a recent fall in the proportion of complaints being upheld, saying that:

“In general, we’re upholding fewer PPI complaints than in previous years. This reflects the concerted effort we’ve made over the years to help financial businesses – as well as claims management companies, who are involved in a substantial proportion of the PPI complaints we receive – to understand what a fair outcome looks like, so they don’t refer complaints to us unnecessarily.”

The case fee has been frozen at £550 once again for 2018/19. This fee is paid by authorised firms on each complaint once they have had 25 or more cases referred to the FOS during the year, meaning of course that smaller firms usually don’t need to pay any case fees.

In her foreword to the plans & budget document, FOS chief executive and chief ombudsman Caroline Wayman notes that the sheer size of the PPI mis-selling scandal resulted in her organisation needing to treble in size, and she looks forward to reducing the size of the organisation’s operations once the PPI deadline has passed.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.


Payday directors banned for misuse of pension liberation money

Three directors of a payday lender have been banned for a total of 20 years for illegally using funds from a pension liberation scheme to pay off the firm’s debt. The misconduct of the three individuals resulted in investors losing a total of £1.2 million.

Philip Miller, Robert Alan Davies, and Daniel Jonathan Miller, all directors of Essex-based Speed-e-Loans.com Limited (SEL), have been disqualified for periods of nine, six and five years respectively. The orders, imposed on them by the Insolvency Service, prevent them from acting as a director of a company; taking part, directly or indirectly, in the promotion, formation or management of a company or limited liability partnership; or acting as receiver of a company’s property.

SEL offered loans between 2010 and 2012. After it had withdrawn from the market, in October 2012, the firm began accepting investment from a pension liberation scheme operated by third-party brokers. This scheme involved members of the public investing via the brokers. However, none of the £1.2 million received by SEL from the scheme was used to fund their trading activities, and was instead all used to meet existing debt repayments.

Although the firm became aware in January 2013 that one of the brokers operating the liberation scheme was on trial for fraud, it continued to receive investment from the scheme. It only acted when a BBC documentary was aired in May 2013 raising concerns about such schemes in general, and at this stage the firm sought professional advice and subsequently entered into administration.

Cheryl Lambert, Chief Investigator at the Insolvency Service, said:

“The directors were collectively, and at the kindest interpretation, recklessly negligent in their desperation to save the company. None of them asked simple, obvious questions when it should have been clear to them the brokers were taking nearly 50% in fees, nor the type of scheme they had become involved with and the individuals who were pushing the scheme.

“Philip Miller, the proposer and principal character, stood to gain financially from individual the transactions through a commission and so his actions demand the harshest criticism.

“Taking action against the people most responsible is a warning to all directors that such behaviour will attract in a very significant sanction. You cannot hide behind a lack of technical knowledge of specialist schemes – you have to exercise independent and critical thought.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.


FCA director says battle to ensure suitability continues

In a large-scale review of suitability of advice, which concluded in May 2017, the Financial Conduct Authority (FCA) concluded that suitable advice was being given in 93.1% of cases. The study encompassed more than 1,100 cases from more than 600 advisory firms.

Where advice was identified as being unsuitable or unclear, i.e. in the other 6.9% of cases, the FCA says that the main areas of concern were: whether clients’ risk profiles were being correctly identified, and replacement contracts being recommended where clients were advised to give up valuable benefits and/or incur higher costs without good reason.

However, in a recent interview, the regulator’s director of supervision cautioned firms against becoming complacent about the results of the study.

Megan Butler commented:

“I don’t think we will ever declare victory on the suitability of advice, or disclosure for that matter.”

Here, the FCA director is also referring to the fact that the review uncovered less positive results regarding firms’ quality of disclosure, with 41.7% of the cases reviewed found to breach disclosure rules in some way.

Of course, this means that the study findings indicated that the regulator’s rules on disclosure had been met in only 58.3% of cases. Two specific areas of concern regarding disclosure were mentioned by the FCA in its report: some firms operating an hourly charging structure were not providing clients with an estimate of how long each service is likely to take, and some firms were using charging structures which have a wide range of possible charges.

Disclosure standards were noticeably poorer in smaller advisory firms, in independent advice firms (as opposed to those offering restricted advice) and in directly authorised firms (as opposed to firms who are members of advice networks).

Ms Butler went on to highlight that there will be another FCA suitability review in 2018, with the results to be published in 2019. She added that:

“Unless you keep on at it, people don’t do it.  So, I will never declare victory. On suitability of advice, we could go out and find 99 per cent is fine. I would say great, but I’m going to come and look in two years’ time. Because if I don’t, when I come and look in eight years’ time, I wouldn’t be surprised if it’s gone down to 40 per cent.”

Pension transfers are also one area where the regulator has seen less positive results regarding suitability of advice. The FCA graded the recommendation to transfer out of a final salary (defined benefit) scheme as ‘unsuitable’ or ‘unclear’ in more than half of the cases it reviewed.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.