At least 350 homeowners were left without insurance cover after a West Midland mortgage and insurance broker failed to underwrite their policies.
City regulator the Financial Services Authority said that Steven Leslie Davis, of Essential Mortgages Limited, had sold accident, sickness and unemployment insurance policies worth £500,000 to customers.
But it said Mr Davis, who was chief executive and director responsible for accounts and finance at his firm, had inadequate systems and resources in place for processing and monitoring people's applications.
As a result of this he failed to pass on premiums and get the policies underwritten.
This led to at least 350 customers being left without insurance cover, and the FSA believes that as many as seven people needed to make a claim on their policies but were unable to because they had not been underwritten.
It yesterday published a Statement of Misconduct against Mr Davis for falling well below acceptable standards in the way he carried out his duties as a director of his firm.
It is the first time the FSA has disciplined a senior manager of a mortgage and general insurance firm.
The regulator said it would normally have issued a significant financial penalty, but decided not to in this case because of Mr Davis' ability to pay a fine and the impact the penalty would have on his ability to pay back his creditors.
Essential Mortgages, which was based in Waterloo Road, Wolverhampton, but conducted business throughout the UK through a network of sales representatives, stopped trading in January last year and entered into a creditor's voluntary agreement in February of that year.
Consumers who were affected by the firm's failings have already been contacted by the liquidator of the firm and at least one person who was unable to claim on their insurance policy has received an ex gratia payment.
Jonathan Phelan, head of retail enforcement at the FSA, said: "Senior managers of authorised firms should take note that the FSA will hold them to account where they fail to act appropriately when carrying out their regulatory responsibilities."