FINAL NOTICE

Bradford

UNITED KINGDOM

1.
ACTION

1.1.
For the reasons given in this notice, the Authority hereby:

(1)
imposes on City & Provincial (“C&P”) a financial penalty of £1,100 in

respect of its breach of Principle 1 of the Authority’s Principles for

Businesses. Were it not for C&P’s financial position, the Authority would

have imposed on C&P a financial penalty of £68,600;

(2)
cancels C&P’s Part 4A permission because it is failing to satisfy Threshold

Condition 2.5 (Suitability); and

(3)
makes an order prohibiting Mr Tanweer from performing any function in

relation to any regulated activities carried on by any authorised or

exempt persons, or exempt professional firm. This order takes effect from

13 March 2014.

2.
SUMMARY OF REASONS

2.1.
Mr Tanweer is the sole trader and principal of C&P, a mortgage broker which

ceased trading in December 2011. Prior to that date C&P offered non-advised

mortgage broking services to retail clients in and around Bradford.

2.2.
Between 21 September 2009 and 21 June 2011 (“the Relevant Period”), C&P

failed to conduct its business with integrity, in breach of Principle 1. Specifically,

Mr Tanweer failed recklessly to prevent various client mortgage applications

(and supporting documentation), which contained false and misleading

information as to the clients’ employment details and income, from being

submitted to lenders for approval.

2.3.
The Authority views C&P’s conduct as particularly serious because its failings:

(1)
C&P poses a risk to consumers and to lenders, and therefore to the

integrity of the UK financial system. Were it not for C&P’s financial

position the Authority considers it would have been appropriate and

proportionate to impose on C&P a financial penalty of £68,600.

(2)
The Authority is also taking action against Mr Tanweer in his personal

capacity, because he lacks honesty and integrity in that he deliberately

provided his own mortgage lender with information about his income

which he knew to be false and misleading and he deliberately failed to

notify his lender of information which would have had a material impact

on its decision to provide him with (or not to withdraw) a further advance

on his mortgage.

2.4.
Accordingly, Mr Tanweer is not a fit and proper person to perform any function

in relation to any regulated activity carried on by any authorised person, exempt

person or exempt professional firm, and the Authority intends to impose a

prohibition order upon him.

2.5.
The Authority has also concluded that C&P does not satisfy Threshold Condition

2.5 (Suitability) in that Mr Tanweer (who is the principal of C&P) is not a fit and

proper person. It is therefore appropriate and proportionate to seek cancellation

of its Part 4A permission.

3.
DEFINITIONS

3.1.
The definitions below are used in this Final Notice.

“the Act” means the Financial Services and Markets Act 2000

“the Authority” means the body corporate previously known as the Financial

Services Authority and renamed on 1 April 2013 as the Financial Conduct

“C&P” means City & Provincial;

“DEPP” means the Decision Procedures and Penalties Manual;

“HMRC” means Her Majesty’s Revenue and Customs;

the “Principles” means the Authority’s Principles for Businesses;

the “Relevant Period” means the period between 21 September 2009 and 21

June 2011;

“Threshold Conditions” means the threshold conditions set out in Schedule 6 to

the Act; and

“the Tribunal” means the Upper Tribunal (Tax and Chancery Chamber).

4.
FACTS AND MATTERS

4.1.
Mr Tanweer is the sole trader and principal of C&P, a non-advised mortgage

broker to retail clients in Bradford, Yorkshire. C&P was established in March

1985 and authorised to conduct regulated business on 31 October 2004. C&P

voluntarily varied its permission to cease conducting regulated activities on 30

November 2011 and has ceased trading.

4.2.
Mr Tanweer held the following controlled functions at C&P:

(1)
CF7 (Sole Trader) until 31 January 2007; and

(2)
CF8 (Apportionment and Oversight) until 31 March 2009.

4.3.
Since 14 January 2005 Mr Tanweer has also held responsibility for insurance

mediation at C&P.

4.4.
Mr Tanweer was the sole individual at C&P who dealt with mortgages during the

Relevant Period. He does not hold any financial services qualifications and

therefore acted only as a non-advised mortgage broker.

4.5.
The Authority was made aware of concerns about Mr Tanweer and C&P following

separate notifications from two lenders that C&P had been removed from their

panel of mortgage intermediaries.

C&P’s failure to identify false/misleading information in mortgage
applications and prevent falsified documentation being submitted to
lenders


4.6.
The Authority has reviewed eleven regulated mortgage applications, which C&P

submitted for five different customers (Client A, Client B, Client C, Client D and

Client E) between September 2009 and May 2011, to Lender A, Lender B,

Lender C and Lender D.

