FINAL NOTICE

To:
Mr Mukhtar Khan trading as United Finance and Insurance

Services

TAKE NOTICE: The Financial Services Authority of 25 The North Colonnade, Canary
Wharf, London, E14 5HS (“the FSA”) has taken the following action:

ACTION

1. For the reasons given in this notice, the FSA has taken the following action against
Mr Mukhtar Khan (“Mr Khan”):

i. made an order, pursuant to section 56 of the Financial Services and Markets Act
2000 (the “Act”) prohibiting Mr Khan trading as United Finance and Insurance
Services (“UFIS”) from performing any function in relation to any regulated
activity carried on by any authorised person, exempt person or exempt
professional firm; and

ii. cancelled, pursuant to section 45 of the Act, the permission granted to Mr Khan
trading as UFIS pursuant to Part IV of the Act.

SUMMARY OF REASONS

2. The FSA concluded, on the basis of the facts and matters described below, that Mr
Khan is not fit and proper to perform any function in relation to any regulated activity
carried on by authorised persons and he should be prohibited from doing so.

3. In the opinion of the FSA Mr Khan is not fit and proper because he has failed to act
with competence and capability. In particular, Mr Khan has failed to:

(1)
hold a relevant qualification when providing advice in relation to regulated
mortgage contracts;

(2)
put in place appropriate systems and controls to ensure that suitable advice is
given and regulatory requirements are complied with;

(3)
record how personal recommendations in respect of regulated


mortgage contracts satisfied the FSA’s suitability requirements;

(4)
demonstrate that appropriate research had been conducted prior to

advice being given in respect of regulated mortgage contracts and contracts of

insurance;

(5)
provide customers with adequate statements of demands and needs;

(6)
gather and record sufficient information about customers personal and
financial circumstances to ensure the suitability of his advice in fact finds;

(7)
understand the regulatory requirements relating to appointed representatives:

(8)
rectify concerns raised by an independent compliance consultant; and

(9)
demonstrate an adequate understanding of the regulatory regime in

which he operates.

4. The FSA concluded, on the basis of this and the facts and matters described below,
that Mr Khan has failed to satisfy the Threshold Conditions set out in Part 1 of
Schedule 6 to the Act (the "Threshold Conditions"). In the opinion of the FSA:

(1) Mr Khan has failed to satisfy Threshold Condition 4 (Adequate Resources) by
virtue of the fact that Mr Khan has inadequate resources in relation to the
regulated activities Mr Khan has permission to carry on given that Mr Khan is not
a suitable person capable of acting as a sole trader; and

(2) Mr Khan has failed to satisfy Threshold Condition 5 (Suitability) because Mr
Khan is not a fit and proper to conduct regulated activities having regard to the
nature of any regulated activity that Mr Khan seeks to carry on and the need to
ensure that Mr Khan’s affairs are conducted soundly and prudently.

5. The FSA therefore considered that, pursuant to section 45 of the Act, Mr Khan’s Part
IV permission should be cancelled.

DEFINITIONS

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

“IDD” means initial disclosure document;

“Mr Khan” means Mr Mukhtar Khan trading as United Finance and Insurance
Services;

“TCF” means Treating Customers Fairly;

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

the “FSA” means the Financial Services Authority;

the “Relevant Period” means the period between 31 October 2004 to 1 March 2011;

the “Threshold Conditions” means the Threshold Conditions set out in Part 1 of
Schedule 6 to the Act;

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

“UFIS” means United Finance and Insurance Services, the trading name of Mr Khan.

FACTS AND MATTERS

7. Mr Khan is a small insurance and former mortgage broker trading as a sole trader
under the name UFIS, based in Blackburn, Lancashire. Mr Khan has no members of
staff working for him.

8. On 31 October 2004, Mr Khan was authorised to carry on the following regulated
activities in relation to regulated mortgage contracts:

(1)
advising on regulated mortgage contracts;

(2)
agreeing to carry on a regulated activity;

(3)
arranging (bringing about) regulated mortgage contracts; and

(4)
making arrangements with a view to regulated mortgage contracts.

