FINAL NOTICE

ACTION

1.
For the reasons given in this notice, the Authority has hereby imposed on Wayne
Anthony Redgrave a financial penalty of £38,600.

2.
Mr Redgrave agreed to settle at an early stage of the Authority’s investigation and
therefore qualified for a 30% (stage 1) discount under the Authority’s executive
settlement procedures. Were it not for this discount, the Authority would have
imposed a financial penalty of £55,200.

SUMMARY OF REASONS

3.
Mr Redgrave is an experienced broker and was a director, controller and the
principal decision maker at Bar Professions Limited (“Bar”). He was personally
responsible during the period from 14 March 2013 to 23 September 2013 (“the
Relevant Period”) for Bar’s negligent failure to conduct adequate due diligence
concerning insurance arrangements for policyholders and for sending a letter to
over 1,300 of Bar’s customers inducing them to enter into contracts of insurance
on the basis of materially inaccurate and misleading information.

4.
Bar, a specialist London based insurance broker, operated two binding authority
agreements (“BAAs”), which were designed to provide compulsory professional
indemnity insurance for the 2012/13 and 2013/14 underwriting years for
approximately 1,300 solicitors across the UK. Without valid professional indemnity
insurance, those firms would have been unable to practise.

5.
The two BAAs were written through the same London based managing general
agent, Aderia UK Limited (“Aderia”), but were insured, at different times, with

two European insurers, Balva Insurance Company AAS (“Balva”) and Berliner
Versicherung Aktiengesellschaft (“Berliner”).

6.
In April 2013, Balva’s operating licence was suspended by its home state
regulator, thereby exposing UK policy holders, including those solicitors insured
through the first of the two BAAs with Aderia, to the risk that no valid insurance
was in place.

7.
In an attempt to put in place replacement insurance cover for policy holders, Bar,
acting through Mr Redgrave, entered into a second BAA with Aderia. This BAA
purported to give Bar authority to write solicitors’ professional indemnity
insurance on behalf of Berliner up to an annual premium income limit of £50
million.

8.
At the time that Bar entered into the second BAA with Aderia, Mr Redgrave had
concerns about a number of matters, including the level of the premium income
limit available. Mr Redgrave also had reasonable grounds to question the
position, standing and authority of Mr Shay Reches (“Mr Reches”), the individual
who controlled and was the principal decision maker at Aderia, but was not
approved by the Authority.

9.
These grounds for concern should have caused Mr Redgrave to scrutinise more
carefully the nature of Bar’s business relationship with Mr Reches, Aderia and
Berliner and to exercise greater due diligence concerning the arrangement.
Instead, between late May and early June 2013, Mr Redgrave sent a letter to each
of Bar’s solicitor customers, numbering over 1,300, which stated that “alternative
arrangements” had been made with Berliner and inviting them to accept
replacement insurance on the basis set out in the letter.

10.
Over 900 solicitors accepted the replacement cover on those terms. The letter,
which was drafted and signed by Mr Redgrave, was materially inaccurate and
misleading in that the underlying managing general agency agreement (“MGA
Agreement”) was neither signed nor effective at the time the letter was sent and
the premium income limit (€5 million), ultimately agreed by Berliner, would have
been insufficient to provide the cover offered in the letter.

11.
The managing general agency agreement between Berliner and Aderia (“the
Berliner MGA Agreement”) was finalised and signed some six weeks after the
letter was sent and was annulled on 23 September 2013. As a consequence, over
900 solicitors, originally insured through the second BAA, were required to seek
new compulsory professional indemnity insurance from different providers or
cease practising.

12.
During the Relevant Period, Mr Redgrave breached Statement of Principle 6, in
that he did not exercise due skill, care and diligence by failing to ensure that Bar,
prior to sending the letter, had:

a)
carried out sufficient and adequate due diligence to ensure that the Berliner
MGA Agreement, underlying the second BAA, was in place between Berliner
and Aderia, and there was a sufficient premium income limit to meet the
proposed cover, when he had reason to doubt that this was the case;

b)
taken reasonable care to ensure that the advice to solicitor customers to
cancel their current policies with Balva and take out the cover with Berliner
was suitable, in breach of ICOBS 5.3.1R; and

c)
communicated information to Bar’s customers in a way which was clear, fair
and not misleading.

