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 Authority’s (FCA) regulations relating to ‘sale and rent back’ (SRB) agreements.
The investigation into Mr Chadda’s 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 Chadda’s 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 Chadda’s 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.
Notes to Editors
The bankruptcy order against Gurpreet Singh Chadda was made on 5 November 2014 following a petition presented by the FCA on 17 September 2014.
Gurpreet Singh Chadda is of Walsall, West Midlands and his date of birth is 3 November 1981.
On 14 October 2015, Gurpreet Singh Chadda signed a 13 year bankruptcy restriction undertaking (BRU). This was accepted by the Secretary of State for Business, Innovation and Skills on 15 October 2015.
The bankruptcy restrictions apply from 15 October 2015 until 14 October 2028.
If the Official Receiver considers that the conduct of a bankrupt has been dishonest or blameworthy in some other way, he (or she) will report the facts to court and ask for a Bankruptcy Restrictions Order (BRO) to be made. The court will consider this report and any other evidence put before it, and will decide whether it should make a BRO. If it does, the bankrupt will be subject to certain restrictions for the period stated in the order. This can be from 2 to 15 years.
The bankrupt may instead agree to a Bankruptcy Restrictions Undertaking (BRU) which has the same effect as an order, but will mean that the matter does not go to court.
There are restrictions set out in insolvency law that the bankrupt is subject to until they are discharged from bankruptcy – normally 12 months - and include that bankrupts:
- must disclose their status to a credit provider if they wish to get credit of more than £500
- who carry on business in a different name from the name in which they were made bankrupt, they must disclose to those they wish to do business with the name (or trading style) under which they were made bankrupt
- may not act as the director of a company nor take part in its promotion, formation or management unless they have a court’s permission to do so
- may not act as an insolvency practitioner, or as the receiver or manager of the property of a company on behalf of debenture holders
- may not be a Member of Parliament in England or Wales
The Insolvency Service administers the insolvency regime, investigating all compulsory liquidations and individual insolvencies (bankruptcies) through the Official Receiver to establish why they became insolvent. It may also use powers under the Companies Act 1985 to conduct confidential fact-finding investigations into the activities of live limited companies in the UK. In addition, the agency authorises and regulates the insolvency profession, deals with disqualification of directors in corporate failures, assesses and pays statutory entitlement to redundancy payments when an employer cannot or will not pay employees, provides banking and investment services for bankruptcy and liquidation estate funds and advises ministers and other government departments on insolvency law and practice.
Further information about the work of the Insolvency Service, and how to complain about financial misconduct, is available.
All public enquiries concerning the affairs of the bankrupt should be made to: The Official Receiver, Public Interest Unit (North), The Insolvency Service, 2nd Floor, 3 Piccadilly Place, London Road, Manchester, M1 3BN. Tel: 0161 234 8531 Email: PIU.North@insolvency.gsi.gov.uk.
The FCA has published a separate notice regarding the ban and fine it imposed on Mr Chadda.
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Published: 30 November 2015
From: The Insolvency Service