Scotland business

Prestwick broker Donald Morgan fined over fraud

Bank notes
Image caption The FSA said Mr Morgan committed fraud in an attempt to support his firm's finances

A partner at an Ayrshire-based insurance broker has been fined £335,000 for committing fraud.

Donald McKee Morgan, from Donald Morgan Insurance Services (DMIS), was also banned from carrying out any future regulated financial services activity.

A Financial Services Authority (FSA) probe found Mr Morgan deliberately kept insurance premium payments from a number of DMIS's clients.

They said it was done in an attempt to support the firm's finances.

The FSA also publicly censured Mr Morgan's wife, Janet, who was the only other partner at DMIS, and banned her from carrying out regulated financial services.

Mrs Morgan took no active part in the affairs of the Prestwick-based firm, and failed to notice her partner's fraudulent activity.

The FSA found Mr Morgan deliberately kept insurance premium payments from DMIS clients, which should have been paid to a broker network (Network A).

Reports falsified

In order to conceal his fraudulent conduct from Network A, he falsified monthly reports and manipulated the computer systems at DMIS. Mr Morgan then used the premium money to pay staff salaries and to fund his lifestyle.

He informed the FSA of his misconduct in August 2010 after realising the financial situation at DMIS was not going to improve and he was not going to be able to repay the money he had misappropriated.

He co-operated fully with the FSA throughout its investigation.

The financial penalty consisted of a punitive element of £112,700 and £222,504 for "disgorgement of financial benefit".

Mr Morgan agreed to settle at an early stage of the FSA's investigation and therefore qualified for a 30% discount.

Were it not for the discount, the punitive element of the penalty would have been £161,000 and the total fine £383,504.

The FSA's head of retail enforcement, Tom Spender, said: "Donald Morgan abused his position as an approved person and also abused the trust placed in him by his clients and business partners.

"Fortunately, his clients were never left uninsured, but his actions were unacceptable and the network suffered significant financial loss as a result."

Earlier this week, US and UK regulators fined one of Scotland's leading investment houses a total of £8.6m for failing to manage a conflict of interest between two of its clients.

The Financial Services Authority (FSA) fined Martin Currie Investment Management Limited and Martin Currie Inc £3.5m.

Martin Currie was also fined $8.3m (£5.1m) by the Securities and Exchanges Commission (SEC) in the US.

The conflict of interest arose when the Edinburgh-based firm caused one client (Fund B) to enter into an ill-advised transaction which rescued another client (Fund A) from serious liquidity concerns.

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