Two mortgage brokers - Andrew Bowden of Surrey and Shaun Lawrence of Nottingham - have been banned by the Financial Services Authority for breaching rules and misleading the regulator. They are the latest example of an extensive blitz of the sector during 2008, which has seen many intermediaries prevented from continuing to sell home loans.
'Lack of honesty and integrity'
The two sole traders Bowden and Lawrence were found guilty of serious lapses in professional conduct. "The FSA found the brokers had misled the regulator, thereby displaying a lack of honesty and integrity," said an FSA statement. "The regulator found Mr Bowden submitted false and unverified information on the firm's regulatory reports to the FSA, while Mr Lawrence removed documents from files before sending them on to the regulator."
Other lapses committed by the two brokers included failing to keep records of all customers and failing to keep client records secure. Bowden traded under the names SJB Partners and Scott Jarrett Bowden & Partners, handling, amongst other business, loans for the purchase of properties in Spain. The FSA investigation found that none of Bowden's client files contained sufficient information for the broker to fulfill his obligations to 'know' his customer.
Lawrence was found to have provided information to lenders that "may have been deliberately misleading" in order to obtain mortgages for clients. In one case, an application stated that a client was earning three times his actual salary and, in another instance, a client was stated to be self-employed and running a profitable business, when she was actually unemployed.
'Lacked competence and capability'
Jonathan Phelan, FSA's head of retail enforcement, said: "The FSA will not tolerate firms who fail to understand and comply with our rules. The actions of both brokers amply illustrate that they lacked not only the competence and capability to follow our rules, but also demonstrated a failure to act with honesty and integrity.
"We have now ensured that both Mr Bowden and Mr Lawrence are unable to work in the regulated industry again and this sends a message to firms that we take failures to comply with relevant standards extremely seriously."
13 bans
The actions against Bowden and Lawrence are merely the most recent examples of a spate of enforcement procedures against brokers taken by the FSA during 2008. Over the course of the year, the FSA has banned a total of 13 mortgage brokers for breaches of its rules.
In addition, a mortgage advisory firm was fined, with its compliance officer losing his regulatory approval. At another brokerage firm, one of its directors was prohibited and his company censured. A further nine brokers were fined. Two more brokers were censured, as were two directors of another brokerage firm.
Most of the mortgage brokerages were small, many being just one person operations. Some were merely convicted of failing to keep proper records. This was also the case of one of the larger financial advisory groups, Thinc, which was fined £900,000 in May for inadequate record keeping relating to the sale of sub-prime mortgages. Thinc was also found to have sold mortgages to clients that were not suitable, given their low earnings and personal circumstances. It was purchased by the insurance company AXA in 2006 - mid-way during the period in which it was found to have breached FSA rules.
Most serious
There have been particular problems with mortgage brokers carrying out business in East London - though the FSA says it is unaware why there is a cluster of poor practice in and around Ilford. In possibly the most serious case, the Forest Gate accountancy firm Abbaci Associates and two of its partners were banned in February from conducting regulated activities. "The FSA found its partners not fit and proper to work in the regulated financial services industry," said the FSA in a statement.
Abbaci was prohibited from mortgage brokerage because of repeated errors in its submissions of clients' mortgage applications. "Given the nature and number of anomalies about customers' pay and employment details, the FSA concluded that the two partners of Abbaci Associates were knowingly involved in the submission of false mortgage applications," explained the FSA.
In one instance, concluded the FSA, the firm submitted a mortgage application for a client that was backed by false statements of income and wrongly stated that the applicant was an employee of Abbaci.
Strong and effective action
The FSA has shown itself capable of strong and effective action against bad practice by mortgage brokers. But it is a serious concern for house buyers and mortgage lenders that there are so many incidences of bad practice. It pays to choose a mortgage broker with considerable care.
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Over the course of the year, the FSA has banned a total of 13 mortgage brokers for breaches of its rules.
