People in debt are highly vulnerable and professionals who advise them are for that reason subject to intense regulation by the Financial Conduct Authority (FCA) and the courts. The point was made by a case in which a debt management specialist whose conduct fell far below required standards of competence and probity was banned from being a company director.
The man was a director of two companies that provided advice and services to those in debt. Following an FCA investigation, it emerged that client monies were not being rigorously ring-fenced or segregated from company funds. Record keeping was also defective to the point where it proved impossible to provide an accurate reconciliation of client funds.
After the FCA inquiry was launched and it became clear that the companies were no longer viable, substantial payments were made out of their funds to the man or to other businesses that he controlled. One of the companies had also made misleading claims in advertising that it was capable of dramatically reducing clients’ debts and halving repayment periods.
After the Secretary of State for Business, Energy and Industrial Strategy launched proceedings, the High Court noted that the companies’ clients were entitled to rely upon their integrity and good governance. There was some mitigation in that record keeping difficulties had in part been caused by problems with a bespoke software package. Money that the man had removed from the companies was regarded, at least by him, to be no more than his due and he had been negligent, rather than deliberately and flagrantly dishonest.
However, the Court noted that he had little or no knowledge of the regulatory regime that applies to debt management companies and equally minimal insight into their importance. After the companies entered administration, he did not appear troubled by the fact that financially vulnerable clients had lost very significant sums. He was guilty of serious misconduct and his disqualification from holding office as a company director was mandatory. The disqualification would last for 10 years.
If you are facing director disqualification proceedings please contact Leanne Schneider-Rose l.schneider-rose@sydneymitchell.co.uk
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