David Head failed to properly supervise insurance brokers that he knew had close links with a firm and individual previously disciplined by the regulator for Payment Protection Insurance (PPI) failings.

Investigations revealed that while FTCS recruited mortgage and insurance brokers as appointed representatives, it lacked the systems and controls to ensure that its agents made suitable recommendations.

In cases where single premium PPI was sold, representatives of the firm did not necessarily consider customers’ eligibility for PPI and sometimes failed to take into account whether any medical conditions or existing insurance cover made PPI unsuitable.

Commenting on the case, the FSA’s director of enforcement and financial crime says: “There is a serious responsibility attached to being an FSA approved person and Head’s fine demonstrates that we will not tolerate failure to deliver on that responsibility.”

Timothy Higgins, Clifford Felstead and Ralph Brunswick were involved in a scheme that defrauded Markel International, QBE Insurance and Amalfi Underwriting over an extended period of time, exposing them to significant losses.

At the time, Mr Higgins was a director and founder of Surety Guarantee Consultants (SGC) which wrote a form of insurance known as surety bonds, and employed Mr Felstead.

The firm held binding authorities with the insurers concerned but wrote business that exceeded its authorised limits, exposing Markel and QBE to greater liabilities than had been agreed.

In doing so, SGC made secret profits and withheld over £2 million that should have been paid to the insurers.

When SGC was audited by the insurers it produced false documents intended to show that it had kept within the terms of the binding authorities.

Mr Brunswick provided the false documents in the name of a company located in the Isle of Man, where he was employed at the time.

The FSA’s director of enforcement, Margaret Cole, says: “All three of these men … abused the trust and confidence placed in them by leading London market insurers in order to make a profit for themselves.”

She adds: “This sort of premeditated dishonesty will not be tolerated in the insurance industry or anywhere else in financial services.”

The regulator has reported a “mixed performance” with a significant number of firms “not adequately demonstrating” the practices it expects from a well-run with-profits business.

The two main areas of concern are:

Ineffective governance of with-profit funds, especially in how independent challenge is provided by firms’ with-profits committees, which means that policyholders’ interests may not be properly protected.

Significant weaknesses in the quality of consumer literature – the FSA is not satisfied that all firms are doing enough to ensure that policyholders receive sufficiently comprehensive, timely and clear information to help them understand their policies.

Firms that have fallen short have been told to take action quickly to improve their operations and two have been referred to the FSA’s enforcement division for further investigation.

The review may also result in a strengthening of some of the rules around with-profits, and the FSA will set out any proposed changes in a consultation paper by the end of the year.

FSA insurance sector director, Ken Hogg, says: “We expect all firms to raise their game in this area, not just the firms that we reviewed.”

In undertaking the review, the FSA conducted in-depth visits to 17 firms, representing 80% of assets in with-profits funds, between September 2009 and February 2010.

The body is in the process of developing a code of practice for sellers of traded life policy investments and has decided to engage specifically with the IFA community because of questions already raised by the Financial Services Authority (FSA) about the asset class.

Earlier this year, the American Council of Life Insurers called on regulators to ban the securitisation of life settlements and the FSA raised concerns over the quality of marketing materials relating to traded life policy investments, suggesting that much more detailed and prominent risk warnings should be included in the literature.

ELSA chairman and investment director at SL Investment Management, Patrick McAdams, comments: “Our aim in taking a principles-based approach is to encourage greater standards and more disclosure across the industry, and move beyond a simple box-ticking exercise to be compliant.”

He adds: “Only by creating this level of confidence in the market, can we expect to see investors acknowledge the very real diversification benefits offered by life settlements, and the capacity of these investments to provide a return that, if held to maturity, is typically shielded from the booms and busts of the conventional investment cycle.”

Chancellor of the Exchequer, George Osborne, outlined his alternative to the current tripartite system of regulation in a Mansion House speech last night.

The changes involve the FSA’s operations that monitor financial institutions becoming a subsidiary of the Bank and its role as consumer watchdog being taken over by a new Consumer Protection Agency.

