The FSA has fined the former finance director of Northern Rock, David Jones, £320,000 for publishing false mortgage arrears figures in the bank’s 2006 annual accounts.
He has also been prohibited from performing any function in relation to any regulated activity.
Jones’s misconduct started in mid January 2007 when he agreed, along with David Baker – the former Northern Rock Deputy CEO – to allow false mortgage arrears figures to appear in explanatory text published with the 2006 annual accounts.
It has emerged that reporting correct figures would have either increased arrears by over 50% or possessions figures by approximately 300%.
For nearly a year, Jones was responsible for the continued misreporting of arrears and possessions figures on a monthly basis to Northern Rock’s assets & liabilities committee (ALCO) and, on a quarterly basis, to the Council of Mortgage Lenders (CML).
From 2005, Northern Rock staff were under pressure to report arrears figures at half the CML average. To achieve this, a series of improper actions were taken which were outside the bank’s stated policy.
For example, cases where a possession order had been made against a property, but where physical possession had not yet been taken (pending possessions cases) were excluded from all arrears and possessions figures.
Although Jones was not involved in the actions that gave rise to their existence, by January 2007 1,917 such cases had been omitted.
Jones was the lender’s finance director (designate) between 10 January 2007 and 1 February 2007. During this time, David Baker informed him of the existence of the pending possessions and asked whether they impacted the firm’s stated provisions for bad debts. Jones assured himself that the provisions were correct and agreed not to reveal the pending possession cases.
As finance director from 1 February 2007 to 22 February 2008, Jones was responsible for the debt management unit (DMU) and the credit management information unit (CMIU) at Northern Rock. Amongst other things, these units were responsible for reporting arrears.
Margaret Cole, FSA director of enforcement and financial crime, said: “Even though other senior directors within the firm were involved in the misreporting of arrears and possessions figures, as a senior director himself and as an FSA authorised person, Jones had a duty to reveal the true position to the public and to important internal committees. He had numerous opportunities to put things right, but failed to do so.
“This is a message to all FSA approved persons, that they must take their individual responsibilities seriously at all times, or suffer the consequences.”
Jones received a 20% discount for settling in Stage 2 of the FSA’s executive settlement procedures. Were it not for this discount, Jones would have been fined £400,000.