Client A

4.7.
C&P submitted three mortgage applications on behalf of Client A, two to Lender

A and one to Lender B, each of which contained false and misleading information

as to income. Specifically, C&P submitted mortgage applications:

(1)
to Lender A in June 2010, stating that Client A was employed as a

machinist with “Basic Income” of £18,000 per annum;

(2)
to Lender A in September 2010, stating that Client A was employed as a

machinist with “Basic Income” of £20,000 with £8,000 overtime and

£7,000 bonus per annum; and

(3)
to Lender B in October 2010, stating that Client A was employed as a

clothing designer with “Gross Income” of £35,500 per annum (despite the

application form requiring basic salary, bonus/commission and overtime

to be entered separately).

4.8.
In October 2010, C&P also submitted to Lender B, on behalf of Client A, falsified

wage slips (dated September and October 2010) and a falsified P60 (tax year

2009/2010) in support of the income figures in Client A’s October 2010

application.

4.9.
Contrary to what was stated in the applications, HMRC does not have any

records at all for Client A for tax years 2007/2008 to 2010/2011.

4.10. At the time C&P submitted the September 2010 application to Lender A and

October 2010 application to Lender B, C&P must have been aware of the

significant inconsistencies and/or discrepancies in relation to the information

submitted and therefore the risk that the income details for Client A were false

and/or misleading. Similarly, at the time C&P submitted the wage slips and P60

on behalf of Client A in October 2010, C&P must have been aware of the risk

that they were falsified. Nevertheless, C&P submitted the mortgage applications

and supporting documentation without taking any steps to verify or challenge

the information they contained. This was, in the circumstances, unreasonable.

C&P was reckless as to whether the employment and income information stated

in the September 2010 application to Lender A and in the October 2010

application to Lender B was false and/or misleading and as to whether Client A’s

wage slips and P60 submitted to Lender B were falsified.

Client B

4.11. C&P submitted three mortgage applications on behalf of Client B, two to Lender

A and one to Lender B, each of which contained false and misleading information

as to Client B’s income. Specifically, C&P submitted mortgage applications:

(1)
to Lender A in May 2006, stating that Client B was employed as a bus

driver with “Basic Income” of £20,000 and with other income of £8,000

per annum;

(2)
to Lender A in March 2011, stating that Client B was employed as a taxi

driver with “Basic Income” of £22,000 and with other income of £8,000

per annum and that he had lived at his current address since 7 July 2006;

and

(3)
to Lender B in May 2011, stating that he was employed as a taxi driver

with a “gross annual salary” of £22,000 per annum and that his address,

where it was stated he had lived for over 13 years, was different to that

stated on the March 2011 application to Lender A.

4.12. In March and June 2011, C&P also submitted to Lender A and Lender B,

respectively, on behalf of Client B, falsified wage slips (dated February and

March 2011) in support of the income figures in the 2011 applications and in

June 2011, C&P submitted to Lender B a falsified P60 (tax year 2010/2011). The

wage slips did not state any PAYE code and the address on the wage slips and

P60 was inconsistent with that on Client B’s bank statements for the same

period, which C&P provided to Lender B at the same time.

4.13. This information conflicts with information provided to the Authority by HMRC

from its records for Client B, which state that:

(1)
Client B was employed as a bus driver between 9 May 2006 and 11

February 2007 with a gross income of £7,074.92 on a PAYE basis;

(2)
Client B has been self-employed as a taxi driver since 19 February 2007

and for the tax year 2010/2011 Client B declared a self-assessed net

profit of £5,472, significantly less than the figures declared on his 2011

mortgage applications; and

(3)
the PAYE reference on the P60 for the tax year to 5 April 2011 does not

exist. Client B had not paid tax via the PAYE system since 11 February

2007.

4.14. C&P submitted the above mortgage applications on behalf of Client B despite

being in possession of a fact find document, apparently completed by C&P on

behalf of Client B on 24 May 2006, which stated that Client B was self-employed

with an income of £20,000. This conflicts with the information submitted by C&P,

on behalf of Client B, in each of the mortgage applications, each of which stated

that Client B was employed. Furthermore, the address given for Client B in the

fact find matched the address given in the May 2006 and May 2011 mortgage

applications, but was different from the address provided in the March 2011

application. This was an obvious chronological inconsistency and conflicted with

the statement made in May 2011 that Client B had lived at the same address for

over 13 years.

4.15. At the time C&P submitted the May 2011 application to Lender B, C&P must have

been aware of the significant inconsistencies and/or discrepancies in relation to

the information submitted and therefore the risk that the address details for

Client B contained in the application were false and/or misleading. Similarly, at

the time C&P submitted the wage slips and P60 on behalf of Client B to Lender B

in June 2011, C&P must have been aware of the risk that they were falsified.

Nevertheless,
C&P submitted the mortgage application and supporting

documentation without taking any steps to verify or challenge the information

they contained. This was, in the circumstances, unreasonable. C&P was reckless

as to whether the employment and income information stated in the May 2011

application to Lender B were false and/or misleading and as to whether Client

B’s wage slips and P60 submitted to Lender B were falsified.

