F
CONDUCT
AUTHORITY

I ;‘ EricIcit it ScEJrc:

L ondon
t?O1JN

‘1(31
44 (O)?O 7066 1 OOt)
ix
+44 tO)%C) /066 it)Y9
WWwlCd orq uk

SECOND SUPERVISORY NOTICE

To:
Perry Prowse (Insurance Consultants) Ltd

El rm
Reference
Number:
311916

ACTION

1.
On 13 September 2019, pursuant to section 55J of the Act, the Authority gave
Perry
Prowse
a
First Supervisory
Notice
which
notified
Perry
Prowse
of the
Authority’s decision to vary Perry Prowse’s Part 4A permission, by removing all of
its regulated activities with immediate effect.
For the reasons given in this Second
Supervisory Notice, the Authority has decided not to rescind the variation of Perry
Prowse’s Part 4A permission.
Accordingly, it remains the case that Perry Prowse is
not permitted to carry on the regulated activities of:

(a)
advising on investments (except on Pension Transfers and Pension Opt Outs);

(b)
advising on P2P agreements;

(c)
agreeing to carry on a regulated activity;

(d)
arranging (bringing about) deals in investments;

(e)
assisting in the administration and performance of a contract of insurance;

(f)
credit broking;

(g)
dealing in investments as agent;

(h)
making arrangements with a view to transactions in investments; and

(i)
holding and/or controlling client money for its insurance distribution activities.

REASONS FOR ACTION

2.
On the basis of the facts and matters described in this Second Supervisory Notice,
having considered Perry Prowse’s representations on the First Supervisory Notice,
it appears to the Authority that Perry Prowse is continuing to fail to satisfy the
Threshold Conditions and that the exercise of its own-initiative power to vary Perry
Prowse’s Part 4A permission with immediate effect was, and remains, desirable in
order to advance its consumer protection objective.
Accordingly, the Authority
considers it is not appropriate to rescind the variation of Perry Prowse’s Part 4A
permission.

3.
Perry Prowse has failed to provide information to the Authority, despite repeated
requests to do so, and has not been open and co-operative in all of its dealings
with the Authority, in breach of Principle 11 (Relations with regulators) of the
Principles. This includes a failure to comply in a timely and adequate manner with
an information requirement issued under section 165 of the Act. As a result, the
Authority considers that Perry Prowse is not a fit and proper person to conduct
regulated activities and is failing to satisfy the suitability Threshold Condition.

4.
The information that Perry Prowse has failed to provide,
in a timely manner,
adequately or at all, was required by the Authority to assess the serious issue of
whether Perry Prowse was conducting its business with due regard to the interests
of consumers. In particular, Perry Prowse repeatedly failed to provide information
to address an allegation that Perry Prowse made unauthorised entries on the Motor
Insurance Database and in relation to a complaint by consumers who were unable
to claim on their home insurance policy bought from Perry Prowse. When Perry
Prowse eventually did provide information
in respect of these matters, it was
inadequate and failed properly to address the issues raised by the Authority. This
failure leads the Authority to consider that, were Perry Prowse permitted to carry
on regulated activities, it would present a serious risk to consumers because the
Authority cannot be satisfied that Perry Prowse’s affairs would be conducted with
due regard for the interests of its customers,
in accordance with Principle
6
(Customers’ interests) of the Principles. The Authority also considers that this
aggravates Perry Prowse’s failure to satisfy the suitability Threshold Condition.

5.
Further, Perry Prowse’s repeated failure to provide information required by the
Authority, and the content of the information eventually provided, causes the
Authority to have concerns regarding the adequacy of Perry Prowse’s processes,
systems and controls.
The Authority
is
not confident that Perry Prowse has
appropriate resources such that it is ready, willing and organised to comply with

regulatory requirements, and
it therefore appears to the Authority that Perry
Prowse is also failing to satisfy the appropriate resources Threshold Condition.

