The former Northern Rock finance director David Jones has been banned by the Financial Services Authority and fined £320,000 for misreporting mortgage arrears figures – a punishment he argues is “unfair”.
The FSA said that Jones, along with former deputy chief executive David Baker llowed false mortgage arrears figures to appear in explanatory text published with the 2006 annual accounts. Reporting correct figures would have either increased arrears by over 50% or possessions figures by approximately 300%, the regulator said.
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 and, on a quarterly basis, to the Council of Mortgage Lenders, according to the FSA.
According to the FSA, from 2005, Northern Rock staff felt under pressure to report arrears figures at half the Council of Mortgage Lenders (CML) average. To achieve this, a series of improper actions were taken which were outside the firm's stated policy, including cases where a possession order had been made against a property, but where physical possession had not yet been taken and which were then excluded from all arrears and possessions figures. Jones had omitted 1,917 cases in this way by January 2007.
Jones received a 20% discount on a potential £400,000 fine for settling in stage two of the FSA’s executive settlement procedures. But he said after the ruling that he felt it to be “unfair and disproportionate”.
“I accept that I did not ensure that information on residential arrears prepared and presented by others was corrected to include certain accounts known as “pending possession cases',: said Jones. “However, I consider that the FSA’s conclusions and imposed penalty are both unfair and disproportionate. .
"As well as ensuring that the pending possessions were fully provided for in the financial statements, I also ensured that there was no impact on future provisioning levels. I was satisfied that stakeholders received sufficient information on credit quality to assess future provisioning levels on the residential loan book; if this were not the case, market expectations would have had to have been adjusted.”
But the FSA - currently on a 'get tough' roll – was unrepentant about the nature of its decision. 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.”
Cole added: “This is a message to all FSA approved persons, that they must take their individual responsibilities seriously at all times, or suffer the consequences."
For his part, Jones does not intend to drop out of the finance industry. "I will now put this matter behind me and move on. I intend to pursue opportunities either in an advisory or full time basis building on over 30 years' experience in finance," he said.