The Financial Conduct Authority (FCA) has today banned Darren Lee Newton from working in the financial services sector.
The FCA said in a statement that it discovered Mr Newton used customers' money for the purchase of the debt management firm, First Step Finance Limited. This showed "a serious lack of honesty and integrity," the UK regulator said, in deciding that Newton is not a "fit and proper person".
Newton purchased First Step, through his company, from Christine Whitehurst and was the sole director between 18 October 2013 and 28 May 2014 of First Step and was a director of another debt management company, Debt Help and Advice Limited.
Newton funded the purchase of First Step from the accounts of First Step, with client money, rather than his own funds. He directed or allowed £322,500 to be transferred from the First Step accounts to Mrs Whitehurst. Mrs Whitehurst and her husband, Adrian, were banned by the FCA in October 2017 for dishonestly misappropriating money.
The FCA said that Newton knew these monies from First Step should only have been used to pay customers' creditors or to be returned to customers. He did this when First Step had a significant client money shortfall in its accounts of over £6 million.
The firm went into administration on 28 May 2014 with a shortfall of £7,156,036 from over 4,000 customers. Customers are not able to recover compensation for their losses from the Financial Services Compensation Scheme.
Mark Steward, executive director of enforcement at the FCA said: "Mr Newton blatantly used customers' money to fund the purchase of First Step from Christine Whitehurst. This was dishonest and showed a complete lack of integrity. First Step was meant to help people manage their debts, but Mr Newton's actions put them one step backwards and in a worse position than before.
"He is not a fit and proper person and poses a serious risk to consumers. This is the strongest action we can take and will prevent him from operating in financial services again."
First Step was a debt management firm offering a debt reduction services to its customers. First Step collected and held client monies before making full and final settlement offers to customers' creditors.
After the purchase of First Step on 18 October 2013 customers were meant to be transferred to Debt Help and Advice, from that date. However, the transfer of customers did not take place. First Step continued to receive payments from existing clients until it was placed into administration in May 2014.