The GFSC issue fines of £78,750.00 on x2 NEDs - Shane Younger and Christopher Percival - 30th July 2020
On 10 July 2020, the Guernsey Financial Services Commission (the “Commission”) decided:
- To impose a financial penalty of £48,650 under section 11D of the Financial Services Commission Law on Mr Younger;
- To impose a financial penalty of £30,100 under section 11D of the Financial Services Commission Law on Mr Percival; and
- To make a public statement under section 11C of the Financial Services Commission Law.
The Commission considered it reasonable, proportionate and necessary to make these decisions having concluded that Mr Younger and Mr Percival failed to fulfil the minimum criteria for licensing under Schedule 7 to the Insurance Law.
- Mr Younger and Mr Percival were non-executive directors (from 22 December 2011 to 22 February 2019 and 22 December 2011 to 14 July 2017 respectively) and
- Mr Younger and Mr Percival also
- Were the majority shareholders of Global Insurance Group Limited (“GIGL”) which was licensed under the Insurance Law.
- Chief Executive and director of a United Kingdom insurance intermediary (“Intermediary A”) respectively.
- Mr Younger and Mr Percival are also
- minority shareholders in the ultimate holding company of Intermediary A.
- As a result of the above
- Mr Younger and Mr Percival’s position with Intermediary A, they had access to more information than the other GIGL directors regarding Intermediary A’s business activities related to GIGL.
- Under an agreement between GIGL and Intermediary A,
- Intermediary A issued insurance policies on behalf of GIGL.
- Intermediary A was also able to collect premiums from policyholders on behalf of GIGL and retain a portion of the premiums as a loss fund to pay claims on behalf of GIGL (“the Claim Fund”).
- Bordereaux reports (a list, or summary, of policies issued and premiums charged and/or claims paid) should have been prepared monthly by Intermediary A and, if due, net premium settlements made quarterly to GIGL.
- The Commission conducted a risk assessment visit to GIGL in July 2017 (“the 2017 Visit”).
- In the period prior to the 2017 Visit, apart from the first quarterly payment to GIGL by Intermediary A,
- The only payments made were the exact amounts required to pay GIGL’s reinsurers.
- GIGL’s management accounts showed that the amounts outstanding from Intermediary A grew whilst GIGL’s cash remained low.
- The amounts due from Intermediary A were GIGL’s major asset.
- GIGL began to request that the payments be regularised from November 2015 onwards.
- However, regular payments from Intermediary A were not forthcoming.
- The outstanding amounts were only paid to GIGL after intervention by the Commission and after investment into Intermediary A by a third party.
- The actions of Mr Younger and Mr Percival could have seriously put at risk the payment of claims to policyholders and therefore could have posed a risk to the reputation of the Bailiwick as an international finance centre.
- During the relevant period of 2012 to February 2019:
- As a non-executive director of GIGL, Mr Younger failed
- To ensure the implementation of effective systems of control, in particular in relation to the Claim Fund held by, and the bordereaux reporting from, Intermediary A.
- Whilst Mr Younger contends that other directors of GIGL were visiting Intermediary A to check the accuracy of reporting by Intermediary A, those directors claim no visits to check the accuracy of reporting took place and no reports of any checks undertaken at such visits have been provided.
- As a non-executive director of GIGL, Mr Younger also failed
- To ensure that the amounts due from Intermediary A were paid to GIGL in a timely manner, in particular after November 2015 when this was first raised with Intermediary A by GIGL.
- A risk register was prepared by another director of GIGL in October 2016, which was subsequently considered by Mr Younger as a director of GIGL.
- Credit risk, which was defined as financial loss through counterparty failing to meet obligations, was deemed to be low likelihood and medium impact in the risk assessment.
- A risk assessment of outsourced activity was also prepared by another director of GIGL in May 2018, which was again considered by Mr Younger as a non-executive director of GIGL.
- Again, credit risk was deemed to be low likelihood and medium impact.
- Given the issues that had been ongoing since November 2015 regarding the payments due from Intermediary A and that Intermediary A was GIGL’s largest debtor, this is surprising.
- As a result, Mr Younger failed to adequately consider the risks to GIGL of Intermediary A failing to honour its debt to GIGL.
- The failures by Mr Younger outlined above
- Demonstrate a lack of competence, experience, sound judgement and diligence by Mr Younger and
- As a result Mr Younger failed to fulfil the fit and proper requirements set out in paragraph 3 of Schedule 7 to the Insurance Law.
- During the relevant period of 2012 to July 2017:
- As a non-executive director of GIGL, Mr Percival failed to
- Ensure the implementation of effective systems of control, in particular in relation to the Claim Fund held by, and the bordereaux reporting from, Intermediary A.
- Whilst Mr Percival contends that other directors of GIGL were visiting Intermediary A to check the accuracy of reporting by Intermediary A, those directors claim no visits to check the accuracy of reporting took place and no reports of any checks undertaken at such visits have been provided.
- As a non-executive director of GIGL, Mr Percival also failed to
- Ensure that the amounts due from Intermediary A were paid to GIGL in a timely manner, in particular after November 2015 when this was first raised with Intermediary A by GIGL.
- Mr Percival failed to
- Adequately consider the risks to GIGL of Intermediary A failing to honour its debt to GIGL despite the issues that were occurring with Intermediary A’s failure to pay at the time of his consideration of the risk assessment prepared in October 2016.
- The failures by Mr Percival outlined above
- Demonstrate a lack of competence, experience, sound judgement and diligence by Mr Percival and
- As a result Mr Percival failed to fulfil the fit and proper requirements set out in paragraph 3 of Schedule 7 to the Insurance Law.
Meet the team of industry experts behind ComsureFind out more
Keep up to date with the very latest news from ComsureFind out more
View our latest imagery from our news and workFind out more
Think we can help you and your business? Chat to us todayGet In Touch
As well as owning and publishing Comsure's copyrighted works, Comsure wishes to use the copyright-protected works of others. To do so, Comsure is applying for exemptions in the UK copyright law. There are certain very specific situations where Comsure is permitted to do so without seeking permission from the owner. These exemptions are in the copyright sections of the Copyright, Designs and Patents Act 1988 (as amended)[www.gov.UK/government/publications/copyright-acts-and-related-laws]. Many situations allow for Comsure to apply for exemptions. These include 1] Non-commercial research and private study, 2] Criticism, review and reporting of current events, 3] the copying of works in any medium as long as the use is to illustrate a point. 4] no posting is for commercial purposes [payment]. (for a full list of exemptions, please read here www.gov.uk/guidance/exceptions-to-copyright]. Concerning the exceptions, Comsure will acknowledge the work of the source author by providing a link to the source material. Comsure claims no ownership of non-Comsure content. The non-Comsure articles posted on the Comsure website are deemed important, relevant, and newsworthy to a Comsure audience (e.g. regulated financial services and professional firms [DNFSBs]). Comsure does not wish to take any credit for the publication, and the publication can be read in full in its original form if you click the articles link that always accompanies the news item. Also, Comsure does not seek any payment for highlighting these important articles. If you want any article removed, Comsure will automatically do so on a reasonable request if you email firstname.lastname@example.org.