SEE FINAL NOTICE ISSUED ON 19 OCTOBER 2012

DECISION NOTICE

Individual Ref. No: RXW00088


TAKE NOTICE: The Financial Services Authority of 25 The North Colonnade, Canary
Wharf, London, E14 5HS (the "FSA") has decided to take the following action:

1.
ACTION

1.1.
For the reasons listed below, the FSA has decided to impose on Mr Raymond Wagner:

(1)
a financial penalty of £100,000, pursuant to section 66 of the Financial
Services and Markets Act 2000 (“the Act”), for failing to comply with
Statement of Principle 1 of the FSA’s Statements of Principle and Code of
Practice for Approved Persons (“APER”) issued under section 64 of the Act;
and

(2)
a prohibition order, pursuant to section 56 of the Act, to prevent Mr Wagner
from carrying out any function in relation to any regulated activity carried on
by any authorised person, exempt person or exempt professional firm (“the
Prohibition Order”).

2.
REASONS FOR THE ACTION

2.1.
The FSA has concluded, on the basis of the facts and matters described below, that Mr
Wagner is not fit and proper to carry out any function in relation to regulated activities
carried on by authorised or exempt persons and he should be prohibited from doing so.

2.2.
The FSA considers that Mr Wagner has breached Statement of Principle 1 of APER
because he has failed to act with integrity in carrying out his controlled functions CF1
(director) and CF10 (Compliance Oversight). Mr Wagner was knowingly involved in
the submission of a regulated mortgage application to a lender for his own benefit
which contained inaccurate and misleading information.

2.3.
The FSA further considers that Mr Wagner has failed to act with honesty and integrity
as he was knowingly involved in the submission of four non-regulated, buy-to-let
mortgage applications to lenders for his own benefit which contained inaccurate and
misleading information.

2.4.
The FSA also considers that Mr Wagner failed properly to supervise two employees at
Ambergate Business Services Limited (“Ambergate”) which resulted in both
individuals submitting mortgage applications through Ambergate containing false
information. Mr Wagner put only minimal systems and controls in place to monitor
mortgage applications (e.g. by way of file-checks). These systems and controls were
inadequate and Ambergate was therefore at risk of being used for the purposes of
financial crime

2.5.
Mr Wagner poses a risk to lenders and consumers and to confidence in the financial
system. This action also supports the FSA’s regulatory objective to reduce financial
crime.

2.6.
As a result of the nature and seriousness of these matters, the FSA considers that Mr
Wagner has failed to meet minimum regulatory standards in terms of honesty and
integrity and competence and capability, and he is not fit and proper to perform any
function in relation to any regulated activity carried on by any authorised person,
exempt person or exempt professional firm. Accordingly, the FSA has decided to
impose on him a financial penalty of £100,000 and to make the Prohibition Order.

3.
STATUTORY PROVISIONS, REGULATORY GUIDANCE AND POLICY

3.1.
The relevant statutory provisions, regulatory requirements and FSA guidance are set
out at Annex 1 to this Decision Notice.

4.
FACTS AND MATTERS RELIED ON

4.1.
Ambergate was a mortgage broker based in Piccadilly, London, which dealt mainly
with high net worth clients. From 1 May 2005 to 31 August 2008 Mr Wagner held the
sole controlling interest in Ambergate. He was a director of Ambergate from 1997
and he was the sole director from 10 December 2003.

4.2.
With effect from 1 December 2001, Mr Wagner was approved to perform the
controlled functions of CF1 (Director), CF10 (Compliance Oversight) and CF11
(Money Laundering Reporting) for Ambergate. He also became responsible for
insurance mediation from 14 January 2005 and on 1 November 2007 he was approved
to perform CF28 (systems and controls). From 1 December 2001 to 31 October 2007
he was also approved to perform CF13 (Finance) and CF21 (Investment Adviser) Mr
Wagner. Mr Wagner also held CF27 (investment management) from 1 December
2001 to 27 July 2005, CF30 (customer) from 1 November 2007 to 26 June 2008 and
CF8 (Apportionment and Oversight) from 1 December 2001 to 31 March 2009.

4.3.
A high street lender raised concerns about a number of mortgage applications
submitted by Ambergate between 6 February 2004 and 28 June 2007. This
information came to the FSA’s attention in September 2007.

4.4.
The FSA visited the firm on 17 April 2008 which highlighted several concerns about
Mr Wagner and Ambergate. This included concerns about the quality of the file
reviews conducted by the firm and the role of Adviser A who had submitted mortgage
applications containing false information whilst employed by the firm.

Mortgage applications for your own benefit

4.5.
The FSA reviewed eleven buy-to-let mortgage applications and one residential
mortgage application as part of its investigation. All twelve applications were
submitted for Mr Wagner’s personal benefit to two high street lenders between May
2002 and August 2007. The review found serious income discrepancies were present
in five of the mortgage applications (one residential and four buy-to-let).

4.6.
The result of the review of the mortgage applications is detailed below in paragraphs
4.7 to 4.12.

4.7.
In May 2005, a mortgage application was submitted in Mr Wagner’s name which
contained false information relating to his income. This application was submitted to
a lender to obtain a loan of £1,062,500 towards the purchase of a house in
Lincolnshire for £1,250,000.

4.8.
The mortgage application signed by Mr Wagner stated that he was self employed and
had a total income of £500,000 per annum. This income consisted of self employed
earnings from Ambergate of £390,000 plus a rental income of £110,000.

