The UK Financial Conduct Authority has fined One Call Insurance Services Ltd and its chief executive £1.15 million for failing to protect its clients’ money and to hold it in trust instead of using it to cover its own financial needs.
The insurer allegedly ‘inadvertently’ used funds from its clients’ money account to finance its own capital requirements, to make payments to directors and indirectly to provide another firm with capital, which resulted in a deficit of £17.3 million in client money. These funds were eventually repaid but customers were exposed to a high risk of loss.
In South Africa the Financial Institutions (Protection of Funds) Act has severe civil and criminal consequences (for the corporation and personally for those individuals involved) where a financial institution fails to handle trust money as trust money separate from its own funds and uses the money for its own benefit.
The FAIS Act also includes requirements regarding dealing with clients’ money in trust. Companies and their executives must be highly astute to see that trust funds are properly handled if they do not want serious consequences.
[The case is One Insurance Ltd v the Financial Conduct Authority, case number FS/2016/008, in the Upper Tribunal, Tax and Chancery Chamber]