9. On 14 January 2005, Mr Khan was granted permission to carry on the following
additional regulated activities in relation to non-investment insurance contracts:

(1)
advising on investments (excluding pension transfers and pension opt outs);

(2)
arranging (bringing about) deals in investments; and

(3)
making arrangements with a view to transactions in investments.

10. On 21 September 2010, Mr Khan voluntarily varied his permission at the request of
the FSA to remove those permissions which relate to regulated mortgage contracts.

Training and Competency

11. Mr Khan does not have any financial services qualifications. Despite this, Mr Khan
advised on approximately 23 regulated mortgages during the Relevant Period. Mr
Khan did not know that he was required to hold a necessary qualification to advise on
mortgages and considered that as he had permission to give advice on mortgages that
was sufficient. There is no evidence that Mr Khan took any steps to inform himself
about the regulatory requirements relating to training and competency.

12. Mr Khan does not have any procedures in place relating to training and competency.
There is no evidence that Mr Khan has attended or undertaken any relevant training in
relation to mortgages, insurance or financial services in general. Mr Khan stated in
interview that he learnt how to advise “on the job.”

Policies and Procedures

13. Mr Khan did not put in place any written compliance policies or procedures except for
an undated TCF Policy. However, this Policy was not followed in practice. For
example, the TCF policy:

(1)
refers to other documents setting out policies and procedures which do not
exist (for example a written business plan);

(2)
refers to records of training which do not exist;

(3)
sets out how frequently file reviews would be conducted; however, no such
file reviews were conducted;

(4)
states there would be an independent audit each year; however, only one such
audit has been conducted in 2008; and

(5)
sets out the requirement for suitability reports; however, no such reports were
prepared.

14. Mr Khan also did not put in place a written complaints policy or procedure.

15. Mr Khan was made aware of many of the above omissions in an audit undertaken by
an independent compliance firm in April 2008. The compliance firm’s
recommendations were not fully implemented by Mr Khan and therefore not all of the
identified failings were rectified.

16. The FSA also wrote to Mr Khan in June 2010, having carried out a TCF assessment,
stating that it was not satisfied that adequate action had been taken to ensure all areas
of the business were delivering fair outcomes for customers and that Mr Khan lacked
knowledge of the TCF principles. There is no evidence that steps have been taken by
Mr Khan to address these concerns.

Appointed representatives

17. Mr Khan had two appointed representatives, Mr X and Ms Y. Neither of them
conducted any business through Mr Khan. Mr X worked with Mr Khan on a part-
time basis for a period of three months in early 2007 because he wanted to learn the
mortgage business. Mr X did not know that he had been registered as an appointed
representative by Mr Khan and only acted as an introducer to Mr Khan for a few
clients. Mr X would pass on basic details of the clients and Mr Khan gave the advice
to those clients. Mr Khan appointed Mr X because he had known him for a long time
and knew he had a mortgage qualification. Mr Khan did not provide any compliance
oversight of Mr X however and Mr X left when he realised that he was not obtaining
the experience he wanted. Ms Y never did any work for Mr Khan.

18. The FSA considered that Mr Khan did not understand the regulatory requirements
relating to the appointment and supervision of appointed representatives nor did he
take any steps to do so.

19. The FSA reviewed ten mortgage files during the course of the investigation. The
following problems were identified:

(1)
there were no suitability reports on any of the files (100% of the files
reviewed) and neither were the reasons for the recommendation to the
customer documented;

(2)
the fact finds were inadequate on all of the files (100%) and specifically did
not record any information to enable Mr Khan to assess affordability;

(3)
there was no evidence of any research having been conducted on nine of the
files reviewed (90%);

(4)
there was no IDD on eight of the files reviewed (80%); and

(5)
there was no proof of income documents on six of the files reviewed (60%).

20. The FSA reviewed ten insurance files during the course of the investigation. The
following problems were identified:

(1)
there was no evidence of any research having been conducted on any of the
files reviewed (100%).

(2)
the statement of demands and needs did not record reasons for
recommendations in seven of the files reviewed (70%);

(3)
there was no fact find on five of the files reviewed (50%); and

(4)
there were no statements of demands and needs on two of the files reviewed
(20%).