4.16. C&P submitted three mortgage applications on behalf of Client C, one to Lender

E and two to Lender A, each of which contained false and misleading information

as to Client C’s employment. Specifically, C&P submitted mortgage applications:

(1)
to Lender E in April 2010, stating that Client C had been employed by a

bed retailer (“the first bed retailer”) since 22 January 2010 earning

£10,500 per annum;

(2)
to Lender A in June 2010, stating that Client C was employed by the first

bed retailer earning £15,000 per annum at the time the application was

submitted. In addition, it stated that Client C was employed by a

completely different bed retailer (“the second bed retailer”) between 4

April 2009 and 15 January 2010; and

(3)
to Lender A in July 2010, stating that Client C had been employed by the

first bed retailer earning £15,500 per annum since 4 April 2009.

4.17. In July 2010, C&P also submitted to Lender A, on behalf of Client C, falsified

wage slips (dated June – July 2010) in support of the income figures in the

application. The address on the wage slips was inconsistent with that stated in

each of the three applications.

4.18. This information conflicts with information provided to the Authority by HMRC

from its records for Client C, which state that:

(1)
Client C’s employment ceased on 25 June 2010. Client C was therefore

unemployed at the time the two applications were submitted to Lender A;

(2)
Client C was paid a total gross amount of £1,630.38 for the six months

that Client C was employed at the first bed retailer (18 January 2010 to 25

June 2010); and

(3)
between 12 August 2009 and 8 January 2010 Client C was employed by

two different companies unconnected with either the first bed retailer or

the second bed retailer.

4.19. C&P submitted the above mortgage applications on behalf of Client C despite

being in possession of a fact find document, apparently completed by C&P on

behalf of Client C on 2 June 2010, which records that Client C had been

employed by the first bed retailer since 4 April 2009 earning £15,500 per

annum. This conflicts with the information submitted by C&P, on behalf of Client

C, in the April 2010 application to Lender E (in respect of his income) and in the

June 2010 application to Lender A (in respect of length of his employment).

4.20. At the time C&P submitted the June 2010 and July 2010 applications to Lender

A, C&P must have been aware of significant inconsistencies and/or discrepancies

in relation to the information submitted and therefore the risk that the income

details for Client C were false and/or misleading. Similarly, at the time C&P

submitted the wage slips on behalf of Client C in July 2010, C&P must have been

aware of the risk that they were falsified. Nevertheless, C&P submitted the

mortgage applications and supporting documentation without taking any steps

to verify or challenge the information they contained. This was, in the

circumstances, unreasonable. C&P was reckless as to whether the employment

and income information stated in the two applications to Lender A were false

and/or misleading and as to whether Client A’s wage slips submitted to Lender A

were falsified.

Client D

4.21. C&P submitted four mortgage applications on behalf of Client D, two to Lender

A, dated 19 August and 27 August 2009, respectively, one to Lender C, dated 16

December 2009 and one to Lender D in January 2010, each of which contained

false and misleading information as to Client D’s income. Specifically, Client D

was stated to be self-employed in all four applications with net profit earnings of

£41,000 in 2007 and £45,000 in 2008. In addition, the information in the

January 2010 application to Lender D regarding Client D’s accountant details

conflicted with that provided in the previous applications.

4.22. In September 2009, C&P also submitted to Lender A, on behalf of Client D,

falsified financial accounts for the years ending 2007 and 2008 in support of the

income figures in the 27 August 2009 application. Client D’s income was not

plausible in the context of Client D’s occupation as a self-employed market

trader.

4.23. In January 2010 C&P also submitted to Lender D, on behalf of Client D, falsified

utility bills and bank statements in support of the income figures in the January

2010 application to Lender D. The address on each of the utility bills and bank

statements submitted to Lender D was inconsistent with the address on the

application form itself and the address details stated in each of the earlier

applications.

4.24. Contrary to what was stated in the applications, HMRC does not have any

records at all for Client D for tax years 2007/2008, 2009/2010 and 2010/2011

and no record of Client D working as a self-employed market trader. Client D’s

only taxable income was received in state benefits.

4.25. At the time C&P submitted the January 2010 application to Lender D, C&P must

have been aware of significant inconsistencies and/or discrepancies in relation to

the information submitted and therefore the risk that the income details for

Client D were false and/or misleading. Similarly, at the time C&P submitted the

financial accounts to Lender A on behalf of Client D in September 2009, and the

utility bills and bank statements to Lender D on behalf of Client D, C&P must

have been aware of the risk that they were falsified. Nevertheless, C&P

submitted the mortgage application and supporting documentation without

taking any steps to verify or challenge the information they contained. This was,

in the circumstances, unreasonable. C&P was reckless as to whether the income

information stated in the January 2010 application to Lender D was false and/or

misleading and as to whether Client D’s financial accounts, utility bills and bank

statements were falsified.

Client E

4.26. C&P submitted two mortgage applications on behalf of Client E, one to Lender A,

dated 16 September 2010, and one to Lender E, dated 24 September 2010,

each of which contained false and misleading information as to Client E’s

income. Specifically:

(1)
both applications stated that Client E had an income of £19,500 per

annum; and

(2)
the first application stated that Client E had been employed as an Assistant

Manager at a car breaking firm in Bradford since 2 February 2009 and the

second application stated that Client E had been employed as a Manager at

the same car breaking firm since 2 February 2009.

