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Upper Tribunal roundly rejects FCA's recklessness case seeking to ban former Julius Baer employees

Posted on 20 June 2023

The Upper Tribunal has handed down its judgment in Thomas Seiler, Louise Whitestone and Gustavo Raitzin v. Financial Conduct Authority [2023] UKUT 00133 (TCC). Mishcon de Reya represented Mr Seiler.

The joined references of the three applicants were allowed in full by the Tribunal, with the Tribunal holding that the Financial Conduct Authority (FCA) had not made out its case on any of its allegations and that none of the applicants had acted recklessly and with a lack of integrity.

Accordingly, the matter has been remitted to the FCA with a direction to reconsider its decision to prohibit the three applicants.


The case concerned arrangements entered into by the bank (Julius Baer) and Dmitry Merinson (an individual connected with the Yukos Group) back in 2010 and 2011. Pursuant to these, Merinson received commission from the bank for introducing companies within the Yukos Group to Julius Baer. The sole director of one of the Yukos companies (Daniel Feldman) was involved in the proposing and approval of the arrangements and, as it turned out, shared in the Merinson commission.

In the Decision Notices which were the subject of the references, the FCA had decided that each of the individuals lacked integrity: being Louse Whitestone in London (the relationship manager), Thomas Seiler in Switzerland (Market Head of Russia and Central and Eastern Europe) and Gustavo Raitzin in Switzerland (Region Head for the same region). The FCA had decided that each individual had recklessly disregarded the risks that Merinson and Feldman were misappropriating Yukos funds. It said that they therefore lacked integrity and should be prohibited from performing any function in relation to regulated activities.

Separately, a Final Notice was issued to JBI (an FCA-registered UK subsidiary of Julius Baer) and published on 30 November 2022. The FCA fined JBI £18,022,500 for failing to conduct its business with integrity, failing to take reasonable care to organise and control its affairs and failing to be open and cooperative with the FCA.


The Tribunal held that the FCA had not made out its case on any of its allegations against the individuals and that none of them had acted recklessly and with a lack of integrity. It unanimously allowed all three references. It remitted the matter back to the FCA to decide whether to make a further finding as to whether a limited prohibition order on the grounds of lack of competence and capability should be imposed. However, in its directions, it set out eight matters it said the FCA must take into account, all militating against the FCA seeking that limited prohibition.

Recklessness / lack of integrity

The Tribunal rejected the argument advanced by the FCA, that recklessness, and therefore a lack of integrity, could be found if a reasonable person in the same position as the individual would have been aware of the risk in question, regardless of the individual's actual knowledge. The Tribunal found an individual can only recklessly ignore a risk of which they are actually aware and that none of the applicants were aware of the relevant risks.


There are very many interesting features of the case. Some are related to the law (such as recklessness / lack of integrity, described above) and others to the approach taken to various issues by the Tribunal. Beyond that, Enforcement Watchers might find issues related to process the most interesting, given their implications for how the FCA runs future investigations. We outline some of these below.

The Tribunal's criticisms of the FCA

  • The FCA was criticised by the Tribunal for its approach to the investigation and the proceedings in a number of respects, including:
  • The Tribunal seriously criticised the length of time the investigation took, calling it "on any view unacceptable." The Tribunal stated that it appeared to it that it was for the FCA to seriously consider whether it is appropriate for it to continue with an investigation which it does not have the resources to complete within a reasonable period of time.
  • The Tribunal found that changes in the case team contributed to a "serious failure" on the part of the FCA to meet its disclosure obligations and that there had been a potential failure to gather relevant documents. There were serious errors in disclosure throughout the case, culminating in the disclosure by the FCA of a relevant document following the conclusion of the hearing. In the context of the disclosure failings, the Tribunal stated "There are only so many times the Authority can apologise for its failings, insist that lessons have been learned and then expect that those affected should simply move on".
  • In addition, the Tribunal criticised the FCA for having "[swallowed] hook, line and sinker" the version of events put forward by a person whose veracity it subsequently doubted. The FCA became, according to the Tribunal, anchored its initial impressions of what had happened and, when presented with further evidence, suffered from confirmation bias. It never stepped back to consider, according to the Tribunal, whether it was more likely that the applicants did not know about the fraud.

The JBI Final Notice

The FCA had already published its Final Notice against JBI, and fined JBI some £18 million for failing to conduct its business with integrity, failing to take reasonable care to organise and control its affairs and failing to be open and cooperative. Yet, these findings were the product of JBI agreeing the "facts". These included criticisms of the individuals which have now been dismissed by the Tribunal. This means there are now inconsistent findings, one reached as a result of negotiation with one party and the other reached following judicial determination involving the other parties. In its judgment, the Tribunal recognised that it would now "clearly be unfair" for the Final Notice to be published in full on the FCA's website. The Tribunal was clear that the allegations into the individuals could easily have been divorced from the allegations against the firm and investigated thoroughly and independently.

The FCA is going to have to take the Upper Tribunal's criticisms on board in future cases. If it does not do so of its own volition, parties may well try to force it to.

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