21. Mr Khan admitted that he did not issue statements of demands and needs to customers
until about 2009/2010. He also said that he sent suitability reports for mortgages from
about 2009 but none were found on the three mortgage files reviewed from
2009/2010. Mr Khan also said that he did not use a standard fact find form until
about 2008/2009 but would take handwritten notes.

22. The FSA noted that the majority of Mr Khan’s customers did not use English as their
first language and so a lot of Mr Khan’s advice was given verbally.

FAILINGS

23. The relevant statutory provisions, regulatory guidance and policy relevant to this Final
Notice are referred to in Annex A. Details of the specific rules that Mr Khan has
breached and the dates that they were in force are also set out in Annex A.

24. By reason of the facts and matters set out above the FSA considered that Mr Khan is
not a fit and proper person due to his lack of competence and capability and his
inability to fully understand and engage with the regulatory regime. The FSA
considered that Mr Khan’s conduct fell short of the standards required by the FSA’s
Fit and Proper test for Approved Persons.

25. In assessing Mr Khan’s competence and capability, the FSA had regard to his failure
to:

(1)
ensure that the TCF Policy was followed;

(2)
ensure that he understood the regulatory requirements relating to appointed
representatives and that the appointed representatives he appointed knew they
were being appointed;

(3)
put in place systems and controls to ensure that all regulatory requirements are
met;

(4)
ensure that he was competent to advise and maintain adequate training and
competency records;

(5)
fully implement the recommendations of an independent compliance
consultant when failings were identified;

(6)
put in place a complaints policy and procedure;

(7)
gather and/or record sufficient information about the customers’ personal and
financial circumstances to demonstrate the affordability, and therefore
suitability of mortgage contracts;

(8)
gather and/or record sufficient information about the customers’ needs and
preferences to demonstrate the suitability of non-investment insurance
contracts;

(9)
record reasons for personal recommendations in respect of regulated mortgage
contracts in breach of MCOBS 4.7.17R; and

(10)
provide customers with adequate statements of demands and needs in breach
of ICOBS 5.2.2.R.

26. In giving mortgage advice without a necessary qualification Mr Khan was also in
breach of the Training and Competency Sourcebook of the FSA Handbook rule TC
2.1.6R.

27. The failings listed above exposed customers to the risk of receiving unsuitable advice.

28. The FSA concluded that Mr Khan poses a serious risk to lenders and consumers and
to the FSA’s regulatory objectives of protecting consumers and maintaining
confidence in the UK financial system.

29. The facts and matters described above led the FSA to conclude that Mr Khan is not a
fit and proper person to carry out any regulated activity carried on by any authorised
person, exempt person or exempt professional firm.

30. As a result of Mr Khan not being fit and proper he was failing, and was likely to
continue to fail, to satisfy Threshold Conditions 4 and 5 and his Part IV Permissions
have been cancelled pursuant to section 45 of the Act.

SANCTION

31. On the basis of the facts and matters described above, the FSA considered that it was
appropriate and proportionate in this case to:

(1)
make an order pursuant to section 56 of the Act prohibiting Mr Khan from
performing any function in relation to any regulated activity carried on by any
authorised person, exempt person or exempt professional firm; and

(2)
cancel, pursuant to section 45 of the Act, the permission granted to Mr Khan
pursuant to Part IV of the Act.

PROCEDURAL MATTERS

Decision maker

32. The decision which gave rise to the obligation to give this Notice was made by the
Settlement Decision Makers.

33. This Final Notice is given in accordance with section 390 of the Act.

34. 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 FSA must
publish such information about the matter to which this Notice relates as the FSA
considers appropriate. The information may be published in such manner as the FSA
considers appropriate. However, the FSA may not publish information if such
publication would, in the opinion of the FSA, be unfair to Mr Khan or prejudicial to
the interests of consumers.

7

35. The FSA intends to publish such information about the matter to which this Final
Notice relates as it considers appropriate.

FSA contacts

36. For more information concerning this matter generally, contact Paul Howick at the
FSA (direct line: 020 7066 7954 /paul.howick@fsa.gov.uk).

