LONDON (Reuters) - Britain’s financial watchdog fined five people and two firms a total of 15.5 million pounds ($22.14 million) on Monday in its first enforcement action regarding insurance cover for lawyers.
The Financial Conduct Authority said Shay Reches, a director at Coverall Worldwide, and with responsibility for a managing general agent, Aderia UK Limited, was central to setting up and operating insurance schemes that left 1,300 solicitors’ firms across England and Wales without proper cover.
“In doing so, Mr Reches recklessly directed payments of insurance premiums to parties other than the insurers and reinsurers responsible for paying claims, increasing the risk that policyholders’ claims would not be paid,” the FCA said in a statement.
“This misconduct contributed to the failure of several insurance schemes as well as to three insurers going into administration.”
The FCA, in conjunction with the Bank of England’s Prudential Regulation Authority, closed down the three insurers — Millburn, European Risk Insurance Company (ERIC) of Iceland, and Balva Insurance of Latvia — as there was a risk of claims not being paid out.
The firms also had debt owed by Sinclair Insurance Company Limited, which is owned and controlled by Reches and registered to the Comoros Islands.
The FCA banned Reches from working in financial services and fined him 1 million pounds. He has agreed to pay 13.1 million pounds to the three insurers, the watchdog said.
“If he fails to pay this amount or any part of it, the fine will be increased by the amount unpaid,” the FCA said, the first time the watchdog has imposed such as requirement.
The case is also the first time the watchdog has used new powers to fine an individual, Reches, who had not been authorised by the regulator.
The FCA also fined Colin McIntosh, chief executive of Millburn and a director of Coverall, 51,600 pounds and banned him from financial services.
Millburn was fined 1.14 million pounds for failing to deal with the FCA in an open and cooperative way.
Coverall was fined 36,800 pounds, and Robert Bygrave, a director at the company, was fined 37,400 pounds and banned from the industry.
Andrea Sadler, a director at Coverall and responsible for managing Aderia’s day to day operations, was fined 18,700 pounds and banned from financial services.
$1 = 0.7001 pounds