DEFINITIONS

6.
The definitions below are used in this Second Supervisory Notice:

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

the “appropriate resources Threshold Condition” means the Threshold Condition set
out in paragraph 2D of Schedule 6 to the Act;

the “Authority” means the body corporate previously known as the Financial
Services Authority and
renamed
on
1
April
2013
as the
Financial
Conduct
Authority;

“Company A” means the insurance company that provided the Authority with
information alleging that Perry Prowse had made unauthorised entries on the Motor
Insurance Database;

the “First Supervisory Notice” means the First Supervisory Notice given to Perry
Prowse dated 13 September 2019;

the “FOS” means the FinancialOmbudsman Service;

the “Handbook” means the Authority’s Handbook of Rules and Guidance;

“Perry Prowse” means the regulated firm Perry Prowse (Insurance Consultants)
Ltd;

“Perry Prowse’s Part 4A permission” means Perry Prowse’s permission to conduct
regulated activities granted pursuant to Part 4A of the Act;

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

the “suitability Threshold Condition” means the Threshold Condition set out in
paragraph 2E of Schedule 6 to the Act;

“SUP” means the Authority’s Supervision Manual, part of the Handbook;

“SYSC” means the Senior Management Arrangements, Systems and Controls part
of the Handbook;

the “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).

FACTS AND MATTERS RELIED ON

7.
Perry Prowse was authorised by the Authority on 14 January 2005 to conduct
regulated insurance broking, credit broking and investment advisory business.

8.
Since 24 April 2019, the Authority has repeatedly requested that Perry Prowse
provide a full explanation addressing specific circumstances suggesting issues with
insurance policies sold by Perry Prowse to consumers. The Authority requested this
explanation after it received information:

a.
alleging that Perry Prowse had made unauthorised entries on the Motor
Insurance Database, including adding vehicles to consumers’ policies without
their knowledge or consent; and
:

b
regarding a complaint by consumers who were unable to claim on their home
insurance policy purchased from Perry Prowse, because the underwriters
informed them that the policy did not exist.
..
.

9.
Since that date, the Authority has also repeatedly requested that Perry Prowse
provide a full and detailed explanation (including updates) in relation to IT system
issues being faced by the firm.

10.
Despite numerous requests by the Authority, including an information requirement
issued on 25 June 2019 under section 165(1) of the Act that Perry Prowse provide
an explanation addressing the issues detailed in paragraphs 8 and 9 above, Perry
Prowse
has
failed
without
sufficient
explanation
to
adequately
provide
the
information required by the Authority. Further, the limited information eventually
provided by Perry Prowse indicates that Perry Prowse does not have adequate
processes, systems and controls in place.

FAILINGS

11.
The regulatory provisions relevant to this Second Supervisory Notice are set out in
Annex A.

12.
From the facts and matters described above, the Authority, having regard to its
operational objectives, has reached the following conclusions:

a.
Perry Prowse’s unreasonable failure to provide the information requested
by the Authority leads the Authority to consider that it is failing to be open
and co-operative with the Authority, in breach of Principle 11 (Relations
with regulators) of the Principles, and is therefore not a fit and proper
person and is failing to satisfy the suitability Threshold Condition;

b.
Perry Prowse’s failure to address adequately allegations of unauthorised
entries on the Motor Insurance Database and the complaint by consumers
who were unable to claim on their home insurance policy because it did
not exist,
leads the
Authority
to
conclude that,
were
Perry
Prowse
permitted to carry on regulated activities,
it would present a
risk to
consumers because the Authority cannot be satisfied that Perry Prowse’s
affairs would be conducted in an appropriate manner, having regard in
particular to the interests of consumers.
The Authority considers that this
aggravates
Perry
Prowse’s
failure
to
satisfy the
suitability Threshold
Condition and may also cause it to be in breach of Principle 6 (Customers’
interests) of the Principles;