13.
Regulatory action in relation to this matter underlines the need for authorised
firms and approved persons in the distribution chain to ensure that adequate
steps are taken to satisfy themselves that robust and effective arrangements are
in place to mitigate risks to customers. This action supports the Authority’s
operational objectives of securing an appropriate degree of protection for
consumers and protecting and enhancing the integrity of the UK financial system.

14.
This action recognises that failure by one or more firms to comply with regulatory
requirements that safeguard consumers and/or protect market integrity can
distort competition. Tackling conduct failures, such as those detailed in this Final
Notice, in order to ensure firms act with integrity, implement appropriate systems
and controls, and arrange adequate protection for client assets, therefore
supports the Authority’s statutory objective to promote effective competition in
the interests of consumers.

DEFINITIONS

15.
The definitions below are used in this Final Notice.

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

“Aderia” means Aderia UK Limited, now known as II&B UK Limited and previously
known as JCM Insurance Brokers Limited and JCM Brokers Ltd.

“Apro” means Apro Management Limited, Bar’s AR.

“AR” means appointed representative.

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

“BAA” means a binding authority agreement, an agreement whereby an insurer
(or its MGA) delegates underwriting authority to another party known as the
Coverholder (often an insurance broker) which will act on behalf of the insurer to
the extent permitted by the agreement, which frames the responsibilities,
entitlements and obligations of the parties.

“the First BAA” means a BAA between Aderia and Bar signed on 20 February 2013
governing the marketing and sale of Solicitors’ PII policies underwritten by Balva.

“the Second BAA” means a BAA between Aderia and Bar signed on 17 May 2013
purportedly governing the marketing and sale of Solicitors’ PII policies
underwritten by Berliner.

“Balva” means Balva Insurance Company AAS, a Latvian insurer and a Passported
Firm.

“Bar” means Bar Professions Limited, a UK-based Coverholder.

“Berliner” means Berliner Versicherung Aktiengesellschaft, a German insurer and
a Passported Firm.

“the Berliner MGA Agreement” means the MGA Agreement, which was signed
between Berliner and Aderia on 15 July 2013, and took effect retrospectively from
1 June 2013.

“Coverholder” means a company (often an insurance broker) authorised to enter
into contracts of insurance, on behalf of an insurer in accordance with the terms
of a BAA.

“DEPP” means the Authority’s Decision Procedure and Penalties Manual.

“EG” means the Enforcement Guide.

“the FCMC” means Financial and Capital Market Commission, the Latvian
regulatory authority, also known as Finanšu un Kapitāla Tirgus Komisija (the
FKTK).

“financial promotion” means an invitation or inducement to engage in investment
activity that is communicated in an authorised firm’s course of business.

“ICOBS” means Insurance Conduct of Business Sourcebook.

“MGA” means a managing general agent, an insurance intermediary which has
contractual authority from one or more insurers to provide underwriting services
on their behalf.

“MGA Agreement” means a contractual agreement giving an MGA contractual
authority from one or more insurers to provide underwriting services, including
negotiating and entering into binding authorities with Coverholders for the sale
and fulfilment of policies, on behalf of the insurers.

“Mr Reches” or “Shay Reches” means Shay Jacob Reches.

“Mr Redgrave” means Wayne Anthony Redgrave.

“the Offer Letter” means the letter sent by Apro in late May/early June 2013 to
most of Bar’s and Apro’s Solicitor Customers or the brokers who introduced those
customers to Bar.

“Passported Firm” means a European Economic Area firm exercising its right to
conduct activities and services regulated under EU legislation in the UK on the
basis of its authorisation in its European Economic Area home state.

“PII” means professional indemnity insurance

“Relevant Period” means the period from 14 March 2013 to 23 September 2013.

“the renewal cover” means the policy which was intended to automatically renew
for the 2013/2014 underwriting year.

“the replacement cover” means the new policy, which was intended to be
incepted on 1 June 2013 to replace the previous cover for the 2012/13
underwriting year.

