Ex insurer CEO faces £150K fine over pay arrangements
21 Nov 2019
Stuart Forsyth, former CEO of a small mutual insurer, is contesting a £154,000 fine and possible ban by two regulators over a tax dispute
21 Nov 2019
The fine from the Financial Conduct Authority (FCA) imposed for transferring large amounts of his own remuneration to his wife and concealing what he had done, in a bid to reduce his tax liability.
As CEO of Scottish Boatowners Mutual Insurance Association (SBMIA), 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, according to the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) which have investigated the matter.
However, from 2010 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, the regulators found.
Between 2010 and 2016, Forsyth transferred just over £200,000 of his pay to his wife, and by the 2015/16 tax year, Mrs Forsyth’s remuneration was just over £52,000, more than any other SBMIA employee save Forsyth himself.
As a result of these arrangements, Forsyth paid approximately £18,000 less in income tax than he should have done.
SBMIA’s board and remuneration committee were aware that Forsyth paid a proportion of his salary to his wife but were not aware how much Mrs Forsyth was paid.
The FCA and PRA said Forsyth concealed the level of payments, by creating 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 Forsyth’s salary.
In late 2015, after internal concerns were raised about Mrs Forsyth’s remuneration, Forsyth inappropriately involved himself in a subsequent investigation by an external auditor, and the following year was said to have sent the PRA the false remuneration committee minutes in response to a request.
The regulators argued that by deliberately arranging these payments to Mrs Forsyth, Forsyth acted without integrity to his financial benefit. The FCA has proposed a fine of £78,318, while the PRA has imposed a fine of £76,180, and both have banned Forsyth.
Forsyth is challenging the regulators’ decision notices and taking the case to the Upper Tribunal, so the findings are provisional, with the FCA and PRA stating they reflect their views as to what occurred and how they consider Forsyth’s behaviour should be characterised.