British regulators are getting tough on perceived corporate governance failures, slapping a £3.5 million ($5.63 million) fine on a firm and banning its chairman for not implementing proper governance.

The UK Financial Services Authority said Tuesday fined Mitsui Sumitomo Insurance Company (Europe) Ltd., the London-based subsidiary of the Japanese insurance firm Mitsui Sumitomo Insurance Company Ltd (Japan), £3,345,000 for serious corporate governance failings, and imposed a ban and fine of £119,303 on its former executive chairman, Yohichi Kumagai.

According to the FSA, MSIEu began expanding its wholesale insurance business in Europe in 2007. And, in 2009, Kumagai was appointed as executive chairman as part of a staff rotation programme that saw a number of directors regularly sent to MSIEu. Shortly after his appointment, the FSA says it wrote to Kumagai and MSIEu stating that its expansion into European markets would need careful and focused oversight from an appropriately skilled board, and that the firm’s systems and controls would also have to be improved to identify and address the risks inherent in this new area.

However, it found that, despite receiving this guidance from the FSA, the management structure and composition of the board was ineffective, and that he failed to take prompt action to remedy the situation. It says he failed to ensure that key jobs were filled with staff who had the necessary experience, knowledge and time to fulfill their roles effectively; that he didn’t hire a chief underwriting officer; and, didn’t ensure the implementation of a new IT administration system across the firm’s branch offices which led to shortcomings in the management information available to the board.

These were significant failings of corporate governance and control arrangements, the FSA found, and it says that the weaknesses in corporate governance and control arrangements resulted in the firm being poorly organised and managed across its business as a whole.

“Senior management must take responsibility for the firms that they run. Kumagai failed to respond adequately to the changing risks facing his business even after they had been pointed out by the FSA. If those who hold senior positions in financial services firms had had any doubt about how seriously we view their regulatory responsibilities this fine and ban should make our position crystal clear,” said Tracey McDermott, acting FSA director of enforcement and financial crime.

The FSA notes that Kumagai and MSIEu agreed to settle at an early stage and therefore their fines were 30% lower. Had they not settled, the fines would have been £170,433 and £4,780,000, respectively.