In a Decision Notice dated 22 January 2016, the FCA's Regulatory Decisions Committee (RDC) determined that, whilst not dishonest, Arif Hussein, formerly a derivatives trader at UBS, lacked integrity because he "closed his mind" (i.e. was reckless) to the possibility that colleagues with LIBOR submission responsibilities would follow his stated preferences when making their submissions. The RDC imposed a prohibition which Hussein elected to appeal to the Upper Tribunal (the FCA was time-barred from additionally seeking a penalty). This article does not focus particularly on the facts of the Hussein matter, but instead on the procedural and tactical learning points from it.
Before the Upper Tribunal, despite the finding in the RDC, the FCA's Statement of Case included an allegation that Hussein had acted dishonestly. It is well known to practitioners that FCA Enforcement can (and will) re-instate allegations rejected by the RDC in certain cases. The risk that RDC findings may get worse before the Upper Tribunal must therefore be taken into account when deciding whether to appeal. This is especially so in cases on the margins of a more serious fitness and propriety finding than the RDC have reached. Whilst conceptually the ability of the FCA to have a second "bite at the cherry" jars with the RDC's status as a committee of the FCA, it is consistent with the Upper Tribunal providing a hearing de novo.
However, whilst the FCA may adapt its case before the Tribunal, it is an entirely different matter for an applicant to change his/her evidential position. Before the RDC, Hussein had said that relevant communications with trader colleagues (who were also LIBOR submitters) were for the purpose of exploring internal hedging opportunities only. However, before the Upper Tribunal, Hussein also said that he believed that it was acceptable (indeed UBS best practice and something that he was aware of) for his trading positions to be taken into account by the LIBOR submitters, provided that this did not result in UBS being other than in the "middle of the pack" of LIBOR submitting banks. As a result of this shift in position, the FCA argued that Hussein must either have been lying to the RDC or to the Upper Tribunal, thereby strengthening its case for an integrity related prohibition on the basis of dishonesty.
Ultimately, the Tribunal was persuaded by Hussein's adapted position and determined that he had not acted dishonesty or recklessly at the time in question. However, the change in position was more problematic. Hussein said that his recollection of the dual-purpose of his communications only arose when he read the Decision Notice in his own case. The Tribunal was prepared to give Hussein the "benefit of the doubt" in respect of the answers he had given to FCA Enforcement during the investigation interview as he was apparently very nervous and the communications he was discussing had occurred some time previously and would not have been extraordinary at that time. In those circumstances, he could be forgiven for not discussing the communications dual purpose. However, the Tribunal viewed Hussein's submissions after that point as being untruthful and misleading. It did not believe that reading the Decision Notice was a revelatory moment.
It is interesting to note the Tribunal's somewhat wistful comment that had Hussein "laid all his cards on the table" before it, then it may have viewed his position more sympathetically. For the Tribunal, whilst it could understand why Hussein acted as he did for fear of the consequences of an adverse decision, it was a serious matter to be untruthful to the FCA and a more serious matter to lie on oath before the Tribunal. These were matters which the Tribunal said went to the heart of "fitness and propriety" to perform regulated activities. That is plainly right. Any applicant who has aspects of their case that have not previously been given or accurately stated can only sensibly address that by being truthful. Hussein's assessment appears to have been that his adapted position would better persuade the Tribunal. Whilst that assessment was accurate, it was also crucial that the Tribunal believe his stated reason for modifying his position. On that point, the Tribunal said that Hussein could offer no "rational explanation" for the change.