4.27. In November 2010, C&P also submitted to Lender E, on behalf of Client E,

falsified wage slips (dated September, October and November 2010) and a

falsified P60 (for the tax year 2009/2010) in support of the income figures in the

application. There was no PAYE reference on any of the wage slips and the wage

slips and P60 each spelt the name of Client E’s employer differently.

4.28. This information conflicts with information provided to the Authority by HMRC

from its records for Client E, which state that:

(1)
Client E’s earnings were significantly less than those stated in the two

mortgage applications. In 2009/2010 Client E declared PAYE earnings of

£4,992. In 2010/11 Client E declared PAYE earnings of £4,992 and £5,715

net profit in a motor repair partnership;

(2)
Between 1 July 2009 and 2 August 2009 Client E was employed by an

individual in Stockton-on-Tees, not the car breaking firm in Bradford.

Otherwise, during the tax years 2009/2010 and 2010/2011 Client E was

employed by an individual at an address similar to that given for the car

breaking firm in the application to Lender E; and

(3)
the PAYE reference on the P60 for the tax year to 5 April 2010 does not

exist.

4.29. C&P submitted the above mortgage applications on behalf of Client E despite

being in possession of a fact find document, apparently completed by C&P on

behalf of Client E on 16 September 2010, which records that Client E had been

employed by a car breaking firm as an Assistant Manager (not a Manager) since

2 February 2009, earning £19,500 per annum. This conflicts with the information

submitted by C&P, on behalf of Client E, in the September 2010 application to

Lender E (in respect of his employer, employer’s address and position held) and

in the P60 submitted to Lender E in November 2010 (in respect of his employer’s

address).

4.30. At the time C&P submitted the September 2010 application to Lender E, C&P

must have been aware of significant inconsistencies and/or discrepancies in

relation to the information submitted and therefore the risk that the employment

details for Client E were false and/or misleading. Similarly, at the time C&P

submitted the wage slips and P60 to Lender E on behalf of Client E in November

2010, C&P must have been aware of the risk that they were falsified.

Nevertheless,
C&P
submitted the mortgage application and supporting

documentation without taking any steps to verify or challenge the information

they contained. This was, in the circumstances, unreasonable. C&P was reckless

as to whether the employment information stated in the September 2010

application to Lender E was false and/or misleading and as to whether Client E’s

wage slips and P60 were falsified.

Mr Tanweer deliberately misleading his own mortgage lender

4.31. In April 2008, Mr Tanweer applied for and obtained a further advance on a

residential mortgage in his own and his spouse’s name with Lender D. Mr

Tanweer stated in the application that the purpose of the further advance was to

fund the purchase of another property.

4.32. The Authority compared the information about Mr Tanweer’s income and

employment, as stated on his mortgage application to Lender D, with

information provided by HMRC.

4.33. In Mr Tanweer’s mortgage application to Lender D of April 2008, he stated that

his total annual income in 2008 was £98,000 with an additional £12,000 in

rental income from commercial properties which he owned. Mr Tanweer’s

spouse, who does not work, did not complete the section relating to employment

and income.

4.34. HMRC’s records show that Mr Tanweer declared net income of £17,556 for the

tax year 2007/2008 and a net loss of £58 for the tax year 2008/2009. In

addition, he declared to HMRC that the income he received from UK property

was £8,286 in the tax year 2007/2008 and £9,920 in the tax year 2008/2009.

4.35. Upon enquiry, Mr Tanweer admitted to the Authority that the £98,000 stated in

his mortgage application included anticipated rental income of £23,000 from the

property Mr Tanweer and his spouse intended to purchase with the further

advance.

4.36. Mr Tanweer also admitted that the further advance from Lender D was not used

for its stated purpose, that is, to purchase another property. Instead, he used

£95,000 of the funds to invest in a commercial enterprise.

4.37. Lender D has informed the Authority that Mr Tanweer did not disclose that any

income figures provided in support of his application included anticipated rental

income, nor did he inform it of any change to the purpose for which he applied

for the further advance. Lender D has also informed the Authority that had it

known the further advance was to be used to invest in a commercial enterprise

it would have declined Mr Tanweer’s mortgage application.

4.38. Accordingly, it is the Authority’s view that, given the discrepancy between the

income figures Mr Tanweer stated in his mortgage application to Lender D and

the (considerably lower) income figure he subsequently declared to HMRC for

the same period, Mr Tanweer has obtained a further advance by declaring false

income information in order to satisfy the lending criteria. In addition, Mr

Tanweer deliberately failed to inform Lender D that the income declared in his

application included anticipated rental income and that he had made a decision

to use the funds advanced for a purpose other than that stated in the

application.

5.
FAILINGS

The regulatory provisions relevant to this Final Notice are referred to in the

Annex.