Tom Spender
FSA Enforcement and Financial Crime Division

ANNEX A

RELEVANT STATUTORY PROVISIONS, REGULATORY REQUIREMENTS AND
FSA GUIDANCE

1.
Statutory Provisions

1.1
The FSA’s statutory objectives, set out in section 2(2) of the Act are market
confidence, financial stability, the protection of consumers and the reduction of
financial crime.

1.2
Section 56 of the Act provides:

“(1)
Subsection (2) applies if it appears to the Authority that an individual is not a
fit and proper person to perform functions in relation to a regulated activity
carried on by an authorised person.

(2)
The Authority may make an order (“a prohibition order”) prohibiting the
individual from performing a specified function, any function falling within a
specified descript or any function.

(3)
A prohibition order may relate to

(a)
a specified regulated activity, any regulated activity falling within a
specified description or all regulated activities;

(b)
authorised persons generally or any person within a specified class of
authorised person. …”

Cancellation of Permissions

1.3
Section 54 of the Act provides that:

“(1)
If the Authority proposes to cancel an authorised person’s Part IV permission
otherwise than at his request, it must give him a warning notice.

(2)
If the Authority decides to cancel an authorised person’s Part IV permission
otherwise than at his request, it must give him a decision notice.”

Threshold Conditions

1.4
Section 41 of the Act provides that:

“(1) “The threshold conditions”, in relation to a regulated activity, means the
conditions set out in Schedule 6.

(2) In giving or varying permission, or imposing or varying any requirement,
under this Part the Authority must ensure that the person concerned will
satisfy, and continue to satisfy, the threshold conditions in relation to all of
the regulated activities for which he has or will have permission.

(3)
But the duty imposed by subsection (2) does not prevent the Authority,
having due regard to that duty, from taking such steps as it considers are
necessary, in relation to a particular authorised person, in order to secure its
regulatory objective of the protection of consumers.”

1.5
Section 45 of the Act provides that:

“(1)
The Authority may exercise its power under this section in relation to an
authorised person if it appears to it that-

(a)
He is failing, or is likely to fail to satisfy the threshold conditions:….

(2)
The Authority’s power under this section is the power to vary a Part IV
permission in any of the ways mentioned in section 44(1) or to cancel it.”

2.
Relevant regulatory requirements and guidance

2.1
In considering the appropriate sanction, the FSA has had regard to its published
guidance. Although the references in this notice are to the Enforcement Guide (“EG”),
the FSA has had regard to the appropriate provisions of the Enforcement Manual
(“ENF”) which is no longer in force but applied during some of the Relevant Period.
The FSA has also had regard to the relevant provisions in its Decision Procedure and
Penalties Manual (“DEPP”) which came into effect on 28 August 2007.

2.2
The FSA will consider making a prohibition order where it appears that an individual
is not fit and proper to carry out functions in relation to regulated activities carried on
by firms. The FSA may exercise these powers where it considers that to achieve any
of its statutory objectives it is necessary to prevent an individual from carrying out
any function in relation to regulated activities. The FSA policy in relation to the
decision to make a prohibition order is set out in Chapter 9 of EG.

2.3
EG 9.4 sets out the general scope of the FSA’s powers in this respect, which include
the power to make a range of prohibition orders depending on the circumstances of
each case and the range of regulated activities to which the individual’s lack of fitness

and propriety is relevant. EG 9.5 provides that the scope of a prohibition order will
vary according to the range of functions which the individual concerned performs in
relation to regulated activities, the reasons why he is not fit and proper and the
severity of risk which he poses to consumers or the market generally.

2.4
EG 9.17 to 9.18 provides guidance on the FSA’s exercise of its power to make a
prohibition order against an individual who is not an approved person. The FSA will
consider the severity of the risk posed by the individual and may prohibit the
individual where it considers this is appropriate to achieve one or more of its
regulatory objectives. When considering whether to exercise its power to make a
prohibition order against such an individual, the FSA will consider all the relevant
circumstances of the case, which may include but are not limited to the factors set out
in EG 9.9.