C.
Perry Prowse’s failings in (b) above cause the Authority to have serious
concerns about the risk of loss or other adverse effect on consumers who
have purchased or may purchase insurance policies from the firm, without

actually obtaining any covet ot adequate covet. The Authotity considets
that the exetcise of the Authotity’s own-initiative powet to vaty Petty
Ptowse’s Patt 4A petmission with immediate effect was an apptoptiate
tesponse to those concetns;

d.
Petty Ptowse’s tepeated failute to ptovide infotmation tequited by the
Authotity, and the content of the infotmation eventually ptovided, causes
the Authotity to have concetns tegatding the adequacy of Petty Ptowse’s
ptocesses, systems and conttols. The Authotity is not confident that Petty
Ptowse
has apptoptiate
tesoutces such that
it
is
teady,
willing
and
otganised
to
comply
with
tegulatoty
tequitements,
and
it thetefote
appeats to the Authotity that Petty Ptowse is also failing to satisfy the
apptoptiate tesoutces Thteshold Condition; and

e.
it was also apptoptiate to exetcise the Authotity’s own initiative powet to
vaty Petty Ptowse’s Patt 4A petmission with immediate effect to advance
its opetational
objectives,
namely the objective
of the
ptotection
of
consumets, and it is not apptoptiate to tescind that vatiation.

REPRESENTATIONS

13:
Annex
B contains a btief summaty of the key teptesentations made by Petty
Ptowse and how they have been dealt with.
In making the decision which gave
tise to the obligation to give this Second Supetvisoty Notice, the Authotity has
taken into account all of the teptesentations made by Petty Ptowse, whethet ot not
set out in Annex B.

PROCEDURAL MATTERS

14.
This Second Supetvisoty Notice is given to Petty Ptowse undet section 55Y(7) and
in accotdance with section 55Y(9) of the Act.

Decision Maker

15.
The decision which gave tise to the obligation to give this Second Supetvisoty
Notice was made by the Authotity’s Regulatoty Decisions Committee. The following
statutoty tights ate impottant.

The Tribunal

16.
Petty Ptowse has the tight to tefet the mattet to which this Second Supetvisoty
Notice telates to the Ttibunal. The Tax and Chancety Chambet is the patt of the
Ttibunal which, amongst othet things, heats tefetences atising ftom decisions of
the Authotity. Undet patagtaph 2(2) of Schedule 3 of the Ttibunal Ptocedute
(Uppet Ttibunal) Rules 2008, Petty Ptowse has 28 days ftom the date on which this
Second Supetvisoty Notice is given to it to tefet the mattet to the Ttibunal.

17.
A tefetence to the Ttibunal can be made by way of a tefetence notice (Fotm FrC3)
signed by ot on behalf of Petty Ptowse and filed with a copy of this Second
Supetvisoty Notice. The Ttibunal’s contact details ate: The Upper- Ttibunal, Tax and
Chancety Chambet,
5th Floot, The Rolls Building, Fettet Lane, London EC4A 1NL
(telephone: 020 7612 9730; email: uttc@hmcts.gsi.gov.uk).

18.
For further information on the Tribunal (including the power to vary time periods),
Perry Prowse should refer to the HM Courts and Tribunal Service website which
provides guidance and the relevant form to complete. The relevant page on HM
Courts and Tribunal Service website can be accessed via the following link:

https : //www .gov. uk/courts-tribunals/upper-tribunal-tax-and-chancery-chamber

19.
A copy of Form FrC3 must also be sent to Saad Nasarullah at the Financial Conduct
Authority, 12 Endeavour Square, London E20 1JN at the same time as filing a
reference with the Tribunal.

20.
Perry Prowse should note that section 391 of the Act requires the Authority, when
this Second Supervisory Notice takes effect, to publish such information about the
matter as it considers appropriate.
:

Contacts

21.
For more
information concerning this matter generally,
Perry
Prowse should
contact Saad Nasarullah at the Authority (direct line: 020 7066 1940).

