PROMETHEAN FINANCE LIMITED v THE FINANCIAL CONDUCT AUTHORITY [2024] UKUT 00229 (TCC)

Neutral Citation: : [2024] UKUT 00229 (TCC)

Case Number: UT/2023/37

UPPER TRIBUNAL

(Tax and Chancery Chamber)

By hybrid hearing with the Tribunal and the Respondents in person at the Rolls Building, London, and Applicant attending by video link from HMCTS premises in Manchester

FINANCIAL SERVICES –registration of non-genuine trading names as trading names of the Applicant on the Financial Services Register – issue of supervisory notice requiring removal of non-genuine trading names – whether actions of Authority were reasonable and proportionate – yes – reference dismissed - s55L(3)(a) Financial Services and Markets Act 2000

Heard on: 30 and 31January 2024

Judgment date: 05 August 2024

Before

JUDGE NICHOLAS ALEKSANDER
MARTIN FRAENKEL

JEAN PRICE

Between

PROMETHEAN FINANCE LIMITED

Applicant

and

THE FINANCIAL CONDUCT AUTHORITY

The Authority

Representation:

For the Applicant: Eliot Maddison, director of the Applicant

For the Authority: Mark Fell KC, Counsel, instructed by the Financial Conduct Authority

DECISION

Introduction

1. The Applicant (“Promethean”) has been regulated by the Authority since 25 July 2016. It has Part 4A Financial Services and Markets Act 2000 (“FSMA”) permissions to carry out a range of regulated consumer activities, including credit broking, debt adjusting and debt counselling (the latter two permissions are limited to exclude the administration of debt management plans) and agreeing to carry on a regulated activity.

2. In November 2022, the Financial Conduct Authority (“the Authority”) identified alleged non-compliance by Promethean in relation to rules and principles in financial promotions made by Promethean and its appointed representatives. In the course of correspondence with Promethean about the alleged non-compliance, the Authority became aware that Promethean had registered a large number of trading names of third-party insolvency practitioners on the Financial Services Register (“the Register”). It is not disputed that these third parties (with two exceptions) are not themselves registered under FSMA and are not appointed representatives of Promethean. The term “non-genuine trading names” (“NGTNs”) was defined in the Authority’s Supervisory Notices as meaning the “trading names listed on the [Financial Services] Register which are not (a) owned; and/or (b) controlled; and/or (c) used in the carrying out of debt counselling” by Promethean. The reference to “non-genuine” is to the fact that these names are not names under which Promethean itself trades, rather they are the trading names used by the third parties.

3. This reference relates to the Authority’s Second Supervisory Notice dated 1 June 2023 by which the Authority imposed the following requirements on Promethean pursuant to section 55L(3)(a) FSMA with immediate effect:

   1. By 4.30pm on 12 April 2023, Promethean must remove all NGTNs registered on the Authority’s Financial Services Register;

   2. Promethean must not register and/or use any Trading Names without the prior written consent of the Authority;

   3. Within 10 days of the Requirements coming into force, Promethean must provide, in a form to be agreed with the Authority, data confirming the number of customers that have been referred to Promethean by its trading names registered with the Authority (including all previous registrations of trading names no longer used) from March 2022 to the date of the Second Supervisory Notice;

   4. Within 14 days of the Requirements coming into force, Promethean must conduct a review of all Promethean’s financial promotions and communications, and those of its Appointed Representatives (“ARs”);

   5. Promethean must make amendments to any financial promotions and/or communications identified at (4) above to ensure they comply with all relevant FCA Handbook Rules within 5 days of their review;

   6. Promethean must provide a written report to the FCA detailing the number of financial promotions and communications withdrawn/amended in accordance with (4) and (5) within 7 days and provide the Authority with a list of breaches identified and amendments, or, if no such breaches are identified, provide written confirmation to the Authority that the Firm’s financial promotions (and those of its ARs) comply with the relevant requirements;

   7. Promethean must conduct a review of its (i) systems and controls, and (ii) policies and procedures in relation to all financial promotion activities for which it is responsible, including the activities of all its Appointed Representatives, and provide a written report of the outcome of the review to the Authority within 3 weeks of the Requirements coming into force;

   8. Promethean must secure all books and records and preserve all information and systems in relation to all activities carried on by it, including but not limited to regulated activities, and must retain these in a form and at a location within the UK, to be notified to the Authority in writing by no later than within 7 days of the Requirements coming into force, such that they can be provided to the Authority, or to a person named by the Authority, promptly on its request;

   9. By close of business within 2 days of the Requirements coming into force, Promethean must publish in a prominent place on its website (https://www.prometheanfinance.co.uk/) in a form to be agreed in advance with the Authority, a notice setting out the terms and effects of these Requirements;

   10. Promethean must as soon as possible, and by no later than close of business within 14 days of the Requirements coming into force, notify in writing all customers who have been referred to Promethean through its Non-Genuine Trading Names since March 2022 of the imposition of the terms and effects of the Requirements. This must be in a form to be agreed in advance with the Authority; and

   11. Once the notifications referred to in sub-paragraph (10) have been made, Promethean must provide to the Authority within 24 hours:

       1. Copies of the template notifications sent to all recipients referred to in sub-paragraph (10);

       2. A list of all parties to whom notifications have been sent pursuant to sub-paragraph (10); and

       3. Confirmation that, to the best of its knowledge, Promethean has sent notifications pursuant to sub-paragraph (10) to all relevant parties.

4. We heard evidence from:

   1. Nick McGruer, head of the Authority’s Department in Consumer Investments, Supervision, Policy and Competition. Mr McGruer was the person responsible for authorising the making of the Second Supervisory Notice that is the subject of this reference; and

   2. Eliot Maddison, the sole director and shareholder of Promethean. Mr Maddison holds the SMF3 (executive director) and SMF16 (compliance oversight) roles in Promethean.

Both provided witness statements and gave oral evidence on oath, on which they were cross examined. We found both witnesses to be reliable.

5. In addition, a core bundle of 219 pages and a supplemental bundle of 2523 pages were produced in evidence.

6. At the hearing, Promethean was represented by Mr Maddison and the Authority was represented by Mark Fell KC.

Procedural matters

7. In November 2023, following correspondence between the parties and with the Tribunal, Promethean made an application

   1. to require amended pleadings;

   2. for the Authority to provide the names and email addresses of the individuals who had made complaints to the Advertising Standards Authority (“ASA”);

   3. for permission to serve amended witness statements; and

   4. for the hearing listed in London for 30 and 31 January 2024 to be vacated and the hearing relisted either at a venue closer to Manchester (where Promethean is based) or conducted by remote video link.

8. Judge Aleksander refused the application for amended pleadings, but gave consent for the service of supplemental witness statements. He also refused the application that the Authority disclose the names and email addresses of the individuals who had complained to the ASA, on the grounds that the Authority was not relying on these complaints, and therefore the Tribunal did not have jurisdiction to require disclosure. Further, Promethean had given no explanation of why these names and email addresses were relevant to the issues under reference.

9. The grounds for the application to vacate the hearing were that Promethean’s financial resources had been depleted as a consequence of the Authority’s actions, and that it could not afford to pay for travel and accommodation for a hearing in London. Judge Aleksander directed that the hearing should not be...