4.9.
Mr Wagner was shown the fact find and the mortgage application during an interview
with the investigation team on 18 March 2009. He said that his income was not
£500,000 and he did not know where that figure had come from. He stated that he had
an income that originated from different sources, which included investment income
and rental income from your properties, however when asked by the investigation
team if this would be as much as £500,000 Mr Wagner stated “No, nowhere, no, not at
all”. He said that the fact find was completed by an adviser at the firm and he had not
checked the details recorded by that adviser on this document. He also stated that the

adviser “may have taken information from a previous application and put it on to this
one” when asked about the income discrepancy on the application.

4.10. More recently, when the matter was before the RDC, the FSA reviewed Product Sales
Data received from the relevant lender. This data showed that on 21 July 2005 an
application was submitted to the lender with a reference number that correlated to the
reference number on the copy of mortgage application which was shown to him in the
course of his interview. Moreover the postcode on the application corresponds to Mr
Wagner’s residential address, the date of birth on the application is the same as his and
the loan amount is the same as that recorded on the application. The total income
declared on this application is £500,000. The lender has also confirmed that the
income amount of £500,000 was the figure which submitted to them in the application.

4.11. Information received from HM Revenue and Customs (“HMRC”) for the year ending
2005 shows that Mr Wagner declared an income that consisted of dividends and rental
income which became a small loss after expenses had been included. The £500,000
income stated on the application therefore represents a significant discrepancy in
income that he could not adequately explain. He signed the application and, bearing
in mind that it was for his own benefit, the FSA considers it implausible that he was
unaware of the details set out within the application, including in particular the
inflated income figure.

Buy-to-let Mortgages

4.12. The FSA reviewed eleven of Mr Wagner’s buy-to-let applications submitted to two
high street lenders between May 2002 and August 2007. The review of these
documents has found that six of the eleven mortgage applications had information
relating to his income. Of the six applications, two had income details that roughly
correlated with the income information held by HMRC. However, four contained
income amounts which were substantially higher than this:

(1)
Application 1: This was submitted to a high street lender by Adviser A on 15
May 2006. The mortgage application stated that Mr Wagner’s income was
£400,000 with an additional rental income of £162,000 per annum. The
application contained a sanctioning record for loans greater than £2 million
and/or cases outside standard board lending policy of the high street lender.
Mr Wagner’s residential and buy-to-let mortgages had a total exposure of
£3,548,375 and, therefore, a sanctioning record was created by the lender’s
business assessors. The sanctioning record gathered information from the
lender’s own affordability calculations, his previous lending history and also
conducted internet searches in relation to Ambergate to assess whether it was
appropriate to provide a mortgage loan for him. This document stated that he
had a declared income of £400,000 and his current portfolio produced a net
additional income of £21,000 per annum.

(2)
Application 2: This was submitted to a high street lender on 23 June 2006.
The application stated that Mr Wagner’s income was £400,000 in addition to
an annual rental income of £177,300. There is also a mortgage declaration
included which had been signed and dated by him on 23 June 2006. This file
also had a sanctioning record which stated that he had a declared income of

£400,000 excluding rental income. The document later stated that his buy-to-
let portfolio produced a net additional income of £28,000 per annum.

(3)
Application 3: This was submitted by Adviser B to a high street lender on 2
April 2007. The self employed accounts section of the application stated that
Mr Wagner’s income was £400,000 and the other income section stated that
he had a gross annual rental income of £206,100. A conversion checklist
document, completed by Adviser B for this application, records his income as
£400,000 and his rental income as £210,000. The declaration in relation to
the actual mortgage application dated 2 April 2007 recorded his total personal
income as £610,000. Directly beneath this figure is his signature. A
sanctioning record is also included with the file which states that he was self
employed with a salary of £400,000 and a rental income of £206,100.

(4)
Application 4: This was submitted to a high street lender on 11 July 2007.
The application stated that Mr Wagner’s self employed income was
£400,000. The sanctioning record stated that he had a declared income of
£400,000 which excludes rental income of over £200,000 per annum.

4.13. Mr Wagner said in interview that his residential application was submitted by other
advisers at Ambergate and also that he had “done so many mortgages and they [the
advisers] just take the information of [sic] the files in the main”. However,
irrespective of who actually completed the information, the applications were for Mr
Wagner’s own benefit and he should have ensured that applications were not
submitted containing false information. The fact that he did not do so raises serious
concerns in relation to his fitness and propriety.

4.14. The false income details in the application information either indicate a lack of checks
by Mr Wagner, which allowed fraudulent information to be submitted, or he was
aware that this false information was being submitted yet he did not prevent this from
occurring. In relation to this his actual signature is directly below the income amount
of £610,000 on the mortgage declaration in application 3 and the FSA therefore finds
it implausible that he was not aware of the false information.

4.15. The HMRC records show that Mr Wagner’s income comprised company dividends,
rents and other income. His employment income and his total income (with rental and
dividends added) are substantially less than the income figures that he declared on the
mortgage applications. In the four buy-to-let applications detailed above, his income
was recorded as £400,000 (with one application stating an additional income of
£210,000 and the other three applications and file documentation stating that he had a
rental income ranging from £28,000 to over £200,000). These amounts are
substantially higher than the the income declared to HMRC, which he admitted in
interview. He has not provided a credible explanation for this discrepancy.

4.16. The FSA’s view is that Mr Wagner’s has deliberately allowed false information to be
submitted for his benefit and as a result he has obtained five mortgages (one
residential and four buy-to-let) totalling approximately £1,906,095.

Systems and Controls Failures

4.17. As sole director (CF1) of Ambergate and holder of the CF8 and CF10 approved
functions, and predecessor controlled functions, the FSA considers that Mr Wagner
did not adequately monitor or organise appropriate monitoring of Adviser A and
Adviser B and this enabled both individuals to submit mortgage applications through
Ambergate for their own personal benefit which contained false information as
follows:

(1)
Adviser A applied for three buy-to-let mortgages and one residential
mortgage, through Ambergate between August and November 2005. The
applications submitted contain inflated income details (ranging from £50,000
to £70,000) when compared to HMRC records. The income information
Adviser A declared in his applications was more than that declared to HMRC
for the tax year ending 5 April 2005 and the tax year ending 5 April 2006.

