Pyrrhus defeats the FCA

29 April 2015

The Upper Tribunal has directed the FCA to prohibit former insurance broker Stephen Allen from performing any function in relation to a regulated activity.

The Tribunal concluded that Mr Allen should be banned from regulated financial services because he is not a 'fit and proper' person as demonstrated by his misconduct before the Tribunal and also in a case before the High Court.

Mr Allen was an insurance broker specialising in professional indemnity risks. In July 2012, the FCA (then the FSA) issued a Decision Notice to Mr Allen stating that it intended to prohibit him because he was not a fit and proper person as a result, among other things, of fees he had allegedly charged improperly to an insurance client. Mr Allen referred the Decision Notice to the Tribunal and, in support of his case, he produced a single redacted page from a High Court judgment handed down on 16 December 2011 (in which Mr Allen was the claimant) with the intention of discrediting a witness due to give evidence against Mr Allen for the FCA before the Tribunal. Unsurprisingly the FCA requested the full judgment, but Mr Allen refused to provide a full, unredacted copy. Undeterred the FCA obtained a copy of the judgment from the Court transcribers whereupon they discovered that the High Court judge had found that Mr Allen had knowingly advanced and given untrue evidence to the High Court which included submitting a forged document as evidence.

Having reviewed the judgment the FCA abandoned its allegation concerning the insurance fees.  Unfortunately this victory for Mr Allen was rather short-lived because the FCA was permitted to rely on the findings of the High Court judge and upon Mr Allen's vain attempts to conceal these findings from the FCA.

The Tribunal's decision to prohibit Mr Allen on the basis of the findings of the High Court judge follows two earlier cases where individuals, who were also approved persons, have been banned from financial services because of misconduct outside of their role in financial services.  In January 2014, Anthony Verrier was prohibited by the FCA because of various findings made by the High Court and Court of Appeal that called into question his fitness and propriety. In those judgments various unfavourable comments were made about Mr Verrier's conduct in the proceedings before the High Court.  More recently, in December 2014, the FCA prohibited Jonathan Burrows on the basis that his conduct outside of work meant that he was not a fit and proper person.  In that well publicised case, Mr Burrows, who had evaded numerous rail fares, had not appeared before a court and there was no judgment upon which the FCA could rely.  Nonetheless his admissions made to the rail company were sufficient for the FCA to ban him.

For those in professions such as medicine and the law, such action is entirely unremarkable.  However these cases are unusual within the financial services sector. The regulators do assess individuals' fitness and propriety on the basis of conduct outside of the sector when considering applications for approval, and they have previously banned individuals convicted of criminal offences.  Nonetheless the type of misconduct relied on in these cases does reflect a shift in the approach of the regulators.  It is impossible to say with certainty whether we will see increasing numbers of individuals banned by the regulator for similar or even less serious misconduct; but with the advent of the senior manager and certification regime the smart money must be on that being a real likelihood.

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