Thursday, 4 November 2010

UK: FSA bans directors in respect of irresponsible lending and unfair practices

The Financial Services Authority has, for the first time in the context of findings of irresponsible lending and unfair practices in respect of dealing with customers in arrears, banned four company directors from performing controlled functions and/or significant influence functions in a regulated firm: see here. The FSA's actions provide a strong reminder of the standards expected of the directors of regulated firms.

One of the directors was the driving force behind the business and received a financial penalty. This director had, amongst other things, delegated responsibility for underwriting loan applications and assessing affordability to a third party mortgage adviser but did not formally assess that third party's competence or adequately monitor his performance. The FSA also found that this director made lending decisions arbitrarily, did not record how decisions were made, and kept no material customer information regarding income and affordability.

The other three directors were family members and failed to appreciate their regulatory responsibilities and, notwithstanding their approved person status, had no meaningful involvement with the business. They failed, according to the FSA, to take reasonable steps to (a) inform themselves about the company's affairs and (b) ensure that the company's business complied with regulatory requirements in respect of appropriate systems and controls.

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