(2)
Information obtained from the lender shows that Adviser B applied for three
buy-to-let mortgages and one residential mortgage through Ambergate
between July 2006 and January 2008. All of the applications contained
inflated income details with the amount in each case stated as £50,000. In
addition due to Adviser B also being the mortgage consultant on three of the
applications he also certified his own mortgage documents as true copies.
The income information Adviser B declared in his applications was more
than that declared to HMRC for the tax years ending; 5 April 2006; 5 April
2007 and 5 April 2008.

4.18. It appears to the FSA that, through a lack of supervision by Mr Wagner over a
significant period, he failed to notice that false information was being supplied to
mortgage lenders by the two individuals at Ambergate. When he was asked by the
FSA about the fraudulent mortgage applications submitted by one of the Ambergate
staff, he stated that “I would’ve thought I wouldn’t have needed to do tremendous
checking on my own staff as such”.

4.19. Mr Wagner also admitted in his compelled interview that he did not think it necessary
to do many file reviews for his own staff. He stated that “I did checks on certain
things, probably not as many as I should but I did, I did do an active check on
different cases”. He also stated in interview that he would check between 10% and
25% of the adviser’s files - normally 10%.

4.20. According to the new business register from November 2004 to July 2008 Ambergate
submitted 548 mortgage applications. During this period Mr Wagner conducted
compliance checks on 47 applications and another Ambergate employee conducted
checks on one application. Therefore in a period covering almost four years he
checked less than 10% of the mortgage applications submitted by Ambergate. The
FSA believes that this level of monitoring was not sufficient and indicates that the
systems and controls that he had in place to check mortgage applications before or
after completion were not fit for purpose. This put Ambergate at risk of being used for
the purposes of financial crime. Further, this lack of systems and controls directly led
to at least eight mortgage applications being submitted to lenders containing false and
misleading information.

5.
REPRESENTATIONS, FINDINGS & CONCLUSIONS

Representations

5.1.
Mr Wagner made both oral and written representations to the FSA. He denied that he
was knowingly involved in submitting false and misleading information both in
respect of his own residential mortgage application and in the four buy-to-let mortgage
applications described above. He also asserted that he was a fit and proper person and
that he had both honesty and integrity.

Submissions relevant to all of the mortgage applications

5.2.
Mr Wagner agreed that he did not earn the amounts declared on the applications
however he maintained that he had not completed the false income details on any of
the mortgage applications. Accordingly, he would not have misrepresented this
information in any mortgage applications submitted on his behalf. He further argued
that there was no need to provide false information in support of the mortgage
applications as he had a long standing relationship with the lender in question.

5.3.
In turning to specifically address the impugned residential mortgage application, Mr
Wagner submitted that the application was not in his handwriting but in the
handwriting of someone else. He also submitted that it was not clear whether the
version, which the FSA was relying on as evidence of the fact that he had provided
false and misleading information, had in fact been submitted to the lender in question.
In support of this he identified a number of discrepancies in the application form. He
accepted that one of the signatures in the form looked similar to his own but he
contended that it could have related to another application. He therefore argued that
the copy of the residential mortgage application, which the FSA had relied upon, did
not accurately reflect that which had actually been submitted. Mr Wagner speculated
that the form could well be a composite of two other forms, describing the application
as a “cut and shut”. Mr Wagner asserted that it was essential for the FSA to provide a
copy of the application form which actually went to the lender before any properly
informed determination could be made as to his involvement in compiling it.

5.4.
Mr Wagner also relied upon evidence from one of his former employees who accepted
that he had completed the manuscript version of the application form. This individual
suggested that Mr Wagner had not played a part in preparing the document and nor
had he encouraged its preparation. Mr Wagner also highlighted the fact that his
former employee had claimed that this document had been provided for reference and
record keeping purposes. Mr Wagner claimed that this explained why the application
form had been created without Mr Wagner’s involvement.

5.5.
Mr Wagner also provided evidence that the lender in question had sought to verify
both Mr Wagner’s income and his ability to afford the residential mortgage with his
accountants at the time. He argued that the lender relied on this, as well as his long-
standing relationship, when deciding whether to approve the mortgage application.
Furthermore Mr Wagner claimed that the record of suitability supported what he

7

considered to be his true income at the time. He also argued that the fact that the
mortgage account had remained up to date was a factor to be taken into consideration
when assessing whether he had misled the lender.

5.6.
Given the foregoing, Mr Wagner submitted that the FSA could not safely conclude
that he was knowingly involved in submitting the residential mortgage application and
therefore it could not be concluded that he had been involved in providing false and
misleading information. He further argued that it was wrong for the FSA to infer
anything about his honesty and integrity without the version that was actually
submitted. Mr Wagner argued that there was no case to answer in respect of the
residential mortgage application and that therefore there was no case to answer in
relation to any of the allegations as this was the only regulated product.

Buy-to-let mortgage applications

5.7.
Mr Wagner argued that, at the relevant time, buy-to-let mortgages were not regulated
by the FSA. He argued that it was therefore inappropriate for him to be subject to any
disciplinary action for misconduct arising in connection with the buy-to-let mortgages
as they fell (and indeed still fall) outside of the the scope of the FSA’s remit.

5.8.
Notwithstanding the foregoing submissions Mr Wagner also argued that he had not
personally submitted any of the buy to let mortgage applications. He additionally
contended that he had not supplied any of the intermediaries with the figures that were
submitted to the lenders.

