Townrow v Financial Services Authority, Court of Appeal - United Kingdom Financial Services and Markets Tribunals, January 12, 2006,  UKFSM FSM025
|Resolution Date:||January 12, 2006|
|Issuing Organization:||United Kingdom Financial Services and Markets Tribunals|
|Actores:||Townrow v Financial Services Authority|
REGULATED ACTIVITIES - Performance - Prohibition Order - Fit and proper person - Failure to reply to enquiries from Regulator - Trading while not authorised on account of dissolution of partnership Failure to conduct proper pensions review - Non-payment of redress to customers - Trading without professional indemnity cover - Failure to make proper disclosure in application for approval - Whether applicant not a fit and proper person to perform functions relating to regulated activities - Reference dismissed FSMA 2000 s 32 - FSMA 2000 s 56 PRACTICE guidance on form of chronology - guidance on core bundle FINANCIAL SERVICES AND MARKETS TRIBUNAL Case No FIN/2005/0009 JONATHAN MILROY TOWNROW Applicant -and- FINANCIAL SERVICES AUTHORITY Respondent Tribunal: Andrew Bartlett QC (Chairman) Christopher Burbidge Ian Abrams Sitting in public in London on 1, 2, 5, 6, 7 December 2005 Date of decision: 12 January 2006 For the Applicant Gareth Fatchett For the Respondent Helen Malcolm and Adrian Berrill-Cox © CROWN COPYRIGHT 2006 2 DECISION INTRODUCTION1. The applicant, Mr Townrow, has worked in the financial services industry for more than 20 years. The Financial Services Authority ("the Authority", or "the FSA") decided on 21 February 2005 to prohibit Mr Townrow from performing any function in relation to any regulated activity carried on by an authorised person. The decision was made under s 56 of the Financial Services and Markets Act 2000 ("the Act" or "FSMA") on the ground that it appeared to the Authority that Mr Townrow was not a fit and proper person to perform those functions. Mr Townrow has referred this decision to the Tribunal.2. The Authority refers to a number of aspects of the conduct of Mr Townrow, principally in his handling of the business of JM Townrow & Associates ("JMTA"). The Authority relies in particular on allegations concerning Mr Townrow's inability and apparent unwillingness to complete JMTA's pensions review, his dealings with his clients, his repeated inconsistencies amounting to lies to the regulator, his failure to comply with decisions of the Financial Ombudsman Service, and his trading while unauthorised and uninsured. ROLE AND JURISDICTION OF THE TRIBUNAL3. In order to deal with one aspect of Mr Townrow's concerns about the Authority's decision it is necessary to recapitulate the role and jurisdiction of this Tribunal.4. Mr Townrow complains that the Regulatory Decisions Committee of the Authority did not deal with the matter properly. He contends that the Decision Notice was authored by the Enforcement Division, contains inadequate reasons, and was merely rubber-stamped by the RDC without any real consideration of his case. 35. We have not found it necessary or useful to consider this complaint, as it does not seem to us to bear on the decision which we have to make. The present reference is not simply a review of the decision taken by the Authority, whether one considers for that purpose the RDC or the Authority's Enforcement Decision. The role of the Tribunal is to consider the matter afresh in the light of all the evidence made available to us. By s133(3) of the Act the Tribunal may consider any evidence relating to the subject-matter of a reference, whether or not it was available to the Authority at the material time. Unlike the RDC, we have heard sworn evidence from various witnesses at some length. Our task is to determine, having heard the evidence, what (if any) is the appropriate action for the Authority to take in relation to the matter referred to us: FSMA s 133(4).6. We do not rule out the possibility that examination of the Authority's decision-making process might in some very particular circumstances shed useful light on the issues. In the present case we have not found it useful. Our approach, therefore, has been to leave wholly on one side the decision made by the RDC, and to consider the matter afresh without reference to the reasoning contained in it. `FIT AND PROPER' UNDER THE REGULATORY REGIME; PROHIBITION ORDERS7. The criteria to be considered by the Authority when assessing whether a person is fit and proper are set out in the Fit and Proper test for Approved Persons (FIT) in the FSA Handbook issued pursuant to s157(1) of the Act. The ingredients of fitness and propriety relate to (1) honesty, integrity and reputation, (2) competence and capability, and (3) financial soundness.8. While the assessment of fitness and propriety of an approved person takes place within the regulatory framework introduced by the Act (fully effective from December 2001), earlier conduct which gives rise to concerns about possible unfitness and impropriety must be judged against the standards which prevailed at the material time. Some of the matters relied on by the Authority concern events before 2001. Mr Townrow's activities were regulated 4 originally