FSA sounds Mortgage Times' death knell

In a Final Notice issued to the mortgage network on 25 January, the City regulator cancelled the permission of Mortgage Times to carry on its regulated activities.

According to the notice, the decision was given based on a warning notice issued to Mortgage Times on 28 September last year which concluded the company had failed to satisfy threshold conditions set out in Schedule 6 of the Financial Services and Markets Act 2000.

In October last year it was reported the FSA had launched an investigation in to the running of Mortgage Times over claims that it had failed to pay commission to some of its appointed representatives.

According to the FSA's warning notice, the network was found to have inadequate resources to conduct regulated activities and was also considered to be in breach of financial prudence regulations in the regulator's Principles for Business.

According to the regulator, Mortgage Times failed to hold the necessary capital resource of the higher of £5000, or 2.5 per cent of its annual income from its regulated activities.

However it stated that Mortgage Times reported an income of £9,343,136 for the year ended 31 December 2008, which would have required regulatory capital of £233,578.

However its accounts for the period showed it had just £23,682 put aside in capital resources.

Mortgage Times announced profits of £138,789 for the period to 31 March 2009, which increased its capital resources by the same amount.

However, the FSA said the group's capital resources included a debt of £899,953 owed to it by parent company The Mortgage Times Group Holdings Limited.

In the notice, the FSA stated it was not satisfied this sum could be recovered as the parent company had been unable to show it had the resources to repay the debt.

There was also no binding agreement to the effect that shareholders of the parent company would provide funding to pay the debt, and no evidence that the shareholders could promptly fund the debt repayment, according to the notice.

After deducting the amount owed by The Mortgage Times Group Holdings, the network was found to have negative capital resources of £737,482, constituting a shortfall of £971,060. The FSA said Mortgage Times had failed to rectify the capital resources deficit despite being given adequate opportunity to do so.

In December last year, the directors of Mortgage Times sent an email to appointed representatives of the network stating it was no longer able to carry out regulated business.

It was also revealed that in November HM Revenue & Customs had issued Mortgage Times with a winding up petition.

At the hearing at the Royal Courts of Justice on 13 January, it was granted an extra three weeks to pay its debts after representatives for the network confirmed it had applied to go into administration.