Mark Roberts, DMCS Manager, on behalf of

Elizabeth France
.
Deputy Chair, Reaulatorv Decisions Committee

ANNEX A

RELEVANT STATUTORY PROVISIONS

1.
The Authority’s operational objectives established in section 1(B) of the Act include
the protection of consumers.

2.
The Authority is authorised by section 55J of the Act to exercise the following
powers:

.
to vary an
authorised
person’s
permission
where
it appears
to the
Authority that such person is failing to satisfy the Threshold Conditions
(section 55](1)(a));

.
to vary an authorised person’s permission where it is desirable to do so to
advance any of its operational objectives (section 55J(1)(c)(i));

.
to vary such a permission by removing a regulated activity from those for
which the permission is given (section 55J(2)(a)(ii)); and

.
to include any provision in the permission as varied that could be included
if a fresh permission were being given in response to an application under
section 55A of the Act (section 55J(1O)).

3.
Section 55Y(3) of the Act allows such a variation to take effect immediately (or
on a specified date) only if the Authority having regard to the ground on which it
is exercising its own-initiative power, reasonably considers that it is necessary for
the variation to take effect immediately (or on that date).

4.
Section 55Y(7) of the Act provides that if, having considered any representations
made by the authorised person (“A”), the Authority decides not to rescind the
variation of the permission, it must give A written notice.

5.
Section 391 of the Act provides that:

(5)
When a supervisory notice takes effect, the [Authority] must
publish such information about the matter to which the
notice relates as it considers appropriate.

(6)
The [Authority] may not publish information under this
section if, in its opinion, publication of the information would be-

(a) unfair to the person with respect to whom the action was taken,
(b) prejudicial to the interests of consumers...

(7)
Information is to be published under this section in such manner as
the [Authority] considers appropriate.”

6.
Paragraph 2D to Schedule 6 to the Act states that:

“(1)
The resources of A must be appropriate in relation to the regulated
activities that A carries on or seeks to carry on.

(4)
The matters which are relevant in determining whether A has
appropriate non-financial resources include-

[.1

(b)
whether A’s non-financial resources are sufficient to enable

.
.
A to comply with-

(i)
requirements imposed or likely to be imposed on A
by the [Authority] in the exercise of its functions...”

7.
Paragraph 2E to Schedule 6 to the Act states that:

“A must be a fit and.proper person having regard to all the circumstances,
including-

(c)
the need to ensure that A’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;

(d)
whether
A
has
complied
and
is
complying
with
requirements
imposed
by the [Authority]
in the exercise of its functions, or
requests made
by the
[Authority], relating to the provision of
information to the [Authority]

(f)
whether A’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...”

RELEVANT HANDBOOK PROVISIONS

8.
In exercising its power to vary a Part 4A permission, the Authority must have
regard to guidance published in the Handbook. The relevant main considerations
in relation to the action specified above are set out below.

9.
Principle 6 (Customers’ interests) of the Principles, states that a firm must pay
due regard to the interests of its customers and treat them fairly.

10.
Principle 11 (Relations with regulators) of the Principles, states that a firm must
deal with its regulators in an open and cooperative way.

Guidance concerning the relevant Threshold Condition

11.
Guidance on the Threshold Conditions is set out in the part of the Handbook
entitled Threshold Conditions (“COND”).

COND 2.4
— Appropriate resources: Paragraph 2D of Schedule 6 to the Act

12.
COND 2.4.1AUK(1) reproduces the relevant statutory provision that the resources
of A must be appropriate in relation to the regulated activities that A carries on or
seeks to carry on.

13.
COND 2.4.2G(2) states that, in this context, the Authority will interpret the term
‘appropriate’ 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.

14.
COND 2.4.2G(2A) reiterates that paragraph
1A(2) of Schedule 6 to the Act
provides that ‘non-financial resources’ of a firm for the purposes of the Threshold
Conditions include any systems, controls, plans or policies that the firm maintains
and the human resources that the firm has available.