2.5
EG 9.9 provides that when deciding whether to make a prohibition order the FSA will
consider all the relevant circumstances of the case, which may include (but are not
limited to):

(1)
whether the individual is fit and proper to perform functions in relation to
regulated activities. The criteria for assessing the fitness and propriety are set
out in the Fit and Proper test for Approved Persons (“FIT”) in FIT 2.1
(Honesty, integrity and reputation), FIT 2.2 (Competence and capability) and
FIT 2.3 (Financial soundness);

(2)
the relevance and materiality of any matters indicating a lack of fitness and
propriety;

(3)
the length of time since the occurrence of any matters indicating lack of fitness
and propriety; and

(4)
the severity of the risk which the individual poses to consumers and to
confidence in the financial system.

Fit and Proper Test for Approved Persons

2.6
The section of the FSA handbook entitled “FIT” sets out the Fit and Proper test for
Approved Persons. The purpose of FIT is to outline the main criteria for assessing the
fitness and propriety of a candidate for a controlled function and FIT is also relevant
in assessing the continuing fitness and propriety of an approved person. FIT also
applies to firms and applicants for Part IV permissions and therefore is relevant to
assessing the fitness and propriety of a sole trader, given that he is responsible for
ensuring that a firm meets its regulated requirements.

2.7
FIT 1.3 provides that the FSA will have regard to a number of factors when assessing
a person’s fitness and propriety, including the person’s competence and capability.

2.8
In determining a person’s competence and capability FIT 2.2 provides that the FSA
will have regard to matters including, but not limited to, those set out in FIT 2.2.1G.
The guidance includes:

(5)
whether the person satisfies the relevant FSA training and competence
requirements in relation to the controlled function the person performs or is
intended to perform (FIT 2.2.1G(1)); and

(6)
whether the person has demonstrated by experience and training that the
person is able, or will be able if approved, to perform the controlled function
(FIT 2.2.1G(2)).

Cancellation

2.9
In exercising its power to cancel a Part IV permission, the FSA must have regard to
relevant provisions in the FSA Handbook. The main provisions relevant to the action
specified above are set out below.

Threshold Condition 4: Adequate resources (Paragraph 4, Schedule 6 to the Act) –
COND 2.4

2.10 COND 2.4.1D(1) states that the resources of the person concerned must, in the opinion
of the FSA, be adequate in relation to the regulated activities that he seeks to carry on,
or carries on.

2.11 COND 2.4.2G(1) provides that Threshold Condition 4 requires the FSA to ensure that a
firm has adequate resources in relation to the specific regulated activity or regulated
activities which it seeks to carry on, or carries on.

2.12 COND 2.4.2G(2) provides that the FSA will interpret the term "adequate" as meaning
sufficient in terms of quantity, quality and availability, and "resources" as including all
financial resources, non-financial resources and means of managing its resources such
as, for example, human resources.

2.13 COND 2.4.3G(1) provides that when assessing this Threshold Condition, the FSA may
have regard to any person appearing to it to be, or likely to be, in a relevant relationship
with the firm, in accordance with section 49 of the Act (Persons connected with an
applicant); for example, a firm's controllers, its directors or partners, other persons with
close links to the firm, and other persons that exert influence over the firm which might
pose a risk to the firm's satisfaction of the Threshold Conditions and would, therefore,
be in a relevant relationship with the firm.

The Handbook

2.23
The Insurance Conduct of Business Sourcebook (“ICOBS”) 5.2.2R, which has been in
force since 6 January 2008, provides:

“(1)
Prior to the conclusion of a contract, a firm must specify, in particular on the
basis of information provided by the customer, the demands and the needs of
that customer as well as the underlying reasons for any advice given to the
customer on that policy.

(2)
The details must be modulated according to the complexity of the policy
proposed.”

2.24
This rule has been in force in substantially the same form since 1 January 2005 in
ICOB 4.4.1R:

“(1) Unless ICOB 4.4.2 R applies, where an insurance intermediary arranges for a
customer to enter into a non-investment insurance contract (including at renewal), it
must, before the conclusion of that contract, provide the customer with a statement
that:

(a) sets out the customer's demands and needs;

(b) confirms whether or not the insurance intermediary has personally
recommended that contract; and

(c) where a personal recommendation has been made, explains the
reasons for personally recommending that contract.

