Thomas v The Financial Services Authority, Court of Appeal - United Kingdom Financial Services and Markets Tribunals, September 22, 2004, [2004] UKFSM FSM010

Resolution Date:September 22, 2004
Issuing Organization:United Kingdom Financial Services and Markets Tribunals
Actores:Thomas v The Financial Services Authority
 
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PERFORMANCE OF REGULATED ACTIVITIES ­ Respondent's refusal to approve performance by Applicant of controlled functions ­ three preliminary issues ­ whether Respondent in breach of time limit in section 61(3) ­ yes ­ whether that made the warning notice and the decision notice void ­ no - whether the fact that the Respondent has appointed investigators in respect of the Applicant are grounds sufficient in themselves for a conclusion that the Applicant is not a fit and proper person ­ no ­ reference not yet determined - Financial Services and Markets Act 2000 ss 61, 133 and 168 THE FINANCIAL SERVICES AND MARKETS TRIBUNAL DAVID THOMAS Applicant - and - THE FINANCIAL SERVICES AUTHORITY Respondent Tribunal: DR A N BRICE (Chairman) COLIN BISHOPP JOHN PARSLOE Sitting in London on 22 and 23 July 2004 Michael Blair QC for the Applicant David Mayhew of Counsel for the Respondent © CROWN COPYRIGHT 2004 2 PRELIMINARY DECISION AND DIRECTIONS The preliminary issues1. Mr David Thomas (the Applicant) referred to the Tribunal a decision notice5 issued by the Respondent on 16 January 2004 which refused an application by Brook Partners Limited. The application was made under section 60 of the Financial Services and Markets Act 2000 (the 2000 Act) and applied for the Respondent's approval of the performance by the Applicant of controlled functions for Brook Partners Limited. The reason for the refusal was that the Respondent was not satisfied that the Applicant was a10 fit and proper person to perform those functions within the meaning of section 61(1) of the 2000 Act.2. On 18 June 2004 there was a hearing for directions when, under the provisions of Rule 13 of the Financial Services and Markets Tribunal Rules 2001 SI 2002 No. 247615 (the Rules), the Tribunal directed that three issues be determined at a preliminary hearing. Those three issues may be summarised as: (1) whether the Respondent was in breach of the time limit of three months in section 61(3) within which it had to determine either to grant the application of20 Brook Partners Limited or to give a warning notice; (2) if the Respondent was in breach of that time limit, what consequences followed; and (3) whether the fact that the Respondent had appointed investigators under section 168 of the 2000 Act to conduct an investigation on its behalf in respect of the Applicant meant that the Respondent could not be satisfied (within the meaning of section 61(1)) that the Applicant was a fit and proper person to perform the controlled functions.303. The first two issues were proposed by the Applicant and the third was proposed by the Respondent. The Tribunal left it to the parties to agree the final text of the preliminary issues. That final text (as amended at the preliminary hearing) is stated below within the context of the consideration of each issue.35 The legislation4. Three main strands of legislation are relevant to a consideration of the preliminary issues, namely: the legislation relating to the approval by the Respondent of40 the arrangement between Brook Partners Limited and the Applicant; the legislation relating to the appointment of investigators; and the legislation relating to the jurisdiction of the Tribunal. All references in this Preliminary Decision to sections are to sections in the 2000 Act unless otherwise stated. The approval5. Part V of the 2000 Act (sections 56 to 71) contains the provisions relating to regulated activities. Sections 59 to 63 comprise a group of sections which contains the provisions about the approval by the Respondent of the performance by a person of a50 controlled function under an arrangement entered into by an authorised person. 36. Section 59 provides that an authorised person must take reasonable care to ensure that no person (called a candidate) performs a controlled function under an arrangement entered into by the authorised person in relation to the carrying on of a regulated activity unless the Respondent approves the performance by the candidate of the controlled5 function to which the arrangement relates. Section 60 provides that an application for the Respondent's approval under section 59 may be made by the authorised person concerned. The relevant parts of section 61 provide: "61(1) The Authority may grant an application made under section 60 only if it is satisfied10 that the person in respect of whom the application is made ("the candidate") is a fit and proper person to perform the functions to which the application relates. ... "61(3) The Authority must, before the end of the period of three months beginning with the date on which it receives an application under section 60 ("the period for15 consideration") determine whether- (a) to grant the application; or (b) to give a warning notice under section 62(2)".7. Section 62(2) provides that, if the