FSA bans five following insurance fraud probe

The FSA has banned five individuals for failures in relation to insurance fraud.

The watchdog has also imposed one of its largest ever fines of £150,000 for insurance fraud on one of these individuals and £50,000 on another.

Today’s announcement brings to 14 the total number of individuals working for insurance related businesses who have been banned by the FSA since the beginning of this year with fines totalling over £500,000.

Andrew Jeffery, director of Jeffery Flanders (Consulting) Limited has been banned and fined £150,000 - one of the largest fines imposed on an individual for insurance fraud.

The FSA said Jeffery recklessly failed to put in place insurance policies appropriately or, in some cases, at all, despite collecting payment from customers.

He exposed customers to risks such as not having adequate household or motor insurance. This was particularly serious as many of the customers were elderly or vulnerable. The regulator said he also knowingly forged documentation and correspondence potentially to mislead insurance companies.

Jeffery obstructed the FSA’s investigation by failing to report changes to the firm’s contact details, as well as not providing documents or attending meetings at the request of the FSA.

Barrie Aspden of Orion Direct Limited and Peppercom Plc has been banned from performing any regulated role in financial services for acting dishonestly and without integrity.

Aspden knowingly used approximately £300,000 of Orion client money to finance the creation of a new company “Click the Pepper”, an online motor insurance site, which traded as Peppercom. His actions meant that several hundred customers of Orion were put at risk of being uninsured because their premiums were misused.

The FSA said Aspden’s conduct demonstrated a fundamental disregard for regulation. Having been made bankrupt and unable to obtain approved person status, Aspden put in place three directors at Orion and Peppercom including two relatives and a family friend. All three directors lacked the competence and skills to perform their roles. This enabled him to control the business without the relevant FSA approval.

Melanie Aspden, Barrie Aspden’s wife, and Gaenor Clayton, his sister-in-law, have also been banned for their failure to demonstrate competence and capability as directors at Orion and Peppercom. They were not involved in decision-making or financial management but instead delegated these responsibilities to Barrie Aspden, an unapproved person.

Melanie Aspden and Clayton both failed to ensure client funds were used solely for the purposes they were provided for, resulting in Barrie Aspden using approximately £300,000 of Orion’s client money to fund the development of the Peppercom business.

They both admitted to not having the necessary experience for the director role. Had they not demonstrated financial hardship they would have each been fined £35,000.

Family friend Paul Willment has been fined £50,000 and banned from financial services, also for failing to demonstrate competence and capability. The fine reflects the seriousness of Willment’s misconduct as director and non-executive director of Orion and Peppercom.

Willment rarely attended Orion’s offices, had no active involvement in the management of the business and delegated his roles and duties to the unapproved employee Barrie Aspden. Between September and November 2007, Barrie Aspden withdrew over £300,000 from Orion’s client money account to fund Peppercom’s development. Willment was aware of the transfers but did not challenge Aspden about it. As a result, Aspden was able to commit insurance fraud.

'Complete disregard'

Margaret Cole, director of enforcement and financial crime at the FSA, said: “These five individuals acted with complete disregard for the interests of their customers and the FSA’s regulatory requirements.”

“Individuals holding a significant influence function role such as that of director must act with integrity as well as with the skill, care and diligence necessary to manage effectively the businesses for which they are responsible.

“The FSA does not tolerate these types of failings. We will continue to take action against those who commit insurance fraud, as well as those who fail to take action to prevent it.”

The actions of Barrie Aspden came to light following information that the FSA received through its whistle blowing line.