Financial Conduct Authority
FCA and PRA publish Decision Notices given to former CEO who paid excessive remuneration to his wife to reduce his tax liability
The Financial Conduct Authority (‘FCA’) and the Prudential Regulation Authority (‘PRA’) have decided to ban and fine Stuart Malcolm Forsyth, the former CEO of a small mutual insurer, £78,318 and £76,180 respectively. The regulators’ respective decision-making committees found, following a joint investigation, that between February 2010 and July 2016 Mr Forsyth transferred excessive amounts of his own remuneration to his wife to reduce his own tax liability and took steps to conceal that arrangement.
Mr Forsyth has referred the Decision Notices to the Upper Tribunal where the parties will present their respective cases. Any findings in the Decision Notices are therefore provisional and reflect the FCA’s and PRA’s respective findings as to what occurred and how they consider Mr Forsyth’s behaviour should be characterised.
The Upper Tribunal will determine what, if any, is the appropriate action for the FCA and the PRA to take, and will remit the matter to the FCA and PRA with such directions as the Upper Tribunal considers appropriate to give effect to its determination. The Upper Tribunal's decision will be made public on its website. Accordingly, the proposed actions outlined in the Decision Notices will have no effect pending the determination of the case by the Tribunal.
The FCA Decision Notice, which reflects the FCA’s view of what occurred, outlines the reasons for the FCA’s decision to ban Mr Forsyth and fine him £78,318 for lacking integrity.
As CEO of Scottish Boatowners Mutual Insurance Association (‘SBMIA’), Mr Forsyth paid his wife a proportion of his own salary in compensation for providing some out of hours administrative support and occasional hospitality at home. Up until 2010, Mrs Forsyth was paid between £5,000 and approximately £10,000 per annum, which was not obviously unreasonable for the work she was undertaking.
From 2010, Mr Forsyth transferred increasing amounts of his salary, and in most years all or part of his own bonus, to Mrs Forsyth in order to reduce his tax liability. Between 2010 and 2016, Mr Forsyth transferred just over £200,000 of his pay to Mrs Forsyth, and by the 2015/16 tax year, Mrs Forsyth’s remuneration was just over £52,000, more than any other SBMIA employee save Mr Forsyth. As a result of these arrangements, Mr Forsyth paid approximately £18,000 less in income tax than he should have done.
SBMIA’s Board and Remuneration Committee were aware that Mr Forsyth paid a proportion of his salary to Mrs Forsyth but were not aware how much Mrs Forsyth was paid. Mr Forsyth concealed the level of payments from SBMIA’s Board and others. In particular:
Mr Forsyth created false minutes to give the misleading impression that SBMIA’s Remuneration Committee had agreed the salaries of both Mr and Mrs Forsyth in 2013, 2014 and 2015. In fact, it had only agreed Mr Forsyth’s salary.
In late 2015, after internal concerns were raised about Mrs Forsyth’s remuneration, Mr Forsyth inappropriately involved himself in a subsequent investigation by an external auditor.
In 2016, Mr Forsyth responded recklessly to an information request from the PRA by sending it the false Remuneration Committee minutes.
Mr Forsyth did not believe that his actions were permissible. He was aware that Mrs Forsyth only carried out a limited amount of administrative work and that the amount of her remuneration for that work was unjustified. By deliberately arranging these payments to Mrs Forsyth, Mr Forsyth acted without integrity to his financial benefit.
Notes to Editors
- The FCA’s Decision Notice for Mr Forsyth was issued on 30 September 2019. The PRA issued a Decision Notice to Mr Forsyth on the same day. The decisions were made by the FCA’s Regulatory Decisions Committee (‘RDC’) and the PRA’s Enforcement Decision Making Committee (‘EDMC’) following a joint investigation. This was the first jointly contested case before the RDC and EDMC. Mr Forsyth referred the matter to the Upper Tribunal (Tax and Chancery Division) on 25 October 2019.
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
- Find out more information about the FCA.
- Find out more information about the Upper Tribunal (Tax and Chancery Chambers)(link is external).
Latest News from
Financial Conduct Authority
Building operational resilience: impact tolerances for important business services06/12/2019 10:10:10
The Bank of England (the Bank), Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) yesterday published a shared policy summary and co-ordinated consultation papers (CPs) on new requirements to strengthen operational resilience in the financial services sector.
FCA consults on how to extend the Senior Managers Regime to benchmark administrators02/12/2019 12:20:00
The Financial Conduct Authority (FCA) recently (29 November 2019) published a consultation on how to apply the Senior Managers Regime (SMR) to benchmark administrators.
FCA secures confiscation order totalling £291,070 against convicted fraudster28/11/2019 10:10:10
A confiscation order of £291,070.36 was made against Mark Barry Starling in Southwark Crown Court.
FCA to ban promotion of speculative mini-bonds to retail consumers27/11/2019 10:10:10
The FCA yesterday announced it will ban the mass marketing of speculative mini-bonds to retail customers.
FCA fines Henderson £1.9m for fund failings21/11/2019 10:10:10
The Financial Conduct Authority (FCA) has fined Henderson Investment Funds Limited (HIFL) £1,867,900 for failing to treat fairly more than 4,500 retail investors in two of its funds, the Henderson Japan Enhanced Equity Fund and the Henderson North American Enhanced Equity Fund (the Japan and North American Funds).
Connaught Independent Review call for information closes but investigation remains open to affected individuals20/11/2019 16:20:00
Raj Parker, the Independent Reviewer into the FSA/FCA’s approach to the Connaught Income Fund Series 1, announces that the Review’s initial call for information has now closed.
22 years of pension savings gone in 24 hours11/11/2019 10:25:00
Victims of pensions scams could lose 22 years’ worth of savings within 24 hours, according to the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR).
FCA urges victims of illegal loan scheme to come forward01/11/2019 10:25:00
The Financial Conduct Authority (FCA) yesterday urged customers who took out a loan with Mr Dharam Prakash Gopee to contact them as they may be eligible for compensation.