“RPPD” means the Regulatory Guide in the FCA Handbook named The
Responsibilities of Providers and Distributors for the Fair Treatment of Customers.

“Solicitor Customers” means Bar’s solicitor customers, numbering approximately
1,300.

“Solicitors’ PII” means professional indemnity insurance provided to solicitors.

“Statement of Principle” means one of the Authority’s Statements of Principle and
Codes of Practice for Approved Persons.

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

FACTS AND MATTERS

16.
Bar was a London based specialist insurance broker. Its principle business was as
a Coverholder, authorised under the Act to undertake general insurance
mediation activities. With the authority, or purported authority, of insurers (Balva
and Berliner), and through the BAAs it held with their MGA (Aderia), Bar entered
into contracts of insurance, predominantly PII for solicitors in England and Wales.
Bar went into administration on 22 October 2014 and liquidation on 29 January
2015.

17.
Mr Redgrave was a director, the controller and 90% shareholder at Bar during the
Relevant Period. He was the main decision maker and held ultimate responsibility
for Bar’s actions. Mr Redgrave ceased to be a director of Bar and an approved
person on 23 October 2014.

18.
Bar arranged PII cover for approximately 1,300 solicitors for the 2012/13
underwriting year with Balva through the First BAA.

19.
Aderia had made Bar and Mr Redgrave aware on 14 March 2013 that Balva was
required by the FCMC to temporarily cease writing various lines of business,
including Solicitors’ PII business. During the following three months, Balva’s
licence to write new business in the UK was formally suspended and then
withdrawn by the FCMC. As a consequence, from March 2013 onwards, Bar and
Mr Redgrave discussed and had then made plans with Aderia to replace Balva’s
cover. Mr Reches, acting through Aderia, introduced Berliner to Bar in March 2013
as a possible replacement for Balva, and discussions about this arrangement took
place between Bar, including Mr Redgrave, Mr Reches and Aderia. This culminated
in Bar and its AR, Apro, entering into the Second BAA with Aderia on behalf of
Berliner on 17 May 2013. The Second BAA was signed by Mr Redgrave on behalf
of Bar and Apro.

20.
The terms of the Second BAA provided that Bar had authority to write Solicitors’
PII business on behalf of Berliner up to an annual premium income limit of £50
million.

21.
Both before and after it entered into the Second BAA, Bar and Mr Redgrave had
grounds for concern as to whether the Berliner MGA Agreement had been
concluded, signed and was in effect, as well as what premium income limits were
in place for business written on behalf of Berliner. Bar and Mr Redgrave asked
questions of Aderia in respect of those grounds for concern, but did not receive
satisfactory answers to those questions before entering into the Second BAA, and
did not see the substantive provisions of the signed Berliner MGA Agreement until
after 15 July 2013.

Due diligence

22.
Under ICOBS 2.5.3G(2), Bar would have been entitled to rely on information
provided to it in writing (such as the Second BAA and the written assurances) by
an unconnected authorised person (such as Aderia) unless it was aware or ought
reasonably to have been aware of any fact that would give reasonable grounds to
question the accuracy of that information. Bar had reasonable grounds to
question the accuracy of information, in particular the provisions of the Berliner
MGA Agreement, under which it held its binding authority. It did not receive
satisfactory responses when it enquired about the provisions of the Berliner MGA
Agreement. In the circumstances, Bar and Mr Redgrave should have undertaken
further and more detailed enquiries in order to satisfy their concerns.

23.
The grounds for concern that Bar raised with Aderia concerning the Berliner MGA
Agreement prior to the Offer Letter being sent in late May/early June 2013
included whether:

a)
the Berliner MGA Agreement was in place and had been signed;

b)
Berliner’s premium income limit was sufficient to enable Bar to write the
level of business for which the Second BAA made provision; and

c)
Berliner was appropriately capitalised.

