An insurance director banned and fined by the the Financial Services Authority (FSA) for allowing a £1.43m fraud which ended up bankrupting his company has had his appeal refused at the Upper Tribunal.
David John Bedford was director and responsible for managing the Financial Risk Division of ESR Insurance Services Ltd.
The FSA decided to ban and fine Bedford £100,000 - reduced to £10,000 due to hardship - in June 2010, but he referred the decision to the Upper Tribunal
Yesterday the Tribunal backed the FSA's action against Bedford, on the grounds that he is not a fit and proper person.
Bedford placed surety bonds - guarantees to pay a loss sustained as a result of a breach of contractual obligations - and related insurance with an American national named Wendell Clemons.
The Tribunal found Bedford should have realised by about July 2006 that placing business with Clemons posed unacceptable levels of risk to ESR's clients.
By July 2007 Bedford was ruled to have known Clemons was committing a fraud, by accepting premiums for the underwriting of a risk but not actually securing the insurance at all.
Bedford nevertheless continued to place business with Clemons, facilitating Clemons theft of £1.43m, more than £445,000 of which was stolen in the period when Bedford knew he was committing a fraud.
The Tribunal also ruled Bedford issued insurance bonds purporting to provide cover with another insurer, Gramercy Insurance Company, but without obtaining their authority to do so in and after September 2006.
One such contract purported to provide cover of over US$13m. In August 2007, Bedford forged reinsurance documents, in part to conceal Clemons's fraudulent behaviour.
The Tribunal said it was only by good fortune no client in fact suffered a loss.
However, the discovery of the frauds and the resulting potential claims against ESR led to it being placed into administration in February 2008, followed by insolvent liquidation in February 2009.
IA sectors – help or hindrance?
Despite multiple complaints
Annuity market worth £4bn in 2017
For ‘distress’ caused
Oversees £30bn of advised and D2C assets