5.9.
Mr Wagner submitted that his inability to use computers was evidence of the fact that
he could not have submitted the electronic buy-to-let mortgage applications. This
assertion echoed a submission that he had also made in relation to the residential
mortgage application. Mr Wagner also identified to the FSA the individuals who he
claimed had submitted the applications. He contended that their involvement in the
process limited the responsibility that should be borne by Mr Wagner for the
submission of these applications. Indeed Mr Wagner distanced himself from the
applications by also contending that the signature appearing on one of the forms,
underneath an income declaration could not be definitively shown to be his. He
accepted that the signature might seem to a “lay person” to look like his. However he
argued that as the FSA had not provided expert evidence proving that it was his
signature and in the absence of any confirmation from him, the FSA could not
conclude that this was in fact his signature.

5.10. Though Mr Wagner argued that the FSA had adopted a crude method for calculating
his income Mr Wagner also submitted that the lender had in any event not relied upon
the income information given on the application forms. To the extent that his declared
income was of any relevance to the lender, or indeed to an assessment of his honesty,
Mr Wagner asserted that the FSA had failed to take account of any tax planning. He
claimed that it had been his intention to sell a property and that this would have given
him an income equivalent to that which was recorded in the applications.
Notwithstanding that assertion however, he maintained that his declared income was a
complete irrelevance.

5.11. Mr Wagner submitted that in the light of the above it could not be concluded by the
FSA that he lacked honesty and integrity.

Systems and controls failures

5.12. Mr Wagner submitted that the allegations which focussed upon his perceived systems
and controls failings were as misconceived as the allegations concerning the mortgage
applications. Mr Wagner criticised the FSA for concluding that the compliance
checks that he had conducted amounted to fewer than 10% of new business conducted
by his firm. Instead he claimed that the appropriate measure was to assess the number
of compliance checks that had been conducted against the number of regulated
residential mortgages that his firm had processed. He claimed that if this measure was
used then it was apparent that in fact 18.5% of mortgage applications had been
checked. He also highlighted other aspects of his compliance regime to demonstrate
that he had not failed in his oversight of others. In particular he highlighted evidence
which he asserted showed that he had responded appropriately when he had suspicions
about the conduct of individuals and how he had augmented the compliance function
at his firm.

5.13. Though Mr Wagner contended that the oversight at his firm had been “in excess of
what might reasonably be expected” he also accepted that some at the firm had
submitted fraudulent mortgage applications. He submitted that this did not mean that
there had been a failure of systems and controls. He argued that any system would
struggle to eliminate fraud if the perpetrators were sufficiently skilled and motivated
and he maintained that he had demonstrated honesty, integrity, competence and
capability when overseeing others at the firm.

5.14. Mr Wagner also questioned the relevance of this aspect of the case against him. Mr
Wagner argued that even if the FSA allegations were correct, which he contended they
were not, then it would be inappropriate for the FSA to conclude that he lacked
honesty and integrity merely because of his allged compliance failings. He submitted
that as this went, at the highest, to his competence and capability, it was therefore
irrelevant to the assessment that was being made.

Mr Wagner’s health

5.15. Mr Wagner submitted that the FSA investigation had severely impacted upon his
mental health. He contended that this was a factor to be taken into account by the
FSA when assessing his fitness and propriety. He also contended that this was
relevant to a determination of the appropriate sanction should the FSA find against
him.

5.16. In addition to highlighting his mental health problems Mr Wagner also referred the
FSA to some physical difficulties that he had endured. Mr Wagner asserted that these
difficulties went some way to demonstrate why his involvement with his firm had
reduced throughout the relevant period.

Character references

5.17. Mr Wagner submitted evidence from a number of character witnesses. He contended
that this evidence demonstrated his honesty and integrity. Moreover he contended that
this evidence was relevant to the assessment of whether or not he had been knowingly
involved in misleading the lender on his residential mortgage application.

5.18. Mr Wagner argued that the financial penalty proposed in the Warning Notice dated 29
October 2010 was disproportionate to the nature and seriousness of the alleged
breaches by him. He also contended that it would not be appropriate to prohibit him in
the light of all of the foregoing submissions which he submitted demonstrated that he
did not lack honesty and integrity.

Procedural fairness

5.19. In addition it was submitted that the representations process had placed Mr Wagner at
“an unfair disadvantage”. He complained that the process was unfair because after the
oral representations meeting he had submitted additional written representations to
which the enforcement team were then given the opportunity to respond. Having
received these representations from Enforcement Mr Wagner then submitted a further
short letter in which he represented that his inability to submit further representations
was unfair.

The reliability of new evidence from Enforcement

5.20. Within the body of the letter in which he complained about the fairness of the process
Mr Wagner also sought to challenge the reliability of the evidence which had been
provided to the panel of the RDC by Enforcement. He argued that this material, from
a high street lender, was unreliable because it was hearsay and because it contained a
significant caveat given in relation to the income statement. He submitted that these
problems with the ‘new’ evidence raised serious doubts about the definitive nature of
the conclusions that could be drawn from this material and therefore it should be
disregarded.

5.21. The FSA finds that Mr Wagner was involved in the submission of fraudulent
applications for one residential mortgage and for four non-regulated buy-to-let
mortgage applications. Furthermore the FSA finds that Mr Wagner failed to properly
supervise two employees of Ambergate. It is axiomatic from the foregoing that the
FSA rejects Mr Wagner submissions.

