Towergate’s client money officer and director Timothy Philip was also fined £60,000 and banned from being directly responsible for client or insurer money again.
The Financial Conduct Authority has fined Towergate £2.63m and banned its former director after it accumulated an undetected £12.6m shortfall in client and insurer bank accounts.
Between June 2005 and December 2013 a series of systems and controls failings included Towergate transferring £10.5m from its client and insurer accounts to its parent company, accumulating a £5m and £5.5m deficit in each account in the process which went unnoticed.
Towergate’s client money officer and director Timothy Philip was fined £60,000 and banned from being directly responsible for client or insurer money again.
Despite the failings neither clients nor insurers lost money as Towergate rectified the shortfall, however the regulator said insurers were put 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 other failings, Towergate failed to remove £1.45m of interest from client money bank accounts and it transferred £2.13m from client accounts to insurer accounts without registering the transfer.
In December 2008 Towergate breached its agreements with insurers by changing the basis upon which it removed commission owed to it by insurers from its insurer money bank accounts, resulting in a £3.6m deficit in the firm’s insurer money bank accounts.
Both Towergate and Philip settled early and qualified for a 30% discount on the fines, which would have been £3.76m and £85,800.
Towergate independently verified the key issue and informed the FCA in 2013.
Its current chairman John Tiner responded to the ruling by saying: “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.”