5.1
By reason of the facts and matters referred to above, the Authority considers

that C&P has breached Statement of Principle 1 and demonstrated a lack of

integrity in the conduct of its business by recklessly failing to prevent:

(1)
the submission of eight mortgage applications to five different lenders on

behalf of five C&P customers which contained false and misleading

information as to the clients’ employment details and income; and

(2)
the submission of eleven falsified wage slips, P60 documents and/or

certified accounts to four lenders on behalf of five C&P customers.

5.2
As a consequence of C&P’s lack of integrity, lenders provided loans to applicants

based on inaccurate information and/or falsified documentation and without

being given all the relevant information to enable them to assess the risk of

applicants defaulting on mortgage payments.

5.3
The Authority therefore intends to impose a financial penalty on C&P pursuant to

section 206 of the Act.

5.4
The Authority also intends to cancel C&P’s Part 4A permission pursuant to

section 55J of the Act because Mr Tanweer is the sole proprietor of C&P but is

not a fit and proper person, for the reasons set out below.

Mr Tanweer: Fitness and Propriety

5.5
In addition, in relation to Mr Tanweer’s own mortgage application, the Authority

has concluded that Mr Tanweer lacks honesty and integrity and is therefore not

a fit and proper person. Specifically, Mr Tanweer:

(1)
deliberately provided his own mortgage lender with information about his

income which he knew to be false and misleading; and

(2)
deliberately failed to notify his lender of information which would have

had a material impact on its decision to provide him with (or not to

withdraw) a further advance on his mortgage, specifically:

a. that the income information provided in support of his application

included anticipated rental income; and

b. that Mr Tanweer did not propose to use the further advance for its

stated purpose (to purchase another property) but instead proposed

using it to invest in a commercial enterprise.

5.6
Mr Tanweer’s conduct fell short of the standards required by the Authority’s Fit &

Proper Test for Approved Persons in terms of honesty and integrity. He is

therefore not a fit and proper person to perform any function in relation to any

regulated activity, carried on by any authorised or exempt person, or exempt

professional person.

6.
SANCTIONS

6.1.
Mr Tanweer’s conduct has fallen significantly below the required standards of the

regulatory system. Each proposed sanction is discussed below.

Financial penalty for breach of Principle 1

6.2.
The conduct at issue took place both before and after 6 March 2010 when the

Authority’s new penalties policy (set out in the current version of Chapter 6 of

DEPP) came into force. As set out at paragraph 2.7 of the Authority’s Policy

Statement 10/4, when calculating a financial penalty where the conduct

straddles penalty regimes, the Authority must have regard to both the penalty

regime which was effective before 6 March 2010 (the “old penalty regime”) and

the penalty regime which was effective after 6 March 2010 (the “new penalty

regime”).

6.3.
The Authority has adopted the following approach in this case:

(1)
calculated the financial penalty for C&P’s misconduct from 21 September

2009 to 6 March 2010 by applying the old penalty regime to that

misconduct;

(2)
calculated the financial penalty for C&P’s misconduct from 6 March 2010

to 21 June 2011 by applying the new penalty regime to that misconduct;

and

(3)
added the penalties calculated under a) and b) to produce the total

penalty.

6.4.
For the purposes of establishing penalty figures applicable to the misconduct

falling within the old and new penalty regimes the Authority has identified the

separate incidents of misconduct committed by C&P both before and after 6

March 2010, as follows:

(1)
Between 21 September 2009 and 6 March 2010 C&P committed three

separate incidents of misconduct, recklessly submitting one application

and, on two separate occasions, documentation in support of that

application, on behalf of a single client; and

(2)
Between 6 March 2010 and 21 June 2011 C&P committed sixteen

separate incidents of misconduct, recklessly submitting seven applications

and, on nine separate occasions, documentation in support of those

applications, on behalf of four clients.

Financial penalty under the old penalty regime

6.5.
The Authority’s policy on the imposition of financial penalties relevant to the

misconduct prior to 6 March 2010 is set out in the version of Chapter 6 of DEPP

that was in force prior to 6 March 2010.

6.6.
For the purpose of calculating the penalty under the old regime in respect of

C&P’s misconduct between 21 September 2009 and 6 March 2010 the Authority

has considered the factors set out below.

Deterrence (DEPP 6.5.2G(1))

6.7.
The Authority considers that the imposition of a financial penalty is appropriate

as it supports the Authority’s stance on credible deterrence, both in terms of

discouraging C&P and others from acting recklessly and encouraging compliance

with regulatory standards and requirements.

The nature, seriousness and impact of the breach in question (DEPP 6.5.2G(2))

6.8.
In determining the appropriate sanction, the Authority has had regard to the

seriousness of the breach, including the extent to which the breach revealed

serious weaknesses in C&P’s internal controls to counter the risk of its mortgage

broking business being used to further financial crime, specifically the absence of

robust procedures for verifying employment and income information, and the

extent to which C&P’s failure to conduct its business with integrity created a

significant risk that financial crime would be facilitated.