5.22. The FSA rejects Mr Wagner’s submission that it would be inappropriate to make any
findings that were reliant upon the application form, which he had criticised as
potentially being a “cut and shut”. The FSA does not accept that this application form
is likely to be a composite of other forms. Instead the FSA considers that it is a

document upon which it can rely. The FSA concludes that the signature on the form,
which Mr Wagner accepted looked like his own signature, was placed by him on this
application form. Furthermore the FSA rejects the suggestion that though Mr
Wagner’s signature appeared on this application form, it actually related to another
application form. Additionally the FSA rejects the proposition that the evidence of Mr
Wagner’s former employee demonstrates that Mr Wagner had not been involved in the
creation of this application form. The FSA finds it to be implausible that Mr Wagner,
regardless of whether or not he could use a computer, would not have overseen the
submission of his own residential mortgage application. The FSA also rejects, as
being highly unlikely, the suggestion that the copy of the application form seen by the
FSA had only been created, after the fact, for record keeping and reference purposes.
Instead the FSA finds that the application form accurately reflected that which had
been sent to the lender and the FSA considers that Mr Wagner was involved in
creating and transmitting it. In reaching this finding the FSA also notes that Mr
Wagner had not previously indicated that he had concerns about the structure and
veracity of the form, which was supplied by him to the FSA.

5.23. The FSA notes that the ‘new’ evidence recently obtained from electronic records
demonstrates that the income figure given to the lender equated to the figure recorded
on the copy of the application form which Mr Wagner had sought to dismiss. The
FSA rejects his submissions concerning the reliability of this evidence. The FSA does
not consider that this material is objectionable hearsay and nor does the FSA agree
that the material is equivocal or unreliable as contended by him. Therefore the FSA
considers that this is evidence upon which it can safely rely. The FSA considers that
this evidence provides compelling support for the contention that Mr Wagner misled
the lender as to his actual income as the figure given to the lender did not accurately
reflect his actual income. Furthermore the FSA considers that this evidence
demonstrates that, regardless of any long standing relationship between Mr Wagner
and the lender or any attempts that the lender may have made to verify his income, the
income figure given in the application form remained of significance to the lender.

5.24. Notwithstanding the foregoing the FSA also considers that whether or not, when
making its decision, the lender relied on the income figure supplied to them by or on
behalf of Mr Wagner, it is still unacceptable for a regulated person to knowingly enter
inaccurate information. The FSA considers that even if he knew that the lender would
never rely on the income figure it would still be wrong for an individual to supply the
wrong figure. The FSA also finds that the seriousness of mortgage fraud is not
mitigated by the fact that an individual, such as Mr Wagner, was able to keep up with
the mortgage repayments.

Buy-to-let mortgage applications

5.25. The FSA finds that Mr Wagner was knowingly involved in the submission of the four
impugned buy-to-let mortgage applications. The FSA considers that whilst he may
not have personally submitted any of the buy to let mortgage applications, the
applications were made on his behalf at his behest and with his knowledge.

5.26. The FSA finds that the intermediaries were supplied with figures by Mr Wagner which
they used to complete the applications and that he knew these figures were not true
reflections of his income. The FSA considers that, whether or not Mr Wagner was
able to use a computer, the applications made on his behalf would have been created
using information supplied by him and he would have ensured that they reflected that
which he wished to convey to the lenders.

5.27. The FSA rejects the suggestion by Mr Wagner that as he had queried whether he was
the author of a signature on one of the applications forms the FSA could not then rely
upon this signature as evidence of his involvement in the submission of this form. The
FSA considers that because the signature appeared, as he conceded it did, to look like
his signature the FSA was entitled to work on the assumption that it was Mr Wagner’s
signature in the absence of evidence to the contrary. The FSA notes that Mr Wagner
did not provide any evidence to rebut the reasonable inference that this was his
signature. The FSA therefore considers that this signature, being underneath the
income figure on the relevant form, provides compelling evidence that Mr Wagner
was aware of the false income details that were being sent to the lenders.

5.28. The FSA also rejects Mr Wagner’s submission that it had adopted a crude method for
calculating his actual income. Mr Wagner argued that this figure should have been
calculated using a different methodology if the FSA wished to compare his actual
income with that which was declared on the application forms. However the FSA
considers that it is appropriate to use the income declared by him to HMRC as the
measure against which to judge the income figure declared to the lenders. Moreover
the FSA rejects his submission that, in taking the income declared to the HMRC as the
appropriate measure, the FSA had failed to take account of the possibility that he may
have anticipated, at the time of the completion of the application forms that he would
have earned that which he recorded as his income. The FSA refutes the suggestion
that he was permitted to supply the income figures that can be found on the buy-to-let
mortgage application forms because he had at some point planned to sell some
property.

5.29. The FSA rejects Mr Wagner’s submission that supplying incorrect income details to
lenders was irrelevant if the lenders did not rely on these figures when coming to their
lending decisions. Notwithstanding the fact that he denied supplying misleading
income details to the lenders, Mr Wagner contended that whether or not he had was
actually a complete irrelevencancy as these income figures were not relied upon by the
lenders. The FSA considers that it is unacceptable that an individual should submit
false and misleading information in a mortgage application on the premise that this
will not be relevant to the lender’s decision.

5.30. The FSA also rejects Mr Wagner’s submission that it would be inappropriate to take
any action against him for his conduct in relation to unregulated buy-to-let mortgages.
Instead the FSA considers that whilst it may not be permitted to impose a financial
penalty for conduct in relation to unregulated activities, it should still bring action
against an individual whose misconduct in such an area raises serious questions about
their fitness and propriety to work in financial services.

5.31. For all of the foregoing reasons the FSA finds that Mr Wagner’s knowing involvement
in the submission of these buy-to-let mortgage applications demonstrates that he lacks
honesty and integrity.