15.
COND
2.4.2G(3)
refers
to
the
fact
that
high
level
systems
and
control
requirements are in SYSC, and states that the Authority will consider whether the
firm is ready, willing and organised to comply with these and other applicable
systems and controls requirements when assessing
if it has appropriate non-
financial
resources
for the
purpose
of the appropriate
resources Threshold
Condition.

1

16.
COND 2.4.4(G) provides that relevant matters to which the Authority may have
regard when assessing whether a firm will satisfy, and continue to satisfy, the
appropriate resources Threshold Condition may include but are not limited to:
whether the firm has taken reasonable steps to identify and measure any risks of
regulatory concern that it may encounter in conducting its business and has
installed appropriate systems and controls and appointed appropriate human
resources to measure them prudently at all times; and whether the resources of
thefirm are commensurate with the likely risks it will face (COND 2.4.4G(d) and
(f)).

COND 2.5
— Suitability: Paragraph 2E of Schedule 6 to the Act

17.
COND 2.5.1AUK(1) reproduces the relevant statutory provision 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, whether he has
complied and is complying with requests made by the Authority, relating to the
provision of information to the Authority, the need to ensure that his affairs are
conducted in an appropriate manner, having regard in particular to the interests
of consumers, and whether his business is being managed in such a way as to
ensure that its affairs will be conducted in a sound and prudent manner (COND
2.5.1AUK(1)(c),(d) and (f)).

18.
COND
2.5.4G(2)
states that examples
of the
considerations
to
which
the
Authority may have regard when assessing whether a firm
will satisfy and

continue to satisfy the Threshold Conditions include whether the firm conducts its
business in compliance with proper standards (COND 2.5.4G(2)(c)).

19.
COND 2.56G states that examples of considerations to which the Authority may
have regard when assessing whether a firm will satisfy, and continue to satisfy
the suitability Threshold Condition include whether the firm has been open and
co-operative in all its dealings with the Authority, and whether the firm has
contravened any provisions of the Act or the regulatory system (COND 2.5.6G(1)
and (4)).

OTHER RELEVANT REGULATORY PROVISIONS

20.
The Authority’s policy in relation to its enforcement powers is set out in the
Enforcement Guide (EG), certain provisions of which are summarised below.

21.
EG 8.1 reflects the provisions of section 55J of the Act that the Authority may use
its own-initiative power to vary or cancel the permission of an authorised firm
where a firm is failing or is likely to fail to satisfy the Threshold Conditions (EG
8.1(1)); or where it is desirable to exercise the power in order to advance one or
more of its operational objectives (EG 8.1(3)).

Varyingafirm’s Part 4A permission on the Authority’s own initiative

22.
EG 8.2.1 provides that the Authority will have regard to its statutory objectives
and the range of regulatory tools that are available to it, when it considers how it
should deal with a concern about a firm.

23.
EG 8.2.3 provides that the Authority will exercise its formal powers under section
55J or 55L of the Act, where the Authority considers it is appropriate to ensure a
firm meets its regulatory requirements. EG 8.2.3(1) specifies that the Authority
may consider it appropriate to exercise its powers where it has serious concerns
about a firm or the way its business is being or has been conducted.

24.
EG 8.2.6(1) specifies that the Authority will consider exercising its own-initiative
power under section 55J(1)(a) or 55L(2)(a) of the Act, where the firm appears to
be failing, or appears likely to fail, to satisfy the Threshold Conditions relating to
one or more, or all, of its regulated activities.

25.
EG 8.2.6(1)(b) specifies that the Authority will consider exercising its own-initiative
power under section 55](1)(a) or 55L(2)(a) of the Act, where the firm appears not
to be a fit and proper person to carry on a regulated activity because it has
breached requirements imposed on it by or under the Act (including Principles and
rules) and the breaches are material
in number or individual seriousness (EG
8 . 2 . 6 ( 1 ) ( b) ( i i i) ) .