Respondent proposes to refuse an application,20 it must give a warning notice to the interested parties (in this reference Brook Partners Limited and the Applicant). Section 62(3) provides that, if the Respondent decides to refuse an application, it must give a decision notice to the interested parties and section 62(4) provides that, if the Respondent decides to refuse an application, each of the interested parties may refer the matter to the Tribunal. Section 63 provides that the25 Respondent may withdraw an approval if it considers that the candidate in respect of whom it was given is not a fit and proper person to perform the function to which the approval relates. Section 63 also contains provisions similar to those in section 62 about the giving of a warning notice, the giving of a decision notice and a reference to the Tribunal.30 The appointment of investigators8. The provisions about the appointment of persons to carry out investigations in particular cases are found in section 168. Subsections (3) and (5) provide that the35 Respondent may appoint one or more competent persons to conduct an investigation on its behalf. However, before such an appointment can be made, one of a number of conditions must be satisfied. The conditions relevant in this reference are: if it appears to the Respondent that there are circumstances suggesting that an offence under section 397 (misleading statements and practices) may have been committed (section 168(2)(a)); if it40 appears to the Respondent that there are circumstances suggesting that market abuse may have taken place (section 168(2)(d)); and if it appears to the Respondent that there are circumstances suggesting that an individual might not be a fit and proper person to perform functions in relation to a regulated activity carried on by an authorised person (section 168(4)(d)).45 The jurisdiction of the Tribunal9. The provisions relating to the jurisdiction of the Tribunal are found in Part IX (sections 132 to 137) and Schedule 13 of the 2000 Act. Section 132 establishes the50 Tribunal and section 132(2) provides that the Tribunal is to have the functions conferred on it by or under the Act. The relevant parts of section 133 provide: 4 "133(3) On a reference the Tribunal may consider any evidence relating to the subject- matter of the reference whether or not it was available to the Authority at the material time. (4) On a reference the Tribunal must determine what (if any) is the appropriate action5 for the Authority to take in relation to the matter referred to it. (5) On determining a reference, the Tribunal must remit the matter to the Authority with such directions, if any, as the Tribunal considers appropriate for giving effect to its determination.10 (6) In determining a reference made as a result of a decision notice, the Tribunal may not direct the Authority to take action which the Authority would not, as a result of section 388(2), have had power to take when giving the decision notice. ... (8) The Tribunal may, on determining a reference, make recommendations as to the Authority's regulating provisions or its procedures."10. Section 388(2) provides that, if a decision notice is preceded by a warning notice, the action to which the decision notice relates must be action under the same Part of the20 2000 Act as the action proposed in the warning notice. Thus section 133(6) means that, when determining a reference made as a result of a decision notice, the Tribunal may not direct the Respondent to take action which is not contained in the same Part of the 2000 Act as the action mentioned in the warning notice. In this reference the warning notice was made under Part V which concerns the performance of regulated activities.25 The evidence11. A bundle of documents was produced by the parties. A witness statement by Mr Terence John Saunders, who is employed by the Respondent as a Manager within the30 Regulatory Transactions Division, was included in the bundle of documents. Mr Saunders' evidence related to preliminary issue (1). Mr Saunders did not give oral evidence at the hearing. The facts3512. We find the following facts, based on the documentary evidence before us, for the purposes of this preliminary decision only. The Applicant4013. The Applicant has had a career in the financial services industry for over thirty years. We were informed that, during that time, no complaint was made against him, and he had no problem with the Respondent or with any other regulatory body, until the events mentioned in this Preliminary Decision.4514. From 1996 the Applicant was an investment analyst, and was Head of the Investment Trust Corporate Finance Department, in the London Office of Brewin Dolphin Securities Limited (Brewin). Brewin acts as a corporate broker and was active within the split capital investment trust (splits) sector between 1998 and 2001. At that50 time the Applicant was approved by the Respondent to perform the controlled functions of investment adviser and corporate finance adviser as a consultant under a contract of 5 services with Brewin. He was part of a small corporate broking team dedicated to...

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