Hcl Insurance Bpo Services Limited

FCA action

fine

1

in fines

£525k

most recent

April 2008

• Fined £525,000 on 8 April 2008

  On 8 April 2008 the FSA imposed a financial penalty of £525,000 on Liberata Financial Services Limited (LFS) in respect of breaches of Principles 3 and 2 of the FSA's Principles for Businesses (the Principles) between 6 January 2005 and 25 April 2007 (the Relevant Period) in relation to failures in its systems and controls for producing and issuing documents to policyholders. LFS agreed to settle at an early stage of the FSA's investigation. It therefore qualified for a 30% reduction in penalty, pursuant to the FSA's executive settlement procedures. Were it not for this discount, the FSA would have sought to impose a financial penalty of £750,000 on LFS. The FSA has imposed a financial penalty on LFS for breaches of the FSA's Principles. These breaches relate to LFS's: 1) failure to take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems (Principle 3); and 2) failure to conduct its business with due skill, care and diligence (Principle 2). LFS's failures relate to its systems and controls for producing and issuing documents to policyholders relating to investment, savings and retirement products. These failings include ineffective procedures, inadequate monitoring of document production and a failure to act appropriately in response to warnings that documents were not being produced. The failings resulted in customers not being treated fairly. As a consequence of the failings, approximately 30,000 policyholders did not receive documents containing important information about their savings, investment and pension products (some of these documents were due to be sent prior to LFS becoming regulated). Of these policyholders, 161 suffered financial loss, as a result of documents not being issued, amounting to £17,584. The extent of the failings resulted in an unacceptable risk that any of the policyholders whose policies LFS administered using its automated document production system (approximately 1.3 million policyholders) would not receive important financial information on which to base their investment decisions and, consequently, suffer financial loss. The FSA considers these failings to be particularly serious because: 1) the production and timely dispatch of documents to policyholders was a core part of LFS's business. Despite this, LFS's systems and controls were wholly inadequate to investigate and resolve errors in its document production process; 2) between December 2005 and January 2007 LFS acted recklessly in failing to consider warnings in its management information that documents subject to its automated production process were not being produced; 3) despite being aware in April 2006 that a number of policyholders had not received documents and that a third of these were at risk of financial loss, LFS failed to consider whether other policyholders had been similarly affected; and 4) the failings persisted over a significant period of time. LFS's failures therefore merit the imposition of a financial penalty. In deciding upon the level of disciplinary sanction, the FSA recognised the following measures taken by LFS which serve to mitigate the seriousness of its failings: 1) LFS appointed external consultants in February 2007 to assist it to review its document production system, identify the documentation which had not been produced, analyse the potential impact on policyholders and ensure that all appropriate documents were provided to policyholders; 2) By April 2007, new management implemented a comprehensive review of LFS's systems and controls. This led to the restructuring of its management and oversight arrangements, improvements in management information and the installation of a dedicated team to oversee its document production system; 3) LFS implemented a remedial action plan, in April 2007, which ensured that all policyholders who suffered financial loss were promptly compensated; and 4) LFS co-operated fully with the FSAn the course of its investigation, including proactively identifying relevant information and bringing it to the FSA's attention. LFS has agreed the facts quickly ensuring an efficient resolution of the matter.