The FSA’s work in combating financial crime will be undertaken by a yet-to-be created Economic Crime Agency.

Meanwhile, The Bank of England will set up a Financial Policy Committee that will have powers dictate capital or liquidity requirements to financial companies.

Commenting on the failures of the current tripartite system set up by Gordon Brown when chancellor, Mr Osborne said: “No one was controlling levels of debt, and when the crunch came no one knew who was in charge.”

The new measures clarify how approved persons should demonstrate a good standard of ethical behaviour, including taking responsibility for their own level of competence.

The proposed changes would also put in place a 30 month deadline for individuals to complete a qualification required for their role, and some provisions that allow individuals to operate without formal qualifications would be removed.

The regulator says it is complementing the Retail Distribution Review by seeking to increase standards of professionalism across the industry and rules that are already in place for investment advice.

FSA director of conduct policy, Sheila Nicoll, comments: “We have designed these proposals to enhance consumer protection … we want to see firms operating robust training and competence schemes and individuals demonstrating good standards of ethical behaviour.”

The consultation will close on 6th September 2010.

The regulator has introduced a temporary rule that allows those who have recently complained about the purchase of a PPI policy more time in which to refer their complaint to the Financial Ombudsman Service (FOS).

The usual six month time limit has been suspended until 27th October 2010 but only for complainants who have been sent a final response from their PPI provider between the dates of 28th November 2009 and 28th April 2010 inclusive.

The FSA says it is working on a long-term solution to ensure customers are treated consistently and fairly when complaining about the sale of a PPI policy, and the action has been taken to ensure recent PPI complainants are not disadvantaged.

In its latest annual report, the FOS revealed that complaints about PPI accounted for some 30% of new cases in the year to the end of March 2010.

The watchdog dealt with 49,196 PPI complaints, compared with 31,066 over the previous twelve month period and while a small proportion of cases related to PPI claims, the vast majority involved complaints about the sale of PPI.

In a policy paper entitled “Increasing consumer access to advice” the ABI reaffirms its support for the Financial Services Authority’s RDR but warns that it could end up restricting consumer access to advice.

With the cost of full financial advice estimated at £670, and therefore beyond the reach of two-thirds of the UK adult population, the Association is calling for the introduction of a simplified process.

According to the body, simplified advice that delivers good outcomes has a number of benefits to consumers, including:

Faster and more affordable advice – a simplified advice process could provide a personal recommendation in 30 to 45 minutes.

Services available via the Internet, over the phone or face-to-face that would work by using facilitators to guide consumers through pre-determined questions.

The body’s director of Life & Savings, Maggie Craig, says: “While there are barriers to providing simplified advice, they can and must be overcome.”

The prospectus for the fundraising, needed to back Pru’s acquisition of AIA, the Asian business of AIG, should have been circulated today.

However, according to reports, the Financial Services Authority has concerns over Prudential’s capital strength and has called a temporary halt to proceedings.

The controversial acquisition has not found favour with some of Pru’s shareholders and earlier this week it emerged that the group was under pressure from institutional investors to sell assets in the UK to help fund its Asian expansion.

According to The Daily Telegraph, Clive Cowdery’s acquisition vehicle, Resolution Ltd, has already arranged for Royal Bank of Scotland and Royal Bank of Canada to provide £5 billion in finance in anticipation of a sale.

Prudential is apparently confident that its rights issue prospectus will be available in the next few days.

According to the newspaper, Pension Corporation’s parent company, Pension Insurance Corporation, has recently received a letter from the regulator regarding £3.3 billion worth of assets managed for 45,000 pension holders.

The move is being taken by some as an indication that the FSA is becoming tougher with insurance companies, particular newer businesses operating as consolidators.

Trustees of company pension schemes have become increasingly keen to offload the responsibilities and balance sheet liabilities of company pension schemes and the Government is known to be keen to ensure that schemes are not treated as commodities, to be bought and sold.

In 2007, the Pensions Regulator intervened in the case of the proposed sale of the Telent pension scheme to Pension Corporation, over concerns that the latter could adopt an investment strategy aimed at benefiting its investors and not scheme members.