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Broker banned for client money failings

Monday 8th February 2010

The director of a Manchester based mortgage and general insurance firm has been banned by the Financial Services Authority (FSA) from holding senior positions in the financial services industry. The FSA found his failure to comply with client money rules resulted in the loss of roughly GBP 85,000 of his customers’ money.

When Bridgewater sold an insurance policy, it charged its customers two years’ insurance premiums upfront, added the sum to the mortgage and held the money to pay the insurance premiums to insurers on their behalf.

However, Sixsmith failed to separate his customers’ money from that of the firm, and used only one bank account under the name of Bridgewater to administer both his business and the premium payments customers had entrusted to him, said the FSA. As a result, when Sixsmith’s firm ceased trading in September last year, approximately GBP 85,000 of customers’ money was lost.

As Bridgewater’s sole director, it was also Sixsmith’s responsibility to ensure that any insurance premiums that customers had lodged with the firm were passed on to the insurers when payments became due. However, approximately 700 policies lapsed because, until May 2008, Sixsmith kept no record of when these payments should begin or end for each of the firm’s customers and therefore he failed to ensure that premiums were paid when due.

Sixsmith failed to take reasonable steps to ensure his business complied with the FSA’s regulations, and therefore breached Statement of Principle 7. He also failed to ensure that adequate systems and controls were in place to safeguard the firm’s client money.

Margaret Cole, director, enforcement said: “Sixsmith was incompetent and his actions posed serious risks to customers who trusted him with their money and expected him to pass that money on to insurers.
“Individuals who look after client money must act in accordance with the rules. Where they fail to comply, we will not hesitate to take enforcement action against them.”

The FSA would have imposed a penalty of GBP 25,000, but this would have placed Sixsmith in serious financial hardship. Sixsmith will not be able to hold senior positions in the financial services industry.

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