Debt management boss joins husband on disqualified director list

Josephine (Josie) Broadstock, 33, of Warrington, together with Robert Jones, 39, of Stockport, have been banned from being company directors following an Insolvency Service investigation.

Husband and wife Josie and Mark Broadstock, along with Robert Jones, were directors of Smooth Financial Consultants Ltd (Smooth).

The company was incorporated in June 2005 and traded as The Debt Advice Centre before trading from Jackson House, Sale, Cheshire in 2012.

Mark Broadstock was the managing director and Robert Jones was appointed as the finance director in January 2012, while Josie Broadstock was appointed a director on May 26, 2011.

In return for a monthly fee, Smooth administered debt management plans and made payments to creditors on behalf of individuals experiencing difficulties in making payments to their creditors, for loans and credit cards.

However, Smooth went into administration on August 2, 2013 and on July 24, 2014, went into creditors’ voluntary liquidation.

During a five-day trial in July 2018, the court heard that regulations governing debt management companies state that funds belonging to clients are to be held in a separate ‘ring-fenced’ client account.

However, from at least February 12, 2013, onwards, Smooth made transfers from the client account to its own company account in excess of the agreed fees.

The transfers were used for ongoing running costs and for the benefit of the directors, who between them received salaries and dividends of £115,992 from February 12, 2013, to August 2, 2013, as well as third parties connected to Mr and Mrs Broadstock.

The court also heard that between February 12, 2013 and August 2, 2013, Smooth failed to pay an estimated value of £572,001 to its clients’ creditors and after a winding up petition had been presented against the company on July 1, 2013, Mark Broadstock transferred £109,512 from the client account to a connected company.

None of the funds were used for the benefit of the clients and after Smooth had gone into administration, the administrators only recovered £49,678 from the connected company. Administrators estimated the shortfall on the client account to be £848,690.

Before the court hearing, the Secretary of State accepted a disqualification undertaking from Mark Broadstock, on June 9, 2017, in which he did not dispute that he failed to ensure Smooth made all payments due to clients’ creditors, he caused or allowed transfers to be made from the client account in excess of fees due to Smooth, and after a winding-up petition had been presented, he transferred £109,512 from the client account to a connected company for no genuine trading purpose.

His ban became effective on June 30, 2017, and lasts for 10 years.

On August 8, 2018 the Court made disqualification orders against Josie Broadstock (eight years) and Robert Jones (seven years), both of which commenced on August 29, 2018.

The Court found that in failing to prevent the clients’ funds, which were held on trust, from being misused between February 12, 2013 and August 2, 2013, during which time cheques raised for clients’ creditors but withheld amounted to £572,001, Josie Broadstock’s conduct fell below the standards of probity and competence that could reasonably be expected of her as a director.

Robert Jones left the company in May 2013, and while he was not aware that cheques to clients’ creditors totalling £69,223 were withheld prior to his departure, the court found he was aware that a substantial shortfall to clients had accrued by February 12, 2013, and in not taking any steps to prevent the company from continuing to misuse trust monies to meet its own cash requirements, his conduct also fell below the expected standards of probity and competence.

Robert Clarke, group leader of Insolvent Investigations North at the Insolvency Service, said: “Not only was there continued misuse of the client funds and breaches of regulatory guidelines, the directors breached the trust of their clients, which is particularly distasteful given the financial difficulties they already experienced.

“Despite the detriment that was being caused to the clients, the directors continued to be well remunerated, and Mr and Mrs Broadstock, or third parties connected to them, even benefited from spending of over £14,000 on the company’s credit card on a legal dispute, a holiday and airline tickets, an anniversary party, and a payment towards the cost of four season tickets in the executive lounge of a premier league football club.”

He said: “The lengthy bans the directors have all received are entirely justified.”