Systems and controls failures

5.32. The FSA finds that Mr Wagner failed to have in place proper systems and controls
which resulted in two employees of Ambergate being able to submit mortgage
applications containing false information. The FSA rejects his submission that the
compliance regime at Ambergate was adequate for the purposes of the prevention of
financial crime. Whilst the FSA does not suggest that the submission of a fraudulent
mortgage application through a particular firm means that the systems and controls at
that firm must be inadequate, the FSA does consider that the misconduct of the two
advisers at Ambergate is good evidence of the problems at the firm. The FSA finds
that the compliance regime which was overseen by Mr Wagner was not robust enough
to prevent the misconduct of the two advisers. The FSA considers that there were too
few compliance checks and that overall that which Mr Wagner had done when
overseeing the advisers at Ambergate was not of an adequate standard.

5.33. In the light of the foregoing the FSA finds that Mr Wagner lacks competence and
capability.

Mr Wagner’s health

5.34. The FSA notes the medical evidence which was put forward by Mr Wagner. However
the FSA does not consider that this evidence impacts upon the findings made about his
misconduct nor does the evidence concerning his mental and physical health mitigate
the seriousness of what he had done and therefore it does not affect the penalty and
sanction that the FSA intends to impose upon Mr Wagner.

Character references

5.35. The FSA also notes the character evidence put forward by Mr Wagner. The FSA does
not consider that the evidence from the various witnesses as to his character
undermines the significance of the evidence of his misconduct. Instead the FSA finds
that this character evidence is of very limited value when contrasted with the evidence
of the fraudulent residential and buy-to-let mortgage applications.

5.36. The FSA finds that the financial penalty, which was originally proposed in the
Warning Notice, is not disproportionate. Instead the FSA considers that the
submission of a regulated residential mortgage application containing inaccurate and
misleading information merits the imposition of a financial penalty of £100,000.

5.37. The FSA finds that in addition to the imposition of the financial penalty it must also
impose a prohibition order upon Mr Wagner. The FSA considers that it is necessary
to prohibit Mr Wagner in the light of its findings about his lack of honesty, integrity,
competence and capability.

Procedural fairness

5.38. The FSA rejects Mr Wagner’s suggestion that he was placed at “an unfair
disadvantage” at any time in the representations process. The FSA notes that Mr
Wagner, having engaged at a late stage in the process, was given an opportunity to
provide additional written representations having made his oral representations. When
he was given this opportunity it was on the understanding that Enforcement would be
given the opportunity to provide a written response to any points raised in these
written representations. The FSA does not consider that this order of representations
and response occasioned any unfairness to Mr Wagner. Moreover the FSA notes that
in any event he provided a further short written response to the comments of
Enforcement.

The reliability of new evidence from Enforcement

5.39. As is noted above the FSA considers that the new material provided by Enforcement is
reliable and compelling evidence.

5.40. Accordingly, having regard to the facts and matters set out above, the FSA concludes
that:

(1)
Mr Wagner contravened Statement of Principle 1 of APER, and lacks honesty
and integrity, as demonstrated by being knowingly involved in submitting a
residential mortgage application containing false and misleading information
through Ambergate for his own personal benefit;

(2)
Mr Wagner lacks honesty and integrity as demonstrated by being knowingly
involved in the submission of buy-to-let mortgage applications to lenders
containing false and misleading information for his own personal benefit; and

(3)
Mr Wagner lacks competence and capability, as demonstrated by failing to
have adequate systems and controls in place to monitor mortgage applications
and supervise advisers. As a result, he failed to prevent the submission of
mortgage applications containing false information through Ambergate by two
employees.

5.41. The conduct described above goes directly to impugn Mr Wagner’s honesty and
integrity, and competence and capability, and therefore demonstrates that he 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.

5.42. The FSA considers that Mr Wagner poses a serious risk to consumers and lenders and
to the FSA’s regulatory statutory objectives of maintaining confidence in the financial
system and the reduction of financial crime.

5.43. The FSA has therefore decided that it is appropriate to impose on Mr Wagner a
financial penalty of £100,000 and to make the Prohibition Order in the terms set out
above.

6.
ANALYSIS OF SANCTION

6.1.
The FSA considers Mr Wagner’s misconduct to be extremely serious. He was
knowingly involved in the submission of false and misleading information to
mortgage lenders for his own personal benefit. Additionally, he demonstrated a lack
of competence and capability by failing to have adequate systems and controls in place
to monitor mortgage applications and supervise advisers.

6.2.
The FSA’s general approach in deciding whether to take action and determining the
appropriate level of financial penalties is set out in Chapter 6 of the Decision
Procedure and Penalties Guide ("DEPP"), which is part of the Handbook of Rules and
Guidance.

6.3.
The breach of APER set out above is sufficiently serious to merit the imposition of a
substantial financial penalty. In determining the level of financial penalty, the FSA
has had regard to all the relevant circumstances of the case and the factors set out in
DEPP 6.5.2G (at the relevant time), including the following:


Deterrence: DEPP 6.5.2G (1)

6.4.
The principal purpose of imposing a financial penalty is to promote high standards of
regulatory conduct by deterring persons who have committed breaches from
committing further breaches, helping to deter other persons from committing similar
breaches and demonstrating generally the benefits of compliant behaviour.

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

6.5.
The FSA has had regard to the seriousness of the breach, including the nature of the
requirements and Statement of Principle breached, and the extent to which the breach
illustrated a lack of honesty and integrity.

6.6.
For the reasons set out above the FSA considers that the breach is of a serious nature.

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

6.7.
The FSA considers that Mr Wagner acted in a deliberate manner in submitting, or
allowing to be submitted, a regulated residential mortgage application on his own
behalf which he knew contained inaccurate and misleading information.

The financial resources and other circumstances of the person on whom the penalty
is to be imposed: DEPP 6.5.2G (5)

6.8.
The FSA notes that Mr Wagner is an individual, but considers that there is no
evidence to suggest that he is unable to pay the financial penalty imposed or that there
are exceptional circumstances that warrant a lower level of penalty.