The extent to which the breach was deliberate or reckless (DEPP 6.5.2G(3))

6.9.
The Authority considers that, between 21 September 2009 and 6 March 2010,

C&P acted recklessly in failing to prevent a single mortgage application and

supporting documentation, which contained false and misleading information,

being submitted to a lender on behalf of a C&P customer. C&P did this despite

inconsistencies and discrepancies in the application/documentation which should

have alerted Mr Tanweer (as the individual who carried out the actions of C&P)

to the significant risk that the customer might have been using C&P to commit

mortgage fraud.

Whether the person on whom the penalty is to be imposed is an individual (DEPP

6.10. The Authority recognises that C&P is a sole trader and the authorised person is

an individual and that the financial penalty imposed on C&P is likely to have a

significant impact on Mr Tanweer. Nevertheless it is considered to be

proportionate in relation to the seriousness of the misconduct.

Financial resources (DEPP 6.5.2G(5))

6.11. The Authority may take into account whether there is verifiable evidence of

serious financial hardship or financial difficulties if the firm or individual were to

pay the level of penalty appropriate for the particular breach.

6.12. C&P has provided evidence that Mr Tanweer would suffer serious financial

hardship were a financial penalty to be imposed on C&P.

Disciplinary record and compliance history (DEPP 6.5.2G(9))

6.13. There has been no previous disciplinary action against C&P.

Other action taken by the Authority (DEPP 6.5.2G(10))

6.14. In determining the level of financial penalty, the Authority has taken into

account penalties imposed by the Authority on other authorised persons for

similar misconduct.

Old regime penalty

6.15. Applying these factors the Authority has determined that £17,500 is an

appropriate financial penalty to be imposed on C&P under the old penalty regime

for breach of Principle 1 between 21 September 2009 and 6 March 2010.

Financial penalty under the new penalty regime

6.16. Under the new penalty regime, in force after 6 March 2010, the Authority applies

a five-step framework to determine the appropriate level of financial penalty.

DEPP 6.5A sets out the details of the five-step framework that applies in respect

of financial penalties imposed on firms.

6.17. Pursuant to DEPP 6.5A.1G, at Step 1 the Authority seeks to deprive a firm of the

financial benefit derived directly from the breach where it is practicable to

quantify this. Only two of the seven applications submitted after 6 March 2010

were successful (the others were withdrawn or declined) and as a result C&P

derived a financial benefit of £1,100 directly from the breach, comprising broker

fees.

6.18. The Step 1 figure is therefore £1,100.

Step 2: Seriousness of breach

6.19. Pursuant to DEPP 6.5A.2G, at Step 2 the Authority determines a figure that

reflects the seriousness of the breach. Where the amount of revenue generated

by a firm from a particular product line or business area is indicative of the harm

or potential harm that its breach may cause, that figure will be based on a

percentage of the firm’s revenue from the relevant products or business area.

6.20. The Authority considers the entire gross revenue generated by C&P during the

Relevant Period to be indicative of the potential harm caused by the breach. The

Authority has therefore determined a figure based on a percentage of the

income C&P declared to HMRC for the period of the breach. The period of C&P’s

breach was from 6 March 2010 to 21 June 2011. The total revenue for this

period is £42,803.

6.21. In deciding on the percentage of the relevant revenue that forms the basis of

the Step 2 figure, the Authority considers the seriousness of the breach and

chooses a percentage between 0% and 20%. This range is divided into five fixed

levels which represent, on a sliding scale, the seriousness of the breach; the

more serious the breach, the higher the level. For penalties imposed on firms

there are the following five levels:

(1)
Level 1 – 0%

(2)
Level 2 – 5%

(3)
Level 3 – 10%

(4)
Level 4 – 15%

(5)
Level 5 – 20%

6.22. In assessing the seriousness level, the Authority takes into account various

factors which reflect the impact and nature of the breach, and whether it was

committed deliberately or recklessly.

6.23. The Authority has determined the seriousness of C&P’s breaches to be Level 4

for the purposes of Step 2, having taken into account the following:

6.24. DEPP 6.5A.2G(7) sets out factors relating to the nature of the breach:

(1)
the breach revealed serious weaknesses in C&P’s systems and controls to

counter the risk of its mortgage broking business being used to further

financial crime, specifically the absence of robust procedures for verifying

employment and income information about its customers;

(2)
the breach created a significant risk that financial crime would be

facilitated;

(3)
the frequency of the breach: C&P repeatedly submitted multiple

applications and supporting documentation which contained false and/or

misleading information, without taking steps to verify or challenge that

information/documentation; and

(4)
C&P failed to conduct its business with integrity.

6.25. DEPP 6.5A.2G(8) and (9) set out factors tending to show the breach was either

deliberate or reckless. We consider that the breach committed by C&P was

reckless. C&P submitted seven separate applications on behalf of four different

customers in circumstances where Mr Tanweer appreciated (or closed his mind

to the fact) there was a risk that his actions could result in a breach but he failed

adequately to mitigate that risk.

