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Three individuals, Mr Yoshiaki Yamazaki, Mr Hiroshi Okazaki and Mr Robert McKibbin have been prohibited from performing any functions in relation to any regulated activity carried on by any authorised person. The remaining three individuals Mr Kazuhide Oda, Mr Toru Morota and Mr David Titterington have been prohibited from performing any function involving the exercise of management authority over any other person in relation to any regulated activity carried on by any authorised person. The FSA has decided that each of the individuals failed to act with honesty and integrity as directors of CE. Their conduct demonstrated a fundamental lack of fitness and propriety and represented a risk to confidence in the financial system.
All six individuals were at varying times directors of CE, a subsidiary of a Japanese insurance company called Chiyoda Fire and Marine Insurance Company Limited (CJ). The consolidated profit of the Chiyoda Group depended in part on the performance of CE. The executive directors of CE were requested to find means of improving CE's 1999 performance. The collective actions of these individuals resulted in an apparent reduction of CE's losses from £34mn to £4mn in 1999.
The improvements in CE's 1999 results were achieved by disguising a loan from an unconnected reinsurance company and a capital injection from CJ as reinsurance contracts. Over the next two years CE entered into a series of further reinsurance contracts in order to repay the original loan from the reinsurance company. All of these transactions led to a misrepresentation of CE's financial accounts for the year ends of 1999 and 2000 and consequent misstatement of the financial information reported to the FSA for those years.
Andrew Procter, Director of Enforcement at the FSA said:
"Fiddling the figures reported to the FSA or those declared in company accounts, has the potential to undermine regulation and destroy confidence in markets. This is why we think that only the very strongest of the sanctions available to us is appropriate in these circumstances. All of these individuals abused their positions and as such they are not fit and proper to work again in senior positions in the UK insurance market.
"We have been aware of the use of reinsurance contracts in financial engineering for some time and have made absolutely clear that such contracts can only be used where there is a legitimate commercial purpose. We also want to make clear that as the UK financial regulator we would regard the behaviour of insurance companies involved in transactions similar to those outlined above as falling below the standards that we require of UK regulated companies. Nobody should doubt our resolve to deal with any similar instances in the most robust manner available to us."
More details on the failings of the individuals and their involvement in the attempt to conceal the true nature of the various transactions can be found at www.fsa.gov.uk/pubs/final/index
