Five years after the FSA first investigated the Black and White Group the regulator finally took action against the brokerage last week.
It fined and banned the now defunct brokerage’s former directors for numerous failings in relation to the sale of mortgages and payment protection insurance.
The FSA has censured the firm for operating in a way that created a high risk of unsuitable sales and customers not being treated fairly.
Had the firm not been liquidated in 2008 the FSA would have fined it a whopping £2.2m.
Christopher Ollerenshaw and Thomas Reeh, the chairman and chief executive respectively, both challenged the decisions of the FSA in the Upper Tribunal.
The Tribunal agreed with the FSA that Ollerenshaw should be banned and fined £100,000, although this was subsequently reduced to £50,000 on grounds of financial hardship.
However, while the Tribunal agreed that Reeh should be fined £75,000 – which was reduced to £10,000 once financial hardship was taken into account – it judged that he should not be banned in the light of mitigating circumstances.
Adrian Childs, the former chief operating officer, was banned from holding a senior position in regulated financial services because he did not understand, or take steps to understand, how to perform his role. Childs would have been fined £50,000 but was declared bankrupt in 2009.
Mortgage Strategy revealed in November 2007 that both the Police and FSA had swooped on the firm’s premises looking for past case documents.
At the time Reeh told Mortgage Strategy: “We are being completely honest and open and have nothing to hide.”
When it subsequently went into administration in 2008 it was revealed that its estimated creditor bill totalled a staggering £3.7m, of which £9,454 was owed to the Financial Services Authority.
Black and White primarily advised on and arranged mortgage contracts, with many of its customers sub-prime with low or impaired credit ratings.
The firm had a panel of over 20 mortgage lenders and purported to consider all of them when advising on a mortgage.
But the FSA says that Ollerenshaw and Reeh encouraged sales advisers to sell a particular lender’s mortgages without considering whether the particular lender’s products were the best for customers and put undue pressure on advisers to sell PPI.
The FSA’s director of enforcement and financial crime Tracey McDermott says: “The failings of Ollerenshaw, Reeh and Childs are serious.
“The way in which they ran B&W led to customers being treated unfairly. Both the incentive scheme and the culture at the firm encouraged staff to focus on sales rather than suitability.”