26.
EG 8.5.2 provides some individual examples of circumstances where the Authority
will
consider
exercising
its
own-initiative
power
under
section
55J(1)(a)
or
55L(2)(a) of the Act, where the firm appears not to be a fit and proper person.
This includes non-submission of regulatory return, repeated failures to comply with
rules or requirements, and failure to co-operate with the Authority which is of
sufficient seriousness that the Authority ceases to be satisfied that the firm is fit
and proper, for example by failing without reasonable excuse to provide material
information reasonably required by the Authority (EG 8.5.2(4), (7) and (8)(b)).

Use of the own-initiative powers in urgent cases

27.
EG 8.3.1 states that the Authority may impose a variation of permission so that it
takes effect immediately or on a specified date
if it reasonably considers
it
necessary for the variation to take effect immediately (or on the date specified),
having regard to the ground on which it is exercising its own-initiative powers.

28.
EG 8.3.2 provides the circumstances in which the Authority will consider exercising
its own initiative power as a matter of urgency, including where the information
available to it indicates serious concerns about the firm or its business that need to
be addressed immediately (EG 8.3.2(1)).

29.
EG 8.3.3 sets outs out a non-exhaustive list of factors the Authority will consider in
exercising when assessing ‘serious concerns’.
EG 8.3.3(1) includes circumstances
where information indicates a significant loss, risk of loss or other adverse effects
for consumers, where action is necessary to protect their interests. EG 8.3.3(2)
includes circumstances where information indicates a firm’s conduct has put it at
risk of being used for the purposes of financial crime, or of being otherwise
involved in crime.

30.
EG 8.3.4 sets out the factors which will determine whether the urgent exercise of
the
Authority’s
own-initiative
power
is
an
appropriate
response
to
serious
concerns, including: the extent of any loss, or risk of loss, or other adverse effect
on consumers (EG 8.3.4(1)); the risk that the firm’s conduct or business presents
to the financial system and to confidence in the financial system (EG 8.3.4(7));
and the firm’s conduct including the firm’s compliance culture and steps it has
taken or is taking to address the issue (EG 8.3.4(8)).

31.
EG 8.5.3 states that, the Authority. may need to consider whether it should first
use its own-initiative powers to vary a firm’s Part 4A permission before going on to
cancel it. Amongst other circumstances, the Authority may use this power where it
considers it needs to take immediate action against a firm because of the urgency
and seriousness of the situation.

32.
EG8.5.4 specifies that where this situation occurs, the Authority may first vary the
firm’s Part 4A permission so that there is no longer any regulated activity for which
the firm has a Part 4A permission. If it does this, the Authority then has a duty to
cancel the firm’s Part 4A permission, once it is satisfied that it is no longer
necessary to keep the Part 4A permission in force.

ANNEX B

REPRESENTATIONS

1.
Perry Prowse’s representations (in italics) and the Authority’s conclusions in respect
of them are set out below.

Perry Prowse responded to the concerns raised by the Authority in an email sent on 7
August 2019

2.
Perry Prowse sent an email to the Authority on 7 August 2019, in which it provided
answers to the three main concerns raised by the Authority.
The Authority did not
respond to that email, so Perry Prowse presumed that it had satisfactorily answered
the Authority’s concerns.

3.
The email sent by Perry Prowse on 7 August 2019 was considered by the Authority
when it decided to issue the First Supervisory Notice.
In reaching that decision, the
Authority took into account evidence provided by Company A and by the EQS, which
undermined important aspects of the information provided by Perry Prowse.
The
Authority therefore took, and remains of, the view that the email of 7 August 2019
did not adequately provide the information required by the Authority.

Unauthorised entries on the Motor Insurance Database allegation

4.
The allegation regarding unauthorised entries on the Motor Insurance Database was
partly dealt with by a letter sent by Perry Prowse to Company A on 27 March 2019.
This was then followed up by a subsequent letter to Company A on 6 August 2019.
No response has been received from Company A.

