Following an investigation by a specialist team of the Insolvency Service, Gurpreet Singh Chadda, unemployed of Walsall, West Midlands has received a 13 year bankruptcy restriction for breaching the Financial Conduct Authoritys (FCA) regulations relating to sale and rent back (SRB) agreements.
The investigation into Mr Chaddas conduct commenced on the making of the bankruptcy order following a petition presented by the FCA.
Mr Chadda, 34, was a sole trader using the names Red2Black Homes and B&L Homes.
The investigation uncovered that between July 2009 and January 2010, Mr Chadda induced property owners experiencing financial difficulties to enter into SRB agreements by providing them with false and misleading information and concealing his own personal gain.
An SRB agreement is one where a home owner sells their home and then rents it back from the arranger to be able to carry on living in the home. Often people who sell their homes in this way are vulnerable as they are in financial difficulty and need to raise money to pay mortgage arrears and / or avoid repossession of their homes.
The FCA fined Mr Chadda 945,277 and banned him from working in the financial services industry as a result of his significant failings. This was the largest ever FCA fine for a sole trader in a retail business. In levying the fine, the FCA believed that Mr Chadda received 695,277 from arranging 7 SRB agreements and incorporated this amount in the fine.
Mr Chaddas widespread failings included:
deliberately misleading the sellers of at least 6 of the 7 properties by purporting to be the purchaser when in fact the purchasers were third parties unknown to the sellers
failing to notify the sellers that these purchasers were not authorised or regulated by the FCA and therefore that they were not covered by the regulatory protection
assisting these purchasers to obtain mortgages knowing that they had failed to inform the mortgage lenders that the purchase was made on an SRB basis
falsely informing the sellers that valuations were or had been determined by independent valuers
misleading the sellers regarding the true market value of their properties
charging the sellers fees which had not been disclosed prior to contractual agreement totalling at least 695,277
failing to cooperate with the FCA and providing false and misleading information to the FCA
In addition to deceiving vulnerable customers, Mr Chadda made false and misleading statements to the FCA. He also failed to disclose documents and information and produced false and misleading documents. Mr Chadda also arranged for people to impersonate his customers in order to further mislead the FCA.
Commenting on this case Ken Beasley, Official Receiver of the Public Interest Unit (North), said:
Mr Chaddas actions were dishonest and he took advantage of vulnerable members of the public for personal gain. The length of the undertaking reflects the severe nature of the misconduct. The Insolvency Service will continue to bring action against those who pose a serious risk to customers and lenders alike.