Other action taken by the FSA: DEPP 6.5.2G (10)

6.9.
In determining the appropriate sanction, the FSA has taken into account sanctions
imposed by the FSA on other authorised and approved persons for similar behaviour.
This was considered alongside the principal purpose for which the FSA imposes
sanctions, namely to promote high standards of regulatory conduct by deterring
persons who have committed breaches from committing further breaches and helping
to deter other persons from committing similar breaches, as well as demonstrating
generally the benefits of compliant behaviour.


6.10. Having had regard to all the factors outlined above, the FSA has decided that it is
appropriate to impose on Mr Wagner a financial penalty of £100,000.

6.11. The FSA has taken account of Mr Wagner’s behaviour including the nature of the
requirements and Statement of Principle breached with respect to his residential
mortgage application, and the submission of his buy-to-let mortgage applications.
These demonstrate his lack of honesty and integrity.

6.12. The FSA has also taken account of Mr Wagner’s failure adequately to monitor
mortgage applications and supervise advisers, and the extent to which this revealed
serious and systemic weakness of Ambergate’s management systems and internal
controls, the number of lenders exposed to a risk of loss, and the potential for
Ambergate to be used for financial crime. This behaviour demonstrates his lack of
competence and capability.

6.13. As a result, the FSA has decided that it is necessary to prohibit him from performing
any function in relation to any regulated activity carried on by an authorised person,
exempt person or exempt professional firm in order to achieve its statutory objectives
of maintaining market confidence, protecting consumers and the reduction of financial
crime.

7.
DECISION MAKER

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

8.
IMPORTANT

8.1.
This Decision Notice is given to Mr Wagner under sections 57 and 67 of the Act and
in accordance with section 388 of the Act. The following statutory rights are
important.

The Tribunal

8.2.
Mr Wagner has the right to refer the matter to which this Decision Notice relates to the
Upper Tribunal (the “Tribunal”). The Tax and Chancery Chamber is the part of the
Upper Tribunal, which, among other things, hears references arising from decisions of
the FSA. Under paragraph 2(2) of Schedule 3 of the Tribunal Procedure (Upper

8.3.
A reference to the Tribunal is made by way of a reference notice (Form FTC3) signed
by him (or on his behalf) and filed with a copy of this Notice. The Tribunal’s contact
details are The Upper Tribunal, Tax and Chancery Chamber, 45 Bedford Square,
London
WC1B
3DN
(tel
020
7612
9700;
email:
financeandtaxappeals@tribunals.gsi.gov.uk).

8.4.
Further details are contained in “Making a Reference to the UPPER TRIBUNAL (Tax
and Chancery Chamber)” which is available from the Upper Tribunal website:

8.5.
A copy of Form FTC3 must also be sent to Paul Howick at the FSA, 25 The North
Colonnade, Canary Wharf, London E14 5HS at the same time as filing a reference
with the Tribunal.

Access to evidence

8.6.
Section 394 of the Act applies to this Decision Notice. In accordance with section
394, Mr Wagner is entitled to have access to:

(1)
the material upon which the FSA has relied in deciding to give him this notice;
and .

(2)
any secondary material which, in the opinion of the FSA, might undermine that
decision.

8.7.
The material upon which the FSA has relied in deciding to give Mr Wagner this
Decision Notice was sent to him with the Warning Notice dated 29 October 2010.
There is no such secondary material to which he must be allowed access.

Third party rights

8.8.
A copy of this notice is being given to Ambergate as a third party identified in the
reasons above and to whom in the opinion of the FSA the matter is prejudicial.
Ambergate has similar rights of representation and access to material in relation to the
matter which identifies it.

Confidentiality and publicity

8.9.
Mr Wagner should note that this Decision Notice may contain confidential
information and should not be disclosed to a third party (except for the purpose of
obtaining advice on its contents). Section 391 of the Act provides that neither the FSA
nor a person to whom a Warning Notice is given or copied may publish the notice or
any details concerning it. He should note, however, that the FSA must publish such
information about the matter to which a Decision Notice or Final Notice relates as it
considers appropriate. He should also be aware, that any Final Notice in this matter
may contain reference to the facts and matters contained in this Decision Notice.

FSA contacts

8.10. For more information concerning this matter generally, Mr Wagner should contact
Paul Howick (direct line: 020 7066 7954) of the Enforcement and Financial Crime
Division of the FSA.

Martin Hagen
Deputy Chairman, Regulatory Decisions Committee

STATUTORY PROVISIONS, REGULATORY GUIDANCE AND POLICY

1.
Statutory provisions

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

1.2.
Under section 56 of the Act, if it appears to the FSA 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, exempt person or exempt professional firm, the FSA may make a
prohibition order.

1.3.
The effect of making a prohibition order is to prohibit an individual from performing
functions within authorised firms and to prohibit authorised firms from employing the
individual to perform specific functions. Such an order may relate to:

(1)
a specified function, any function falling within a specified description, or any
function (section 56(2)); and

(2)
a specified regulated activity, any regulated activity falling within a specified
description, or all regulated activities (section 56(3)(a)).

Financial penalty

1.4.
Section 66 of the Act provides that the FSA may take action against a person if it
appears to the FSA that the person is guilty of misconduct and the FSA is satisfied that
it is appropriate in all the circumstances to take action against him. Misconduct
includes failure by an approved person to comply with a statement of principle. The
action that may be taken by the FSA includes the imposition of a penalty on the
approved person of such amount as it considers appropriate.