24.
Prior to sending the Offer Letter, Bar had taken some steps through Aderia to
satisfy itself that the Berliner MGA Agreement, and other arrangements, were in
place and effective for the purposes of the Second BAA. However, the steps that
Bar took were inadequate in the following ways:

a)
on a number of occasions, prior to the Offer Letter being sent, Bar asked
Aderia to provide a copy of the signed Berliner MGA Agreement.
Notwithstanding those requests, Bar did not see a copy of the signed
Berliner MGA Agreement until after 15 July 2013 following intervention by
the Authority and over six weeks after sending the Offer Letter;

b)
Bar made a number of requests from March 2013 onwards to meet the CEO
of Berliner in order to discuss the PII arrangements. That meeting only took
place in July 2013 following intervention by the Authority; and

c)
Bar had concerns about Berliner’s reinsurance arrangements and pressed
Aderia for information between April and May 2013, but only received
details of a draft reinsurance slip on 23 June 2013.

25.
Throughout the Relevant Period, Mr Redgrave and Bar’s dealings with Aderia were
conducted principally through Mr Reches. This should have led Mr Redgrave and
Bar to conduct adequate due diligence in order to satisfy themselves concerning
the fitness and propriety of the individual acting on behalf of Aderia. Among the
facts and matters (which were known, or would reasonably have been known, to
Mr Redgrave and Bar), which should have led Mr Redgrave and Bar to make
further enquiries, were that:

a)
Mr Reches was the controller and majority owner of Aderia but was not
approved by the Authority;

b)
Mr Reches was attempting to purchase shares in Berliner, which was a
potential provider of PII to Bar’s Solicitor Customers, creating a potential
conflict of interest for Mr Reches;

c)
Mr Reches, together with the companies controlled by him, was the subject
of certain restrictions imposed by overseas regulators concerning the
carrying out of unlicensed insurance business, which might adversely affect
his status and standing as a participant in any UK regulated activity; and

d)
Bar had recently experienced difficulties with Balva, which, like Berliner, was
a European insurer, introduced to Bar by Mr Reches and over which Bar
believed that Mr Reches had sought to exert control and hold shares.

26.
The specific grounds for concern, outlined above, regarding the fitness and
propriety of Mr Reches was a further reason for Mr Redgrave and Bar to conduct
greater due diligence concerning the validity and effectiveness of the
arrangements being put in place on behalf of its Solicitor Customers prior to
sending the Offer Letter, which, as a result, contained inaccurate and misleading
information.

The role of Apro

27.
Mr Redgrave notified the Authority in February 2011 of the appointment of Apro
as Bar’s AR. Bar did not, however, have an AR agreement with Apro. Bar and
Apro had common directors, including Mr Redgrave. The original intention was
that Bar would undertake the broking side of the business with Apro effectively
acting as a separate underwriter. However, in time, the distinction between Bar
and Apro became blurred. Bar and Apro acted as one entity with the same
offices, management and directors.

28.
Apro’s role was effectively to act as a vehicle to facilitate liaison with wholesale
brokers, who would not want to deal with a rival broker (Bar) directly, which was
why the Offer Letter was sent on Apro-headed paper. However, in effect, there
was no distinction between Bar and Apro.

29.
Bar was, in any event, responsible for communicating and approving financial
promotions sent by its AR, Apro in accordance with ICOBS 1.1.1R and ICOBS
2.2.2R. Mr Redgrave should have taken reasonable steps to ensure that
communications or financial promotions were clear, fair and not misleading as he
was the main decision maker and ultimately responsible for Bar and Apro; he also
drafted and signed the Offer Letter.

30.
Bar, through its AR, Apro, sent the Offer Letter between late May/early June 2013
to most of its Solicitor Customers or to the brokers who had introduced those
customers to Bar. The Offer Letter, among other things, stated that:

a)
Balva had been “temporarily suspended”;

b)
Bar/Apro had made “alternative arrangements” with Berliner;

c)
Berliner had “agreed to honour all quotations previously offered by Balva
securing all discounted premiums accepted last year on either the 1 or 2
year deal”;

d)
Bar/Apro remained “very confident” that Balva’s “position will change”;

e)
Bar/Apro was “suggesting [to its Solicitor Customers that] the current Balva
policy will be cancelled from 1st June and a new policy with Berliner be
incepted on the same day to run continuously to 30th September 2013”; and

f)
Bar/Apro would “be including an automatic extension to the policy effective
1st October 2013 to either 30th September 2014 or 30th April 2015”.

