Journal of Financial Crime Ð Vol. 12 No. 3
Placing Bankers in the Front Line:
The Secondary Liability of Bankers for their
Customers' Regulatory Contraventions
powerto pursuenot onlythose inbreach ofits rulebook
but also those who become involved in those breaches
through being `knowingly concerned' in the relevant
An early example of the use of this
power against `secondary' parties culminated in the
Court of Appeal decision SIB v Pantell (No. 2)
asolicitor who acted for a client who was not authorised
to carry on investment business found himself the
target of regulatory action. The circumstances in
which the FSA may act against those who are `know-
ingly concerned' have been broadened considerably
and the sanctions the FSA may impose
have also been extended.
The rationales for this `sec-
ondary' liability have never been articulated,
but it is
another example of a regulatory policy that seeks to
include anyone involved in the ®nancial services
sector in the prevention and detection of contraven-
tions. The money laundering legislation
is a notable
exampleof this and, as will be shown below, the obliga-
tions imposed on ®nancial services ®rms such as banks
under that legislation increase their potential liability
to regulators under the `knowingly concerned' head.
Therefore it will surely not be long before the FSA
turnsthe spotlight on bankers who operate the accounts
of those who contravene its regulatory regime.
FSA to act against such `secondary' parties only when
there had been well-de®ned breaches of the regulatory
regime by the `primary' transgressor,
adopts a much more comprehensive approach. Thus
the power so to act arises when the primary transgres-
sor has breached a so-called `relevant requirement'.
That phrase is de®ned very broadly as a `require-
ment' imposed either `by or under' the FSMA
or `by or under any other Act' which gives rise to an
oence, which the FSA may prosecute.
category of `relevant requirement' covers only the
insider dealing oence imposed by the Criminal
Justice Act 1993, Part V, as the FSA does not have
the power to prosecute oences Ð such as the
Money Laundering Oences under POCA
Ð arising under statutes other than FSMA
It is the ®rst category of `relevant requirement' Ð
one `imposed by or under' the FSMA
potentially very broad.
Starting with the word
`requirement', although there are many sections
which expressly enable the imposition of `require-
and the Act often uses the verb `require', it
would seem that `relevant requirement' is not con®ned
to requirements imposed under those sections but also
extends to any obligations imposed.
In short, duties
imposed by or under the Act result in `requirements'.
Moreover, it seems clear that `requirement' covers
obligations not to act, so that a prohibition
would give rise to a `requirement' not to trans-
Thus constraints on behaviour also give rise
to `requirements' to keep within those constraints. As
for the quali®cation `imposed by or under' the FSMA
2000, this covers two situations. The ®rst relates to
requirements directly imposed by the Act itself.
Assuming the wide view of `requirement' suggested
above is adopted, whenever the Act imposes a duty
or creates a criminal oence, this gives rise to a require-
ment `imposed by' the Act. The second type of
requirement is that imposed `under' the FSMA
and would cover requirements imposed under any
powers conferred by that Act. This would cover
`requirements' in secondary legislation made under
the Act Ð including the Money Launder ing Regula-
Moreover, it covers requirements
imposed by the FSA
under its rule-making
Therefore the FSA's rules
in its Handbook
give rise to `requirements'.
In sum, it follows that the circumstances when the
FSA may act against those `knowingly concerned'
have been signi®cantly broadened by FSMA
Journalof Financial Crime
Vol.12,No. 3, 2005,pp.200± 208