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Upper tribunal reverses RDC decision

Upper Tribunal reverses RDC decision

18 September 2015

The Upper Tribunal has disagreed with and partially reversed the conclusion of the Regulatory Decisions Committee ("RDC") in relation to the alleged misconduct of and appropriate penalty for Andrew Wilkins.

Mr Wilkins was a co-director of Catalyst Investment Group Limited. Catalyst promoted to IFAs a bond that was linked to Senior Life Settlements and that was issued by ARM SA a company based in Luxembourg ("ARM").  At a certain point, ARM became required as a matter of Luxembourg law to become regulated by the Luxembourg financial services regulator (the CSSF). ARM submitted an application for regulation and, whilst that was pending, the CSSF required it to temporarily cease issue of the bonds, which it duly did.  The application was finally rejected some 2 years later.

The FCA took action against Timothy Roberts (the CEO of Catalyst and director of ARM), Mr Wilkins, Alison Moran (the compliance officer of Catalyst) and Catalyst itself.  In essence, the allegations related to the fact that Catalyst did not take the necessary steps to update IFA's regarding the on-going Luxembourg regulatory position of ARM and continued to allow funds to be collected by ARM for future scheduled bond issues. Mr Wilkins resigned at an early stage and well before ARM's application was rejected.

At the RDC, Ms Moran and Catalyst were fined £20,000 and £450,000 (reduced to a censure due to financial circumstances) respectively.  Mr Roberts was fined £450,000 and prohibited on the basis of integrity and competence, and Mr Wilkins was fined £100,000 and received a ban from performing significant influence functions on the basis of competence.  Both men referred these determinations to the Upper Tribunal.

Following a lengthy hearing, the Upper Tribunal dismissed Mr Roberts' reference. However, in respect of Mr Wilkins, whilst certain aspects of lack of skill and care were found, it determined that Mr Wilkins neither lacked integrity nor did he lack competence and capability such as to render him not fit and proper. It also reduced his fine to £50,000.

You can read the Upper Tribunal's decision here and the Upper Tribunal's additional reasons for determination here.

COMMENT

There are a number of points of interest in this case:

  • For the Tribunal to reach such a different view on the facts from the RDC is rare.  It may well point to the fact that the RDC is not an appropriate forum to hear evidence-heavy cases without the benefit of hearing live witness evidence over the course of many days. 
     
  • The RDC had found that Mr Wilkins' failings related to competence and capability only and it decided on a SIF prohibition. Despite this, when Mr Wilkins made his reference to the Tribunal, FCA Enforcement sought to resurrect its argument that Mr Wilkins lacked both integrity and competence, and that he should be fully prohibited. Further, it made an additional allegation against him that it could have made in front of the RDC, but did not do so.  It is true that to say that such an approach in this way is neither unprecedented nor impermissible. However, given that an RDC decision is an FCA decision, there is a very real issue about the circumstances in which it should be permitted to argue in front of the Tribunal in a way that it has itself already found to the contrary.  The upping of the ante in this way is something that could dissuade respondents from referring matters to the Tribunal.
     
  • Following its principal judgment on 11 August, the FCA released a press release indicating that  the Upper Tribunal had not made findings concerning Mr Wilkins in relation to competence, and stating that the question of prohibition would be remitted back to the RDC.  Mr Wilkins submitted that the position was quite clear, namely that the FCA's arguments on competence had also been rejected.  He referred the Upper Tribunal to the jurisdictional basis it had under the rules and by virtue of case law that entitled it to issue further reasons. The FCA press release was taken down, and the Upper Tribunal issued Additional Reasons for Determination, making clear that it had not found a lack of competence. Such clarification is highly unusual. As a consequence, the FCA confirmed that it would not be imposing any ban upon Mr Wilkins and it issued a clarifying press release.
     
  • The FCA's initial inaccurate press release was not without precedent. It chimes with the recent Upper Tribunal case (Bayliss & Co (Financial Services) Limited & Clive John Rosier v. FCA  [2015] UKUT 0265 (TCC)) in which the Tribunal criticised an FCA press release in relation to a Decision Notice under appeal and recommended changes to the process of preparing press releases for Decision Notices.   We shall have to see whether the FCA changes its approach to the preparation of press releases in future.

 

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