31.
Over 900 of Bar’s Solicitor Customers agreed to this arrangement.

The Berliner MGA Agreement

32.
At the time that Bar entered into the Second BAA with Aderia on 17 May 2013,
and sent the Offer Letter, Berliner had not signed the Berliner MGA Agreement
authorising Aderia to delegate authority for Bar and Apro to write Solicitors’ PII on
behalf of Berliner. The Berliner MGA Agreement was not agreed and signed until
15 July 2013 – the day before a short notice visit from the Authority was due to
take place and approximately six weeks after the Offer Letter was sent.

33.
The Berliner MGA Agreement stated that Berliner would provide insurance up to
an annual premium income limit of only €5 million whereas the Second BAA
purported to provide Bar with the facility to write business on behalf of Berliner
up to an annual premium income limit of £50 million. As a consequence, the
actual premium income limit for 2013 of €5 million would have been exhausted by
the replacement cover for the 2012/13 year alone (and which was due to expire
on 30 September 2013); there would have been no underwriting capacity
available for the renewal cover offered in the Offer Letter for the 2013/14 year.

FAILINGS

34.
The regulatory provisions relevant to this Final Notice are referred to in Annex A.

35.
Statement of Principle 6 states that an approved person performing an
accountable significant-influence function must exercise due skill, care and
diligence in managing the business of the firm for which he is responsible in his
accountable function.

36.
Mr Redgrave breached Statement of Principle 6, by failing to exercise due skill,
care and diligence at Bar and Apro by signing and sending the Offer Letter, prior
to ensuring each aspect of the Offer Letter was correct. In particular, he failed to
ensure that:

a)
the Berliner MGA Agreement was in place, and that there was a sufficient
premium income limit to meet the proposed renewal cover, when Bar had
reason to doubt that was the case. Bar had made enquiries in respect of its
doubts, but the reassurances received did not satisfy those doubts, as set
out in paragraphs 23 and 24;

b)
Bar took reasonable care to ensure that the advice to the Solicitor
Customers to cancel their current policies with Balva and take out the
replacement and renewal cover with Berliner was suitable, in breach of
ICOBS 5.3.1R;

c)
Bar satisfied itself in relation to facts about which it was aware, or should
have been aware, in respect of Mr Reches as set out in paragraphs 25 and
26; and

d)
Bar communicated information to the Solicitor Customers in the financial
promotion within the Offer Letter, which Mr Redgrave drafted and signed, in
a way which was clear, fair and not misleading, in breach of ICOBS 2.2.2R,
in that the Solicitor Customers were led to believe that:

i)
Bar/Apro had made arrangements with Berliner for it to guarantee
replacement cover for the existing Balva policies, which in fact was not
the case; and

ii)
PII cover would automatically be renewed when, in fact, Bar/Apro had
no authority to arrange this business.

37.
The Offer Letter was materially inaccurate and misleading and Solicitor
Customers, seeking replacement and renewal PII cover on the basis proposed by
the Offer Letter, would have been at risk of being uninsured or of having
otherwise legitimate claims rejected.

38.
Mr Redgrave and Bar should have undertaken further due diligence in relation to
Berliner, Mr Reches and the provisions of the Berliner MGA Agreement under
which the Second BAA was granted, in order to give it reasonable grounds to be
satisfied in respect of its concerns before sending the Offer Letter. Mr Redgrave
should have also ensured that each aspect of the Offer Letter was correct, before
it was sent.

SANCTION

Financial penalty

39.
The Authority’s policy for imposing a financial penalty is set out in Chapter 6 of
DEPP. In respect of conduct occurring on or after 6 March 2010, the Authority
applies a five-step framework to determine the appropriate level of financial
penalty. DEPP 6.5B sets out the details of the five-step framework that applies in
respect of financial penalties imposed on individuals in non-market abuse cases.

40.
The application of the Authority’s penalty policy is set out in Annex B to this
Notice in relation to Mr Redgrave’s breach of Statement of Principle 6.