6.26. Similarly, on nine separate occasions, C&P submitted supporting documentation

on behalf of four different customers in circumstances where Mr Tanweer

appreciated (or closed his mind to the fact) there was a risk that his actions

could result in a breach but he failed adequately to mitigate that risk.

6.27. All references in this section to actions carried out by Mr Tanweer were actions

carried out by C&P.

6.28. A Level 4 breach equates to 15% of the total revenue. The new regime penalty

after Step 2 is therefore £6,420.

Step 3: mitigating and aggravating factors

6.29. In response to a request from the Authority, on 30 November 2011 Mr Tanweer

trading as C&P agreed voluntarily to vary its permission to cease conducting

regulated activity. However, we do not think this is in itself sufficient for an

allowance to be made for a mitigating factor.

6.30. Pursuant to DEPP 6.5.3(3), we have considered the fact that C&P is a sole trader

and the authorised person is in fact a single individual. Nevertheless, we

consider the Step 2 figure which resulted from using the 15% revenue level to

be proportionate.

6.31. The Step 3 figure is therefore £7,520 (£1,100 plus £6,420).

Step 4: adjustment for deterrence

6.32. The investigation team considers the absolute value of the penalty too small in

relation to the breach to meet its objective of credible deterrence and pursuant

to DEPP 6.5A.4(1)(a) considers it appropriate to increase the penalty to

£50,000. This is in line with penalties imposed by the Authority for similar

misconduct.

6.33. Taking into account the old regime penalty of £17,500, the total combined

penalty equates to £68,600 (comprising disgorgement of £1,100 and a punitive

element of £67,500).

6.34. The Authority considers that combining the two separate penalties calculated

under the old and new penalty regimes produces a figure which is proportionate

and consistent with the Authority’s statements that the new penalty regime may

lead to increased penalty levels.

6.35. The Step 4 figure is therefore £68,600.

6.36. The Authority would have sought to impose a total financial penalty of £68,600

on C&P for its breach of Principle 1, were it not that C&P has provided verifiable

evidence to establish that imposing any financial penalty would cause it, as a

sole trader, serious financial hardship. The penalty is therefore reduced to the

disgorgement element of £1,100.

Step 5: settlement discount

6.37. As the financial penalty proposed has been reduced to the disgorgement element

of £1,100 before calculation of any applicable discount for early settlement, no

further discount can be applied.

6.38. Having considered all the circumstances set out above, the Authority considers

that £68,600 would be the appropriate penalty to impose on C&P. However,

taking into account C&P’s financial position, the Authority proposes to publish a

statement that C&P has contravened regulatory requirements, and impose a

financial penalty of £1,100, comprising the disgorgement element only.

6.39. The Authority considers that Mr Tanweer poses a serious risk to consumers, as

he has acted in a manner which lacks honesty and integrity whilst in the position

of a person authorised by the Authority. A prohibition order is necessary and

proportionate, and is consistent with the Authority’s policy of seeking to prevent

individuals lacking in honesty and integrity from working in authorised firms,

which supports the Authority’s regulatory objectives of protecting and enhancing

the integrity of the UK financial system and securing an appropriate degree of

protection for consumers.

Cancellation of C&P’s Part 4A permission

6.40. As C&P’s principal, Mr Tanweer was solely responsible for the regulated activities

at C&P and only he dealt with mortgage applications during the Relevant Period.

Mr Tanweer is not a fit and proper person and has failed to conduct his business

with integrity and in compliance with proper standards and has failed to

demonstrate that he is ready, willing and organised to comply with the

requirements and standards under the regulatory system. As such, C&P is failing

to satisfy Threshold Condition 2.5 (Suitability) and pursuant to section 55J(2)(b)

of the Act, its Part 4A permission should be cancelled.

7.
PROCEDURAL MATTERS

Decision maker

7.1.
The decision which gave rise to the obligation to give this Notice was made by

the Settlement Decision Makers.

7.2.
This Final Notice is given under, and in accordance with, section 390 of the Act.

Manner of and time for Payment

7.3.
The financial penalty must be paid by C&P to the FCA in four equal instalments,

the first instalment being paid within three months of the date of the Final Notice

(being 13 June 2014), followed by three further payments at three monthly

intervals thereafter, with the total amount of the financial penalty to be paid

within a year of the Final Notice.

If the financial penalty is not paid

7.4.
If all or any of the financial penalty is outstanding on the day after it is due to be

paid, the Authority may recover the outstanding amount as a debt owed by C&P

and due to the Authority.

7.5.
Sections 391(4), 391(6) and 391(7) of the Act apply to the publication of

information about the matter to which this notice relates. Under those

provisions, the Authority must publish such information about the matter to

which this notice relates as the Authority considers appropriate. The information

may be published in such manner as the Authority considers appropriate.