by FIMBRA and later by the PIA. For the purposes of the present case the standards of conduct required by FIMBRA and by the PIA were not materially different from those required by the new regime.9. As regards the making of a prohibition order, ENF 8.5.1A states: "The FSA will consider in each case whether its regulatory objectives of maintaining market confidence in the financial system, promoting public awareness, protecting consumers and reducing financial crime can adequately be achieved by withdrawing approval or disciplinary sanctions, for example, public censure or financial penalties, or by issuing a private warning. The FSA considers that a prohibition order generally has more serious consequences than the withdrawal of approval because a prohibition order will usually be wider in scope (see ENF 8.3.2 G). It is therefore likely that the FSA will consider making a prohibition order against approved persons only in the more serious cases of lack of fitness and propriety where it considers that the other powers available to it are not sufficient to achieve the FSA's regulatory objectives."10. ENF 8.5.2 states: "When it decides whether to exercise its power to make a prohibition order against an approved person, the FSA will consider the following factors: (1) whether the individual is fit and proper to perform functions in relation to regulated activities. The criteria for assessing the fitness and propriety of approved persons are contained in FIT 2.1 (Honesty, integrity and reputation); FIT 2.2 (Competence and capability) and FIT 2.3 (Financial soundness). The criteria include: (a) honesty, integrity and reputation; this includes an individual's openness and honesty in dealing with consumers, market participants and regulators and ability and willingness to comply with requirements placed on him by or under the Act as well as with other legal and professional obligations and ethical standards; 5 (b) competence and capability; this includes an assessment of the individual's skills to carry out the controlled function that he is performing; and (c) financial soundness; this includes whether the individual has been the subject of any judgment debts or awards in the United Kingdom or elsewhere that are continuing or were not satisfied within a reasonable period; (2) whether and to what extent, the approved person has: (a) failed to comply with the Statements of Principle; or (b) been knowingly concerned in a contravention by the relevant firm of a requirement imposed on the firm by or under the Act (including the Principles and other rules); (3) the relevance, materiality and length of time since the occurrence of any matters indicating unfitness; (4) the particular controlled function the approved person is performing, the nature and activities of the firm concerned and the markets in which he operates; (5) the severity of the risk which the individual poses to consumers and to confidence in the financial system; (6) the previous disciplinary record and general compliance history of the individual including whether the FSA (or any previous regulator) has previously imposed a disciplinary sanction on the individual." THE WITNESSES11. The Authority called Stefan Brzezicki, Marina Petit, Hilary Bourne, Michael Heather, and Andrew Fatherley of the FSA, and one of JMTA's clients, Graham Evans. The statements of Alan Ford, Christopher Harris, Daniel Shedden, Denis Lyons. Domenic Sidonio, Gary Nicholls, Ian Thomson, John Little, Lesley Titcomb, Malachy Madden, Mark Ferguson, Nigel Smith and 6 Terry Saunders were read. Mr Townrow gave evidence himself, and called John Bailey.12. We found no reason to doubt the evidence of the Authority's witnesses, who appeared to us to be doing their best to give honest and reliable evidence.13. Mr Townrow's evidence suffered from inconsistency and equivocation. Reminding ourselves that the burden of proof lies on the Authority, and making all possible allowances for misunderstanding or faulty recollection, we have nevertheless been driven to the conclusion that Mr Townrow exhibited a strong tendency in his evidence to say what appeared to him to be expedient, rather than trying to give truthful and accurate answers to counsel's questions. We refer to specific aspects below. We also had reservations about Mr Bailey's evidence, to which we shall make reference. MR TOWNROW AND JMTA14. JMTA was initially known as Financial Consultancy Services and was authorised as a partnership by FIMBRA in April 1988. It started trading under the name JM Townrow & Associates on 9 February 1989. Mr Townrow and his wife Annette were the partners. It was admitted to membership of the PIA on 11 April 1997.15. JMTA provided advice on, and arranged and dealt in life assurance, pensions, and collective investment schemes and advised on investment.16. Although there were from time to time in the history of JMTA others employed who fulfilled various controlled functions, Mr Townrow, who described himself as senior partner was responsible for the day-to-day management of JMTA, the allocation of resources at JMTA, and compliance...
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