5.
The issue with the unauthorised entries was caused by a temporary junior employee,
who no longer works at Perry Prowse,
who had updated the Motor Insurance
Database in error.
Perry Prowse accepts that the training given to employees at that
time was inadequate.
Perry Prowse does not believe other customers have been
affected by this issue, but has not been able to investigate as it no longer has access
to the Motor Insurance Database or to information on customers’ policies.

6.
In any case, Perry Prowse has now ceased to offer any motor business, due to the
heavy administrative burden it placed on the firm.
There is therefore no possibility of
the problem recurring.

7.
Company A first informed Perry Prowse on 7 November 2018 that it appeared that
Perry Prowse had made unauthorised entries on the Motor Insurance Database, and
asked Perry Prowse for a response to the issues it had identified. Despite several
reminders from Company A, Perry Prowse did not provide a response until 27 March
2019, which it acknowledged at the time only partly addressed the issues raised by
Company A.
Company A informed the Authority on 15 October 2019 that it had not
heard from Perry Prowse since 1 April 2019, when Perry Prowse informed it that a
further letter addressing the other points made by Company A would follow within
the next 24 hours.
On 16 October 2019, Perry Prowse sent an email to the Authority
and Company A attaching a screenshot of a Microsoft Word version of a letter to

Company A dated 6 August 2019, and it subsequently sent emails to the Authority
and Company A attaching a further copy of that letter.
On the evidence available to
it, the Authority cannot be satisfied that the letter had previously been sent to
Company A.

8.
Moreover, the letters of 27 March 2019 and 6 August 2019 fail to address in full all of
the issues raised in Company A’s letter of 7 November 2018, as Perry Prowse was
required to do.
For example, Perry Prowse did not provide details of the insurance
companies affected, as requested by Company A in order that it could redirect claims
accordingly.
Further, the
letters
indicate that
Perry
Prowse
has
not made
a
reasonable attempt to carry out a proper investigation of this issue, despite it clearly
being a matter which could potentially lead to harm being caused to consumers.
As
a result of these failures, the Authority cannot be satisfied that, were Perry Prowse
permitted
to
carry
on
regulated
activities,
it
would
conduct
its
affairs
in
an
appropriate manner, having regard in particular to the interests of consumers.

9.
The fact that Perry Prowse has now ceased to offer any motor business does not
address the Authority’s concerns. Perry Prowse intends to continue to sell other
insurance policies, including home insurance, and, as
is set out in this Second
Supervisory Notice, Perry Prowse has failed to provide information to the Authority
which adequately addresses a complaint regarding the sale of a home insurance
policy to consumers.
The Authority therefore cannot be satisfied that, by ceasing to
offer motor business, Perry Prowse would not present a risk to consumers.
Further,
Perry Prowse has failed to address adequately the issues raised by the Authority and
has failed to be open and cooperative with the Authority, so it appears to the
Authority that Perry Prowse is not satisfying the suitability Threshold Condition.

Complaint by consumers

10. The complaint by the consumers has been dealt with by the EQS.
Perry Prowse
believes the consumers are happy with the outcome suggested by the EQS and that
the issue is now close to resolution.
The situation arose because Perry Prowse
correctly arranged an insurance policy for the consumers, but the premium payment
to the underwriters was missed in error, seemingly because of issues with the IT
system, and the underwriters subsequently treated the policy as not taken up.

11. Perry Prowse stated that this issue has been dealt with by the FOS and that it would
provide copies of the latest correspondence.
However, the Authority has been
informed by the FOS that a final decision regarding the complaint has still to be
made, and Perry Prowse has not provided the promised copies of its correspondence
with the FOS.
Further, Perry Prowse has not explained to the Authority the action it
has taken, or intends to take, to ensure that this issue would not be repeated in
future.
Given that it appears that the IT system issues have not been completely
resolved, the Authority is not satisfied that Perry Prowse has dealt with this issue
appropriately or that, were Perry Prowse permitted to carry on regulated activities,
consumers would not be at risk of purchasing insurance policies without actually
obtaining any or adequate cover.

