FSA fines firm for inadequate capital and for providing misleading information
19th March 2008The Financial Services Authority (FSA) has fined Blake Independent Financial Services Limited (BIFS), of Barnsley, South Yorkshire, GBP31,500 for failing to maintain adequate capital and for providing misleading financial information to the FSA.
FSA inquiries found that:
- BIFS failed to ensure that it maintained adequate financial resources from the date of its authorisation on 29 October 2003 until July 2007;
- Before authorisation BIFS did not put in place subordinated loans - which rank after other debts should a company fall into receivership or be closed - required by the FSA to meet its capital resources requirement; subsequently in 2005 it did not put in place a further subordinated loan required by the FSA to rectify a capital resources shortfall; and
- BIFS submitted FSA regulatory returns which indicated that it had the required loans in place and provided the FSA with misleading loan agreements which did not match those countersigned and held on file by the FSA.
Jonathan Phelan, Head of Retail Enforcement FSA, said:
"These were serious failings on the part of the firm resulting in it being authorised on the basis of subordinated loans that did not exist and being in breach of its capital resources requirement for more than three years. And when requested to provide copies of loan agreements BIFS submitted misleading documents.
"The fine sends out a clear warning to the industry that the way in which firms conduct their business and the way they interact with the FSA are as important as ensuring that individual rules are not breached."
BIFS has taken action to mitigate its failings: the capital resources deficit was promptly rectified (once it was identified by the FSA) and the firm now meets its capital resources requirement; it has employed a compliance consultancy and an accountancy firm to oversee the completion of future regulatory returns; it has employed a new Head of Compliance; and the accountancy firm which apparently advised BIFS in relation to the treatment of the subordinated loan agreements has been replaced. In addition, BIFS cooperated fully with the FSA with regard to this matter.
BIFS agreed to settle at an early stage of the FSA's investigation and therefore qualified for a 30% discount of the fine. Without the discount the fine would have been GBP45,000.