41.
In determining the financial penalty to be attributed to Mr Redgrave’s misconduct,
the Authority had particular regard to the following matters as applicable:

a)
the need for credible deterrence;

b)
the nature, seriousness and impact of the breach;

c)
the risk of consumer detriment as a result of Mr Redgrave’s failings; and

d)
any applicable settlement discount for agreeing to settle at an early stage of
the Authority’s investigation.

42.
The Authority has therefore imposed a financial penalty of £38,600.

PROCEDURAL MATTERS

Decision maker

43.
The decision which gave rise to the obligation to give this Notice was made by the
Settlement Decision Makers.

44.
This Final Notice is given under, and in accordance with, section 390 of the Act.

Manner of and time for Payment

45.
The financial penalty must be paid in full by Mr Redgrave to the Authority by no
later than 1 February 2017.

If the financial penalty is not paid

46.
If all or any of the financial penalty is outstanding on 1 February 2017, the
Authority may recover the outstanding amount as a debt owed by Mr Redgrave
and due to the Authority.

47.
Sections 391(4), 391(6) and 391(7) of the Act apply to the publication of
information about the matter to which this notice relates. Under those provisions,
the Authority must publish such information about the matter to which this notice
relates as the Authority considers appropriate. The information may be published
in such manner as the Authority considers appropriate. However, the Authority
may not publish information if such publication would, in the opinion of the
Authority, be unfair to you or prejudicial to the interests of consumers or
detrimental to the stability of the UK financial system.

48.
The Authority intends to publish such information about the matter to which this
Final Notice relates as it considers appropriate.

Authority contacts

49.
For more information concerning this matter generally, contact Paul Howick at the
Authority (direct line: 020 7066 7954; or e-mail paul.howick@fca.org.uk).

Financial Conduct Authority, Enforcement and Market Oversight Division

ANNEX A

RELEVANT STATUTORY AND REGULATORY PROVISIONS

RELEVANT STATUTORY PROVISIONS

1.
The Authority’s statutory objectives, set out in section 1B(3) of the Act, includes
the consumer protection objective.

2.
Section 66 of the Act provides that the Authority may take action against a
person if it appears to the Authority that he is guilty of misconduct and the
Authority is satisfied that it is appropriate in all the circumstances to take action
against him. A person is guilty of misconduct if, while an approved person, he
has failed to comply with a statement of principle issued under section 64 of the
Act, or has been knowingly concerned in a contravention by a relevant authorised
person of a relevant requirement imposed on that authorised person.

RELEVANT REGULATORY PROVISIONS

Statements of Principle and Code of Practice for Approved Persons

3.
The Authority’s Statements of Principle and Code of Practice for Approved Persons
(APER) have been issued under section 64 of the Act.

4.
Statement of Principle 6 states that:

“An approved person performing an accountable significant-influence function
must exercise due skill, care and diligence in managing the business of the firm
for which he is responsible in his accountable function.”

5.
The Code of Practice for Approved Persons sets out descriptions of conduct which,
in the opinion of the Authority, do not comply with a Statement of Principle. It
also sets out factors which, in the Authority’s opinion, are to be taken into
account in determining whether an approved person’s conduct complies with a
Statement of Principle.

DEPP

6.
Chapter 6 of DEPP sets out the Authority’s statement of policy with respect to the
imposition and amount of financial penalties under the Act.

Insurance Conduct of Business Sourcebook (ICOBS)

7.
ICOBS applied to Bar throughout the Relevant Period. Chapter 1 of ICOBS sets
out the Authority’s rules and guidance on the Application of ICOBS; Chapter 2 of
ICOBS sets out the Authority’s rules and guidance on General Matters; and
Chapter 5 of ICOBS sets out the Authority’s rules and guidance on Identifying
client needs and advising.

8.
ICOBS 1.1.1R provides:

“This sourcebook applies to a firm with respect to the following activities carried
on in relation to a non-investment insurance contract from an establishment
maintained by it, or its appointed representative, in the United Kingdom:

(1)
an insurance mediation activity;

(2)
effecting and carrying out contracts of insurance;

(3)
managing the underwriting capacity of a Lloyd's syndicate as a
managing agent at Lloyd's;

(4)
communicating or approving a financial promotion;

and activities connected with them.”

