FSA bans Scottish broker couple over insurance fraud
Regulator fines couple £335,000 after husband committed fraud while wife “failed to notice”.
The Financial Services Authority has fined and banned Donald McKee Morgan, a partner of Donald Morgan Insurance Services, £335,204 over allegations of insurance fraud.
Mr Morgan’s wife, Janet Morgan, who was the only other partner at the firm, has also been publicly censured by the regulator and banned from carrying out regulated financial services.
The FSA said that while Janet Morgan took no active part in the affairs of the firm, she “failed to notice” her partner’s fraudulent activity.
An FSA investigation found that, in an attempt to support the firm’s finances, Mr Morgan deliberately kept insurance premium payments from a number of DMIS’s clients which should have been paid to an unnamed broker network.
In order to conceal his fraudulent conduct from the network, Mr Morgan falsified monthly reports and manipulated the computer systems at DMIS. He then used the premium monies to pay staff salaries and to fund his lifestyle.
Mr Morgan informed the FSA of his misconduct in August 2010 after realising the financial situation at DMIS was not going to improve and he was not going to be able to repay the money he had misappropriated. He cooperated fully with the FSA throughout its investigation, the regulator added.
The financial penalty consists of a punitive element of £112,700 and £222,504 for disgorgement of financial benefit.
Donald Morgan agreed to settle at an early stage of the FSA’s investigation and therefore qualified for a 30% discount. Were it not for the discount, the punitive element of the penalty would have been £161,000 and the total fine £383,504, the FSA said.
Tom Spender, the FSA’s head of retail enforcement, said: “Donald Morgan abused his position as an approved person and also abused the trust placed in him by his clients and business partners.
“Fortunately, his clients were never left uninsured, but his actions were unacceptable and the network suffered significant financial loss as a result.
“Insurance brokers must adhere to our rules, ensure customers are treated fairly and trust in the industry is maintained. However, Donald Morgan’s actions left much to be desired and that is why he has incurred a significant fine.”
In a separate case, the FSA said it “notes and welcomes” the sentencing of Mark Hazelwood to five years in prison for insurance fraud.
Mr Hazelwood was the subject of a previous FSA investigation having allegedly deceived customers out of almost £400,000 and was subsequently prohibited from working in financial services.