Lloyd's broker pays out compensation

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LEADING INSURANCE broker Lambert Fenchurch has been forced to pay compensation to a range of clients over the way commission payments were handled.

Regulators at Lloyd's of London are now investigating to see whether there has been a breach of market rules which could lead to a fine.

The insurance broker admits that hundreds of thousands of dollars of commission were unfairly kept by the US marine division of the Fenchurch group, before its merger with Lowndes Lambert.

John Pexton, a managing director of Lambert Fenchurch's marine division and a former Fenchurch main board director, has been interviewed as part of the Lloyd's investigation.

David Margrett, chief executive of Lambert Fenchurch, declined to comment on the problem. "It would not be fair on John Pexton or Lloyd's for me to comment ahead of any findings," he said.

But insiders said the company is seriously embarrassed by the issue, which has been continuing for a number of years. It was first unearthed by Lowndes Lambert officials after the takeover of the Fenchurch group last year.

"Once they had seen what was going on the Lambert directors wasted no time in paying compensation to clients who had lost out. Some of those clients have remained with the company," said one insider.

He added that the Lambert Fenchurch directors had taken the issue to Lloyd's, whose investigation was expected to be completed last month. But it will take longer to complete because the case officer has left and has just been replaced.

Mr Pexton was in control of the US marine division at the time of the difficulty, but he is understood not to have benefited personally from the extra payments.

Lambert Fenchurch reported strong pre-tax and pre-exceptional profits last week, but saw its share price fall after cutting its dividend and warning it needed to build up cash reserves. It wants money for expansion but also to bolster itself against "current harsh trading conditions".

The company was one of many caught up in pensions mis-selling. It made a pounds 2.4m provision in its latest accounts to cover the outcome.

Further trouble in the marine sector has surfaced with the dismissal of one of its most senior brokers, Julian Wade, who has spent 25 years in the business.

He is suing the company for unfair dismissal and breach of contract, but Mr Margrett said the claim would be strongly contested.

Mr Wade joined Lambert Fenchurch when his former broking company, Blackwall Green, was taken over in early 1996. He has instructed law firm Williamson & Horrocks to take action against his former employer.