FCA fines Towergate £2.6m

"We have issued repeated warnings to the industry on the importance of complying with client money rules which are designed to ensure that client money is adequately protected in the event of a firm failing."

The FCA found that Towergate, an insurance intermediary which holds both client and insurer money, accumulated a shortfall of £12.6 million in its client and insurer money bank accounts which, "due to systems and controls weaknesses, went undetected for a number of years".

Failings included the transfer of £10.5 million from Towergate’s client money and insurer money bank accounts to the office bank account of an intermediate parent company, and changing the basis upon which it removed commission owed to it by insurers from its insurer money bank accounts.

The FCA has also fined former Towergate director Timothy Philip £60,000 and banned him from having direct responsibility for client and insurer money.

The regulator highlighted that despite the failures there was no actual loss of client or insurer money and Towergate did in time rectify the shortfall. However, had the firm become insolvent during the period when the shortfall existed, the FCA said that insurers were at risk of losing money and may have experienced complications in recovering their money.

Mark Steward, Director of Enforcement and Market Oversight at the FCA, said: "We have issued repeated warnings to the industry on the importance of complying with client money rules which are designed to ensure that client money is adequately protected in the event of a firm failing. There can be no excuses given these warnings and the stakes involved. In addition, the firm’s failings placed insurer money at risk of loss.

"Senior management are ultimately responsible for ensuring that firms are following our rules and it is very clear that Mr Philip failed in that regard, falling well below the standards we require."

In response, John Tiner, Chairman of Towergate, said: “While this issue is historic, isolated, and had no financial impact on any clients or insurer partners, it does not excuse the fact that the company failed to live up to the high standards we expect of ourselves at Towergate and we deeply regret it occurred.  

"The company fully accepts the conclusions reached by the FCA, and the board is pleased that the regulator has recognised the company’s transparency and assistance throughout the process. Since identifying the issue, we have made a number of fundamental changes to our governance and control environment. The FCA findings allow us to close the matter, and maintain our focus on continuing to build a better business.”