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Towergate Insurance Misallocates £15m of Client Money

Firms continue to take inadequate steps to ensure compliance with the Client Money rules.  The latest case involving insurance broker Towergate highlights the FCA’s renewed sense of purpose and the fact that insurance brokers are not immune.

The broker misallocated £15m of client and insurer money over a four year period (from November 2007 to January 2011) between restricted and unrestricted accounts.  According to Towergate’s 2013 Q3 bonhdholder report, the errors were uncovered as a result of a management initiative to strengthen the control framework and centralise client money processing.  Towergate CEO Mark Hodges insists that once it was confirmed, management transferred £15m back into the client money and insurer accounts and notified the FCA.

Compliance experts have called this “worrying” considering the length of time it took for the issues to come to light and that it was not picked up by the consolidator’s auditors.  The FCA will now determine whether this constitutes a compliance breach.  In the past three years alone, the FCA and its predecessor the Financial Services Authority (FSA) have levied more than £55m in fines for firms’ client money breaches.  This will surely be an area of increasing focus over the next 12 months before the introduction of CASS RP for insurance brokers towards the end of 2014.

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