2.
Regulatory Guidance

FSA’s policy for exercising its power to make a prohibition order

2.1.
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 withdraw its approval and/or make a prohibition order is set out in Chapter 9 of the
Enforcement Guide (“EG”). Although the references in this notice are to EG, the FSA
has had regard to the appropriate provisions of the FSA’s Enforcement Manual
(“ENF”) which applied during some of the relevant period in which the misconduct
occurred.

2.2.
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.

2.3.
EG 9.9 provides that when deciding whether to make a prohibition order against an
approved person and/or withdraw its approval, 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 FIT 2.1 (Honesty, integrity and reputation), FIT 2.2 (Competence and
capability) and FIT 2.3 (Financial soundness);

(2)
whether, and to what extent, the approved person has failed to comply with the
Statements of Principle issued by the FSA with respect to the conduct of
approved persons.

(3)
the relevance and materiality of any matters indicating unfitness;

(4)
the length of time since the occurrence of any matters indicating unfitness; and

(5)
the severity of the risk which the individual poses to consumers and to
confidence in the financial system.

2.4.
EG provides at paragraph 9.23 that the FSA may impose a financial penalty in
addition to imposing a prohibition order where it is appropriate to do so.

The FSA’s policy on the imposition of financial penalties

2.5.
At the relevant time the FSA's policy in relation to the imposition of financial
penalties was set out in Chapter 6 of the Decision Procedure and Penalties Manual
(DEPP) which forms part of the FSA Handbook. It was previously set out in Chapter
13 of ENF, to which the FSA has had regard. DEPP 6.1.2 provides that the principal
purpose of imposing a financial penalty is to promote high standards of regulatory
conduct by deterring persons who have committed breaches from committing further
breaches, helping to deter other persons from committing similar breaches and
demonstrating generally the benefits of compliant behaviour.

2.6.
The FSA will consider the full circumstances of each case when determining whether
or not to take action for a financial penalty. DEPP 6.2.1G sets out a non-exhaustive
list of factors that may be of relevance in determining whether to take action for a
financial penalty, which include the following:

(1)
DEPP 6.2.1G(1): The nature, seriousness and impact of the suspected breach.

(2)
DEPP 6.2.1G(2): The conduct of the person after the breach.

(3)
DEPP 6.2.1G(4): FSA guidance and other published materials.

(4)
DEPP 6.2.1G(5): Action taken by the FSA in previous similar cases.

Determining the level of the financial penalty

2.7.
The FSA will consider all the relevant circumstances of a case when it determines the
level of financial penalty. DEPP6.5.2G sets out a non exhaustive list of factors that
may be of relevance when determining the amount of a financial penalty, which
include:

(1)
deterrence having regard to promoting high standard of regulatory and/or
market conduct by deterring persons who have committed breaches from
committing further breaches and helping to deter other persons from
committing similar breaches;

(2)
the nature, seriousness and impact of the breach in question;

(3)
the extent to which the breach was deliberate or reckless;

(4)
whether the person on whom the penalty is to be imposed is an individual;

(5)
the size, financial resources and other circumstances of the person on whom
the penalty is to be imposed; and

(10)
other action taken by the FSA.

3.
Regulatory Requirements

(i) APER

3.1.
APER sets out the Statements of Principle and Codes of Practice for Approved
Persons detailing conduct which, in the opinion of the FSA, does not comply with the
relevant Statements of Principle. It further describes factors to be taken into account
in determining whether an approved person’s conduct complies with a Statement of
Principle.

3.2.
APER 3.1.3G stipulates that when establishing compliance with, or a breach of, a
Statement of Principle, account will be taken of the context in which a course of
conduct was undertaken, including the precise circumstances of the individual case,
the characteristics of the particular controlled function and the behaviour to be
expected in that function.

3.3.
APER 3.1.4G states that an approved person will only be in breach of a Statement of
Principle if they are personally culpable, that is, where their conduct was deliberate or
where their standard of conduct was below that which would be reasonable in all the
circumstances.

3.4.
On the facts of this case, the FSA considers the most relevant Statement of Principle to
be Principle 1 under which an approved person must act with integrity in carrying out
his controlled function.

3.5.
APER 4.1 sets out examples of conduct which, in the opinion of the FSA, do not
comply with Statement of Principle 1.

3.6.
APER 4.1.3E states that deliberately misleading (or attempting to mislead) by act or
omission either a client or the FSA does not comply with Statement of Principle 1.
APER 4.1.4E considers that such conduct includes but is not limited to, deliberately
providing false or inaccurate documentation or information, or deliberately falsifying
documents. In considering a person's integrity the FSA may also have regard to
whether that person has contravened any of the requirements and standards of the
regulatory system (FIT 2.1.3G(5)).

(ii) Fit and Proper Test for Approved Persons

3.7.
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.

3.8.
In this instance the criteria set out in FIT are relevant in considering whether the FSA
may exercise its powers to prohibit and/or withdraw approval of an individual in
accordance with EG 9.8.

3.9.
FIT 1.3 provides that the FSA will have regard to a number of factors when assessing
a person’s fitness and propriety. The most important considerations include the
person’s honesty, integrity and reputation, and their competence and capability.

3.10. In determining a person’s honesty, integrity and reputation, FIT 2.1 provides that the
FSA will have regard to matters including, but not limited to, those set out in FIT
2.1.3G. These include:

(1)
whether the person has contravened any of the requirements and standards of
the regulatory system (FIT 2.1.3G(5)); and

(2)
whether, in the past, the person has been candid and truthful in all his dealings
with any regulatory body and whether the person demonstrates a readiness and
willingness to comply with the requirements and standards of the regulatory
system and with other legal, regulatory and professional requirements and
standards (FIT 2.1.3G(13)).

3.11. In determining a person’s competence and capability FIT 2.2.1G provides that the
FSA will have regard to matters including, but not limited to:

(1)
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

(2)
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)).