Perrys East Midlands Limited

FCA action

fine

1

in fines

£51.1k

most recent

August 2008

• Fined £51,100 on 21 August 2008

  On 21 August 2008 the FSA imposed a financial penalty of £51,100 on GK for breaches of the FSA's Principles and rules in in respect of breaches of Principle 9 of the FSA's Principles for Businesses (the Principles) and associated rules between 14 January 2005 and 31 December 2007 (the Relevant Period) in relation to advised sales of payment protection insurance (PPI) at GK's motor dealer showrooms. GK agreed to settle at an early stage of the FSA's investigation. It therefore qualified for a 30% (stage 1) 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 £73,000 on GK.. These breaches relate to GK's failure to take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer who was entitled to rely upon its judgement (Principle 9). GK breached Principle 9 by failing to take reasonable care in recommending a PPI product which was suitable for its customers and by failing adequately to monitor its sales. GK's failings exposed 734 customers to the unacceptable risk of buying PPI policies that were not suitable for them during the Relevant Period. As a result GK failed to treat its customers fairly. GK's breaches are viewed as particularly serious because: (1) GK failed to gather sufficient information about a customer's circumstances, and as a result GK risked recommending PPI to customers when the product was not suitable for them. (2) GK's sales staff, as a matter of course, recommended the most comprehensive level of cover for which the customer was eligible rather than considering the most suitable level of cover for the customer's needs. (3) GK produced a generic Statements of Demands and Needs document (SODAN) which was not individually tailored to the customer. The SODAN also did not record sufficient information material to the insurance, particularly in respect of pre-existing medical conditions. (4) GK had an inadequate structure and ineffective procedures for monitoring sales and failed to routinely monitor sales. (5) GK failed to produce sufficient management information to ensure that senior management were aware of risks associated with its regulated business activities. (6) These failings arose against a background of high profile communications by the FSA highlighting the need for firms to ensure their PPI sales processes were meeting FSA requirements. The need for GK to have robust and effective systems and controls and sales processes was significant because it sold PPI from a network of motor dealerships comprising approximately 60 advisers across 12 locations. There are several factors which the FSA has taken into account in mitigation. GK proactively, and without prompting by the FSA, suspended sales of PPI and implemented a remediation programme. GK has worked closely with the FSA to ensure that its remediation programme will lead to all customers who have been disadvantaged receiving appropriate redress. There are several factors which the FSA has taken into account in mitigation. GK proactively, and without prompting by the FSA, suspended sales of PPI and implemented a remediation programme. GK has worked closely with the FSA to ensure that its remediation programme will lead to all customers who have been disadvantaged receiving appropriate redress. The FSA also recognises the following additional measures taken by GK which mitigate the seriousness of its failings. : (1) Prior to the commencement of Enforcement action GK engaged an external compliance consultant to review its PPI sales process. Following this review GK has implemented a number of the recommendations made, including revising the SODAN, sales process and overhauling the staff training programme. (2) Prior to the FSA visiting GK in June 2007, GK had already identified failings in its monitoring of PPI sales and subsequently appointed two auditorsand dded an additional level of management within the sales area of the business. (3) GK has fully co-operated and positively engaged with the FSA's investigation, in some respects demonstrating best practice.