However, the Authority may not publish information if such publication would, in

the opinion of the Authority, be unfair to you or prejudicial to the interests of

consumers or detrimental to the stability of the UK financial system.

7.6.
The Authority intends to publish such information about the matter to which this

Final Notice relates as it considers appropriate.

Authority contacts

7.7.
For more information concerning this matter generally, contact Paul Howick

(direct line: 020 7066 7954 /email: Paul.Howick@fca.org.uk) of the Enforcement

and Financial Crime Division of the Authority.

…………………………………
Bill Sillett

Head of Department
Financial Conduct Authority, Enforcement and Financial Crime Division



ANNEX: RELEVANT STATUTORY AND REGULATORY PROVISIONS

1.
RELEVANT STATUTORY PROVISIONS

1.1
The Authority’s statutory objectives, set out in section 1B(3) of the Act, include

the consumer protection objective and the integrity objective.

1.2
Section 56 of the Act provides that the Authority may make an order

prohibiting an individual from performing a specified function, any function

falling within a specified description or any function, if it appears to the

Authority that that individual is not a fit and proper person to perform functions

in relation to a regulated activity carried on by an authorised person, exempt

person or a person to whom, as a result of Part 20, the general prohibition

does not apply in relation to that activity. Such an order may relate to a

specified regulated activity, any regulated activity falling within a specified

description, or all regulated activities.

Imposition of financial penalty

1.3
Section 206(1) of the Act provides:

“If the Authority considers that an authorised person has contravened a

requirement imposed on him by or under this Act… it may impose on him a

penalty, in respect of the contravention, of such amount as it considers

appropriate."

Publication of a public censure

1.4
Section 205 of the Act provides that the Authority may publish a statement to

the effect that the Authority considers that an authorised person has

contravened a relevant requirement imposed on it.

Cancellation of Part 4A permission

1.5
The Authority has the power, under section 55J of the Act, to cancel an

authorised person’s Part 4A permission. The Authority may exercise its power

under this section in relation to an authorised person with a Part 4A permission

if it appears to the Authority that such a person is failing, or is likely to fail, to

satisfy the threshold conditions for which the Authority is responsible or it is

desirable to exercise the power in order to advance one or more of the

Authority’s operational objectives.

1.6
Section 55B and Schedule 6 to the Act set out the threshold conditions (“the

Threshold Conditions”) which are conditions that the Authority must ensure a

firm will satisfy, and continue to satisfy, in relation to regulated activities for

which it has permission.

1.7
Paragraph 2E of Schedule 6 to the Act (Threshold Condition 2.5: Suitability)

states that the person concerned must satisfy the Authority that he is a fit and

proper person having regard to all the circumstances including, amongst other

things:


the need to ensure that the person’s affairs are conducted in an

appropriate manner, having regard in particular to the interests of

consumers and the integrity of the UK financial system;


whether the person’s business is being, or is to be, managed in such a

way as to ensure that its affairs will be conducted in a sound and prudent

manner; and


the need to minimise the extent to which it is possible for the business

carried on by the person, or to be carried on by the person, to be used

for a purpose connected with financial crime.

2.
RELEVANT REGULATORY PROVISIONS

Principles for Businesses (the “Principles”)

2.1
The Principles are a general statement of the fundamental obligations of firms

under the regulatory system and are set out in the Authority’s Handbook. They

derive their authority from the Authority’s rule-making powers set out in the

Act. The relevant Principles are as follows. The relevant Principle in this case is

Principle 1 (Integrity), which states that a firm must conduct its business with

integrity.

The Fit and Proper Test for Approved Persons (“FIT”)

2.2
The part of the Authority’s Handbook entitled “The Fit and Proper Test for

Approved Persons” (“FIT”) sets out the criteria that the Authority will consider

when assessing the fitness and propriety of a candidate for a controlled

function. FIT is also relevant in assessing the continuing fitness and propriety

of an approved person.

2.3
FIT 1.3.1G states that the Authority will have regard to a number of factors

when assessing the fitness and propriety of a person. The most important

considerations will be the person’s honesty, integrity and reputation,

competence and capability and financial soundness.

Threshold Conditions

2.4
COND 2.5.4G and COND 2.5.6G give guidance in respect of whether an

authorised person satisfied Threshold Condition 2.5.


DEPP

2.5
Chapter 6 of DEPP, which forms part of the Authority’s Handbook, sets out the

Authority’s statement of policy with respect to the imposition and amount of

financial penalties under the Act.

The Enforcement Guide

2.6
The Enforcement Guide (“EG”) sets out the Authority’s approach to exercising

its main enforcement powers under the Act.

2.7
Chapter 7 of the EG sets out the Authority’s approach to exercising its power to

impose a financial penalty.

2.8
Chapter 9 of EG sets out the Authority’s policy in relation to prohibition orders.

2.9
EG 9.1 states that the Authority may exercise this power where it considers

that, to achieve any of its regulatory objectives, it is appropriate either to

prevent an individual from performing any functions in relation to regulated

activities or to restrict the functions which he may perform.