News

Protect yourself

The functions may be controlled but the fines are potentially unlimited. The new statutory regime contains severe disciplinary sanctions and scope for both civil and criminal action against individuals. Although it is not possible under UK law to insure against regulatory fines or imprisonment, cover for legal costs of representation is both permitted and prudent. To date most regulatory insurance has been added to Directors’ and Officers’ Liability cover (D&O), Bankers’ Blanket Bond (BBB) or Stockbrokers’ Indemnity but these products tend to suffer from a number of drawbacks. Often they are purchased by the employer rather than by the individual, which means that the employee depends upon the employer to pay the premium, renew it and provide access to the cover. Frequently there is also a single aggregate limit across all regulated employees, which can quickly prove inadequate when more than one person is investigated for the same incident. Crucially, situations arise when employers wish to distance themselves from the person under investigation and conflicts of interest may arise. A new policy from Blackmore Borley ( www.reginsurance.com; tel 020 7929 4616) seeks to address these deficiencies. It has received the imprimatur of the Securities Institute, the leading examining body for the securities and derivatives industry with 16,500 members, which is a major point in its favour. Essentially the policy covers “legal or other costs incurred when investigated by the FSA for an act committed or alleged to have been committed during the policy period.” Cover limits of £100,000, £250,000, £500,000 and £1,000,000 per individual are available.The premium depends upon the controlled function and the limit purchased but the range is £240 to £555 (plus 5% IPT). The policy may not be cancelled by the underwriter during its term and it is fully portable, moving with the individual when he or she changes jobs or regulated activity. It will pay the regulator’s costs and there is no requirement to repay the underwriter should the individual’s defence fail. The policy also includes three years “run-off ” cover after the holder retires at no extra cost.