The Financial Conduct Authority (FCA) and Prudential Regulation Authority has banned and fined the ex-CEO of a small mutual insurer after he took steps to reduce his tax liability and conceal his actions.
Stuart Malcolm Forsyth was fined £154,498 in total by the two regulators following a joint investigation that found he had transferred "excessive" amounts of his own remuneration to his wife to reduce his tax liability, and had taken steps to conceal that arrangement.
According to the FCA, when Forsyth was CEO of Scottish Boatowners Mutual Insurance Association (SBMIA), he 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, Forsyth was paid between £5,000 and £10,000 per annum, which was not considered unreasonable for the work she was undertaking.
From 2010, however, the FCA said Forsyth transferred increasing amounts of his salary, and in most years all or part of his bonus to Forsyth in order to reduce his tax liability.
Between 2010 and 2016, Forsyth transferred just over £200,000 to his wife, and by the 2015/16 tax year, Mrs Forsyth's remuneration was just over £52,000 - more than any other SBMIA employees, except the CEO.
The FCA claimed as a result of these payments, Forsyth paid approximately £18,000 less in income tax than he should have done.
False minutes created
SBMIA's board and remuneration committee were aware Forsyth paid a proportion of his salary to his wife, but were not aware of how much she was paid.
Forsyth concealed the level of payments by creating false minutes to give the impression that SMBIA's remuneration committee had agreed the salaries of both Forsyth and his wife, when in actuality it had only agreed Stuart Forsyth's. Then, in late 2015, after internal concerns were raised about Mrs Forsyth's remuneration, the former CEO inappropriately involved himself in a subsequent investigation by an external auditor.
According to the FCA, Forsyth did not believe his actions were permissible. He was aware that his wife only carried out a small amount of administrative work and that amount of remuneration was unjustified. The financial watchdog argued that, by deliberately arranging the payments to Mrs Forsyth, he acted without integrity to his financial benefit.
Since the issuing of the FCA's decision notice for Forsyth on 30 September, the ex-CEO has referred the matter to the Upper Tribunal, where the FCA, PRA and Forsyth will present their respective cases. The Upper Tribunal will then determine what, if any, is the appropriate action for the two regulators to take.
This article was first published by Professional Adviser, a sister title to International Investment.