(2) The statement in (1) must reflect the complexity of the contract of insurance
proposed.

(3) Unless (4) applies, the statement in (1) must be provided in a durable medium.”

2.25
The Mortgage Conduct of Business Sourcebook (“MCOBS”) 4.4.1R, which has been
in force since 1 November 2007, provides:

“(1)
A firm must ensure that, on first making contact with a customer when it
anticipates giving personalised information or advice on a regulated
mortgage contract, it:

(a) establishes with the customer whether it will provide advice or
information;

(b) establishes with the customer how much he will pay or, alternatively, the
basis on which the firm will be remunerated, where appropriate; and

(c) provides the customer with either:

(i) an initial disclosure document; or

(ii) if the firm has reasonable grounds to be satisfied that the services
which it is likely to provide to the customer will relate to a
combination of different types of home finance transaction, or will
relate to home finance transactions and one or more of non-investment
insurance contracts or packaged products, a combined initial disclosure
document;

in a durable medium.”

2.26
This rule has been in force in substantially the same form since 14 January 2005 in
MCOB 4.4.1R:

“(1) A firm must ensure that, on first making contact with a customer when it
anticipates giving personalised information or advice on a regulated mortgage
contract, it:

(a) establishes with the customer whether it will provide advice or
information;

(b) establishes with the customer how much he will pay or, alternatively, the
basis on which the firm will be remunerated, where appropriate; and

(c) (unless (2) applies) 1 provides the customer with either:

(i) the initial disclosure document in MCOB 4 Annex 1 R1 1 ; or

(ii) if the firm has reasonable grounds to be satisfied that the services
which it is likely to provide to the customer will, in addition to
relating to regulated mortgage contracts or regulated lifetime
mortgage contracts11 relate to 1one or more of non-investment
insurance contracts or packaged products 2 2 , the combined initial
disclosure document in MCOB 4 Annex 2 R1 1 ;

subject to (3) and 1in a durable medium.”

2.27
MCOB 4.7.17R, which has been in force since 31 October 2004, provides:

(1)
A firm must make and retain a record:

(a)
of the customer information, including that relating to the customer’s
needs and circumstances, that it has obtained for the purposes of
MCOB 4.7; and

(b)
that explains why the firm has concluded that any personal
recommendation given in accordance with MCOB 4.7.2 R satisfied the
suitability requirement in MCOB 4.7.4 R(1). This explanation must
include, where this is the case, the reason why a personal
recommendation has been made on a basis other than that described in
MCOB 4.7.13 E(1).

(2)
The record in (1) must be retained for a minimum of three years from the date
on which the personal recommendation was made.”

2.28
The Training and Competency Sourcebook (“TC”) rule 2.1.6R provides:

“A Firm must ensure that an employee does not carry on an activity in TC Appendix 1
(other than an overseeing activity) for which there is an examination requirement
without first passing the relevant regulatory module of an appropriate examination.”

2.29
TC Appendix 1 includes the activity of “advising on regulated mortgage contracts for
a non-business purpose.”

2.30
This rule has been in force since 1 November 2007. Prior to that (from 31 October
2004 to 31 October 2007) the TC sourcebook had a similar rule contained in TC
2.5.1R:

(1) A firm must ensure that an employee under supervision passes an appropriate
examination within the time specified in

TC 2.5.1AR, and, for this purpose, a
firm must record the date on which the employee began engaging in or
overseeing the relevant activity.

(2) For the purposes of calculating the time spent by an employee under supervision,
a firm must:

(a)
aggregate periods of time spent engaging in or overseeing the activity
during different periods of employment;

(b)
disregard any period of 60 business days or more during which the
employee is continuously absent from engaging in or overseeing the
activity.

(3) A firm must ensure that any employee who does not pass an appropriate
examination within the specified time:

(a)
ceases to engage in or oversee the activity; and

(b)
does not resume the activity or oversee the activity without first passing an
appropriate examination.”

2.31
TC.2.1.4R sets out that advising a customer on a regulated mortgage contract is an
activity to which TC 2 applies.