The firm failed to ensure it provided suitable advice which exposed over 80 customers to the risk of being sold an unsuitable self-certified mortgage.
The case arose from a number of visits to the firm, including one in August 2007 which was part of an FSA thematic project looking at the sale of self-certified mortgages.
Between January 2006 and April 2008 the firm failed to make appropriate enquiries about customers’ income, expenditure, credit history and debt position, so that it could properly assess the affordability of its recommendations.
It also failed to record from customers sufficient personal and financial information about them to demonstrate the suitability and reasons for its recommendations.
It failed to conduct adequate due diligence in respect of a third party introducer and failed to carry out straightforward checks which would have enabled it to assess the accuracy of information provided by customers referred by that Introducer.
This increased the risk of the firm being used by third parties to commit financial crime.
Georgina Philippou, head of retail enforcement at the FSA, says:“Brokers advising on mortgages need to give suitable advice to ensure that customers are not unduly exposed to financial hardship in the future. This is especially important in firms like Gillen Farrelly who advise customers who might be consolidating debts or have adverse credit histories and where affordability is an important consideration.”
In setting the penalty the FSA has taken into account that Gillen Farrelly voluntarily engaged a firm of external compliance consultants to conduct a compliance audit in May 2008; has terminated its arrangements with the Introducer and has not accepted any referrals of mortgages from the Introducer since November 2007.
It also no longer sells self certification mortgages; and has agreed to undertake a customer contact and remediation exercise.
The firm agreed to settle at an early stage of the FSA’s investigation. It therefore qualified for a 30% reduction in penalty. Were it not for this discount, the FSA would have imposed a financial penalty of £25,000.