IT system issues

1 2 . The IT system issues, which related to a dispute with the supplier of the firm’s
software system, have been resolved.
Perry Prowse believes that no consumers
were directly affected by these issues as this system is only used for back office
functions, all of which the firm has been able to carry out without the system.
Any
insurance quotations
which Perry Prowse has provided to customers have not
required this system and have been dealt with through insurers’ own systems.

13, The issues with the IT system had an effect on the completion and submission of the
regulatory returns.
The returns were completed in time in draft form, but the
submission was delayed due to the unavailability of certain management figures as a
result of the IT system issues.
The regulatory returns have now been submitted.
This is a one-off issue and there have never previously been any delays with the
submission ofPerry Prowse’s regulatory returns.

14.Although Perry Prowse has stated that the IT system issues have been resolved, it
appears from the information it has provided to the Authority that there are ongoing
issues connected to the IT system which continue to cause difficulties for the firm.
These include the firm’s ability to ensure that consumers are not without cover and
so the IT system issues have at least indirectly affected consumers.
Perry Prowse
has also acknowledged that it does not have appropriate processes in place and that
the IT system issues have prevented it from providing all information required by the
Authority. This includes information regarding when the issues came to light and the
extent of them.
Accordingly, the Authority is not yet satisfied that the IT system
issues have been completely resolved, and considers that the information provided
by Perry Prowse regarding its ongoing difficulties indicates that Perry Prowse does
not have adequate resources, processes, systems and controls in place to ensure
that the firm pays proper regard to the interests of consumers and is not ready,
willing and organised to comply with regulatory requirements.

15.The regulatory returns were not submitted prior to the issue of the First Supervisory
Notice.
Although
they
have
now
been
submitted,
for the
reasons
described
elsewhere in this Notice, the Authority remains of the view that Perry Prowse is not
satisfying the Threshold Conditions.

Background to issues and recent business changes

16. In December 2017, Perry Prowse ceased being a member ofa broker network due to
the high membership costs.
This had the unforeseen effect that some insurers
decided not to continue conducting business with Perry Prowse, which led to an
immense amount of additional work replacing renewals for policyholders.
At the
same time, a senior member of staff left Perry Prowse, taking certain clients with
him.
He has not been replaced, which has led to more work for Perry Prowse’s sole
director, who has also had to deal with difficult personal issues.
In addition, the
broker network held back £30,000 owed to Perry Prowse, half of which was not paid
until recently whilst the remainder remains unpaid.
The combination of all these
factors has had a detrimental effect on the business, including being the underlying
cause of the issues highlighted in the First Supervisory Notice, which are only now
being overcome

1 7 . Various changes have been implemented in Perry Prowse ‘s business, including the
relocation of the firm’s offices, a change to its telephone system and changes to its
IT system.
These changes should make Perry Prowse more efficient and accessible
and should ensure that the problems previously encountered do not arise again.
As
a result of the remedial actions taken, Perry Prowse will not cause the Authority any
further concerns and is a fit and proper person, but is also prepared to accept closer
monitoring by the Authority.

18.The background issues laced by Perry Prowse might partly explain why it has lailed
to deal appropriately with some ol the issues it has faced since it ceased being a
member of the broker network, but they do not excuse or mitigate its failure to
satisfy the Threshold Conditions.
Perry Prowse’s failure to be open and cooperative
with the Authority over such an extended period is of particular concern, given that
the Authority required
information
to assist
it
in
assessing
potential
harm
to
consumers.

19.The remedial actions taken by Perry Prowse do not satisfy the Authority that, were
Perry Prowse permitted to carry on regulated activities, it could have confidence that
consumers would not be at risk from the way Perry Prowse conducted its affairs and
that
Perry
Prowse would
have sufficient resources and
appropriate
processes,
systems and controls in place to be able to comply with its regulatory requirements.
The Authority has considered but does not agree that its concerns would be resolved
by closer monitoring of Perry Prowse, especially in the light of Perry Prowse’s record
of inadequate correspondence with the Authority.