9.
ICOBS 2.2.2R provides:

“When a firm communicates information, including a financial promotion, to a
customer or other policyholder, it must take reasonable steps to communicate it
in a way that is clear, fair and not misleading.”

10.
ICOBS 2.5.3G provides:

“(1) Where it is compatible with the nature of the obligation imposed by a

particular rule and with the Principles, in particular Principles 1 (Integrity), 2
(Skill, care and diligence) and 3 (Management and control), firms may rely
on third parties in order to comply with the rules in this sourcebook.

(2) For example, where a rule requires a firm to take reasonable steps to

achieve an outcome, it will generally be reasonable for a firm to rely on
information provided to it in writing by an unconnected authorised person or
a professional firm, unless it is aware or ought reasonably to be aware of
any fact that would give reasonable grounds to question the accuracy of
that information. However, a firm cannot delegate its responsibility under
the regulatory system. For example, where a rule imposes an absolute
obligation (such as the requirement for an insurer to handle claims promptly
and fairly) although a firm could use outsourcing arrangements to fulfil its
obligation, it retains regulatory responsibility for achieving the outcome
required.”

11.
ICOBS 5.3.1R provides:

“A firm must take reasonable care to ensure the suitability of its advice for any
customer who is entitled to rely upon its judgment.”

Relevant Handbook Regulatory Guides

The Responsibilities of Providers and Distributors for the Fair Treatment
of Customers (RPPD)

12.
The RPPD sets out the FCA’s view on what the combination of Principles for
Businesses and detailed rules require respectively of providers and distributors in
certain circumstances to treat customers fairly.

“In the area of financial promotions, Principles 3, 6 and 7 are particularly
relevant. In particular, a firm:

(1) should have in place systems and controls to manage effectively the risks

posed by financial promotions;

(2) in passing on a promotion created by a provider, must act with due skill,

care and diligence. A firm will not contravene the financial promotions rules
where it communicates a promotion produced by another person provided
the firm takes reasonable care to establish that another firm has confirmed
compliance with the relevant detailed rules, amongst other matters”.

The Enforcement Guide (EG)

14.
EG sets out the Authority’s approach to exercising its main enforcement powers
under the Act.

15.
Chapter 7 of EG sets out the Authority’s approach to exercising its power to
impose a financial penalty.

ANNEX B

PENALTY ANALYSIS

1.
The Authority’s policy for imposing a financial penalty is set out in Chapter 6 of
DEPP. In respect of conduct occurring on or after 6 March 2010, the Authority
applies a five-step framework to determine the appropriate level of financial
penalty. DEPP 6.5B sets out the details of the five-step framework that applies in
respect of financial penalties imposed on individuals in non-market abuse cases

2.
The application of the Authority’s penalty policy is set out below in relation to Mr
Redgrave’s breach of Statement of Principle 6.

Step 1: disgorgement

3.
Pursuant to DEPP 6.5B.1G, at Step 1, the Authority seeks to deprive an individual
of the financial benefit derived directly from the breach where it is practicable to
quantify this.

4.
The Authority has not identified any financial benefit that Mr Redgrave derived
directly from the breach.

5.
Step 1 is therefore £0.

Step 2: the seriousness of the breach

6.
Pursuant to DEPP 6.5B.2G, at Step 2, the Authority determines a figure that
reflects the seriousness of the breach. That figure is based on a percentage of
the individual’s relevant income. The individual’s relevant income is the gross
amount of all benefits received by the individual from the employment in
connection with which the breach occurred, and for the period of the breach.

7.
The period of Mr Redgrave’s breach was from April to September 2013. As the
breach lasted less than a year, Mr Redgrave’s relevant income will be the gross
amount received during the 12 months preceding the end of the breach; that is,
during the period September 2012 to September 2013 (DEPP 6.5B.2G(2)). The
Authority considers Mr Redgrave’s relevant income for this period to be £552,669.

