The FSA has fined Donald McKee Morgan, a partner in the firm of Donald Morgan Insurance Services (DMIS), £335,204 for committing insurance fraud.

Morgan, who was based in Ayrshire, Scotland, has also been banned from carrying out any regulated financial services activity in the future.

Morgan’s wife, Janet Morgan, who was the only other partner at DMIS, has also been publicly censured and banned from carrying out regulated financial services. Janet Morgan took no active part in the affairs of the firm, and failed to notice her partner’s fraudulent activity.

An FSA investigation found that, in an attempt to support the firm’s finances, Donald Morgan deliberately kept insurance premium payments from a number of DMIS’s clients which should have been paid to a broker network (Network A). In order to conceal his fraudulent conduct from Network A, Donald Morgan falsified monthly reports and manipulated the computer systems at DMIS. Donald Morgan then used the premium monies to pay staff salaries and to fund his lifestyle.

Donald Morgan informed the FSA of his misconduct in August 2010 after realising the financial situation at DMIS was not going to improve and he was not going to be able to repay the money he had misappropriated. He cooperated fully with the FSA throughout its investigation.

The financial penalty consists of a punitive element of £112,700 and £222,504 for disgorgement of financial benefit. Donald Morgan agreed to settle at an early stage of the FSA’s investigation and therefore qualified for a 30% discount. Were it not for the discount, the punitive element of the penalty would have been £161,000 and the total fine £383,504.

Tom Spender, the FSA’s head of retail enforcement, said: “Donald Morgan abused his position as an approved person and also abused the trust placed in him by his clients and business partners. Fortunately, his clients were never left uninsured, but his actions were unacceptable and the Network suffered significant financial loss as a result.

“Insurance brokers must adhere to our rules, ensure customers are treated fairly and trust in the industry is maintained. However, Donald Morgan’s actions left much to be desired and that is why he has incurred a significant fine.”