The FCA (the UK Financial Conduct Authority) published its final findings in regard to the Solicitors Professional Indemnity Scheme in 2011-3, which also involved the collapse of two insurers (European Risks Insurance Company – an Icelandic insurer and Millburn Insurance Company), and the cessation of operations of Balva (a Latvian insurer).
Klapton, which acted as reinsurer for some of these schemes, was not fined or involved in the investigation, and is not affected financially by the FCA or the PRA findings or decisions.
The conclusion of the FCA investigation reached after Mr. Shay Reches, Klapton’s Chairman, entered a settlement agreement with the FCA.
Mr. Reches was not a director or an officer of any of the companies involved, however, the FCA said that he could have prevented a significant part of this scheme failure.
The FCA fined 5 individuals and two companies amounting to £3m. Mr. Reches was personally fined £1.05m. The fine is defined as a “deterrence to send a strong message to the market”, although the FCA confirmed Mr. Reches had not taken any funds personally and that he had not acted dishonestly.
Mr. Reches volunteered to recover and make payments to the failed insurers for £13.1m. Mr. Reches established that making these payments will be a just action and will enable a significant recovery of the UK public losses from the scheme. The FCA defined the Settlements as “a special fine”, and included these payments in its overall fines total.
FCA confirmed that its decisions regarding Mr. Reches are restricted to his activities in UK regulated companies, but do not affect or restrict Mr. Reches’s international activity.
The PRA (UK Prudential Regulation Authority) also published their findings on this scheme and confirmed that they are not taking any actions or sanctions against Mr. Reches.
Mr. Reches stated that he respects and accepts the FCA decision, and will act according to the findings and the agreed settlements.