The fine - for failing to monitor its sales force adequately in 1992 - is an embarrassment for Sir Mark, who is a former deputy chairman of the Securities and Investments Board, the City's lead regulator, which is trying to impose higher standards on the life insurance industry.
JRA was found to have insufficient information on the advice given to clients by its sales staff in 1992, which was its first year of trading. Lautro also found that in some instances unsuitable advice had been given and clients had been persuaded to surrender policies they held with other companies to take out JRA policies without sufficient justification, a process known as 'churning'.
Churning allows the salesman to earn commission from the new policy, but disadvantages investors because they lose money when they cash in their old policies.
Many of JRA's 570-strong sales force have been recruited from the ranks of Allied Dunbar, which was founded by Sir Mark.
In the ensuing row, Allied Dunbar accused JRA of luring its salespeople away with unrealistic financial packages that put them under enormous pressure to sell.
Mike Wilson, JRA's chief executive, said that unsuitable products had been sold in only a very small number of cases. 'We reviewed a sample of 2,000 policies. We found less than 10 cases where the wrong advice had been given,' he said. Investors were compensated where bad advice was given.
Mr Wilson said: 'In these sorts of cases there is often a disagreement about the definition of advice. We had the option of going for a full-scale hearing with Lautro. It is a bit like a court hearing. But we decided to admit the charge and accept the level of the fine.' He said that a total of 20 staff had left since JRA's launch as a result of compliance procedures.
JRA was launched in 1992, with backing from Scottish Amicable and St James's Place - Lord Rothschild's company.
In just over two-and-a-half years, the company has won 100,000 policyholders, with a total of pounds 750m under management. It plans a stock market flotation.
So far Lautro has fined 24 companies for rule breaches. Many of the fines have been much higher than that levied on JRA. Nearly all have been because companies have failed to monitor adequately their direct sales forces.Reuse content