8.
In deciding on the percentage of the relevant income that forms the basis of the
Step 2 figure, the Authority considers the seriousness of the breach and chooses
a percentage between 0% and 40%. This range is divided into five fixed levels
which represent, on a sliding scale, the seriousness of the breach: the more
serious the breach, the higher the level. For penalties imposed on individuals in
non-market abuse cases there are the following five levels:

Level 1 – 0%
Level 2 – 10%
Level 3 – 20%
Level 4 – 30%
Level 5 – 40%


9.
In assessing the seriousness level, the Authority takes into account various
factors which reflect the impact and nature of the breach, and whether it was
committed deliberately or recklessly. DEPP 6.5B.2G(12) lists factors likely to be
considered ‘level 4 or 5 factors’. Of these, the Authority considers the following
factor to be relevant:

a)
The breach caused a significant loss or risk of loss to individual consumers,
investors or other market users (DEPP 6.5B.2(G)(12)(a): Had Bar’s
customers accepted the proposals to cancel and replace their policies, given
that Bar was not in a position to write the replacement and renewal policies,
there was a risk of the customers being uninsured or of having otherwise
legitimate claims rejected. Due to the withdrawal of Berliner, none of the
replacement and renewal policies were actually put in place, so there has
been little or no actual loss to Bar’s customers as a result of the breaches.

10.
DEPP 6.5B.2G(13) lists factors likely to be considered ‘level 1, 2 or 3 factors’. Of
these, the Authority considers the following factors to be relevant:

a)
Little, or no, profits were made or losses avoided as a result of the breach,
either directly or indirectly (DEPP 6.5B.2(G)(13)(a): Although Mr Redgrave’s
intention was to facilitate the continuation of the Solicitors’ PII business,
and the commission that flowed from it, Bar ultimately made a loss as a
result of the breach, which was the principal reason for Bar becoming
insolvent and being placed into administration, then liquidation, and Mr
Redgrave consequently being made redundant.

b)
The
breach
was
committed
negligently
or
inadvertently:
(DEPP

6.5B.2(G)(13)(d):
The Authority’s view is that Mr Redgrave’s failures

occurred as a result of negligence, rather than deliberate misconduct,
recklessness or a lack of honesty or integrity on the part of Mr Redgrave.

11.
The Authority also considers that the following factors are relevant:

a)
Whilst it is clear that Mr Redgrave was the most senior individual at Bar and
the main decision-maker, there were other individuals at Bar who carried
out roles relevant to Bar’s failings and Mr Redgrave relied on those
individuals to some extent.

12.
Taking all of these factors into account, the Authority considers the seriousness of
the breach to be level 2 and so the Step 2 figure is 10% of £552,669.

13.
Step 2 is therefore £55,266.

Step 3: mitigating and aggravating factors

14.
Pursuant to DEPP 6.5B.3G, at Step 3 the Authority may increase or decrease the
amount of the financial penalty arrived at after Step 2 to take into account factors
which aggravate or mitigate the breach.

15.
The Authority considers that there are no aggravating or mitigating factors in this
case.

16.
Step 3 is therefore £55,266.

Step 4: adjustment for deterrence

17.
Pursuant to DEPP 6.5B.4G, if the Authority considers the figure arrived at after
Step 3 is insufficient to deter the individual who committed the breach, or others,
from committing further or similar breaches, then the Authority may increase the
penalty.

18.
The Authority considers that the Step 3 figure of £55,266 represents a sufficient
deterrent to Mr Redgrave and others, and so has not increased the penalty at
Step 4.

19.
Step 4 is therefore £55,266.

Step 5: settlement discount

20.
Pursuant to DEPP 6.5B.5G, if the Authority, and the individual on whom a penalty
is to be imposed, agree the amount of the financial penalty and other terms,
DEPP 6.7 provides that the amount of the financial penalty which might otherwise
have been payable will be reduced to reflect the stage at which the Authority and
the individual reached agreement. The settlement discount does not apply to the
disgorgement of any benefit calculated at Step 1.

21.
The Authority and Mr Redgrave reached agreement at Stage 1 and so a 30%
discount applies to the Step 4 figure.

22.
Step 5 is therefore £38,686.

23.
The Authority has therefore imposed a total financial penalty of £38,600 (rounded
down to the nearest £100) on Mr Redgrave for breaching Statement of Principle 6