The Queen (on the application of C) v Financial Services Authority
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE SILBER |
| Judgment Date | 25 May 2012 |
| Neutral Citation | [2012] EWHC 1417 (Admin) |
| Docket Number | Case No: CO/410/2011 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 25 May 2012 |
[2012] EWHC 1417 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Silber
Case No: CO/410/2011
Dinah Rose QC and Ben Jaffey (instructed by Herbert Smith LLP) for the Claimant
Michael Brindle QC and Michael Green QC (instructed by Financial Services Authority) for the Defendant
Hearing dates: 3 and 4 April 2012
Further written submissions submitted on 5 and 6 April 2012
It would frustrate the relief sought for the Claimant's identity, and the precise allegations made against him by the FSA, to be publicly disclosed at this stage. Paragraphs [21–26] set out a limited factual summary to put this judgment into context. The proceedings to date have been heard in private, with anonymity granted to the claimant. The anonymity granted to the Claimant may be lifted in the future depending on whether his name becomes public in the ordinary course of disciplinary proceedings. If so, this judgment will be published in full and the anonymity order will be lifted.
Accordingly, this judgment has been published in its present form to protect the claimant's identity. The full judgment has been provided, in confidence, to the parties.
I. Introduction
The claimant challenges the decision of the Regulatory Decisions Committee ("RDC") of the Financial Services Authority ("FSA") to issue a Decision Notice to him dated 27 October 2010, pursuant to the provisions of Section 67 of the Financial Services and Markets Act 2000 as amended ("the 2000 Act"). The Decision Notice censured the claimant and it imposed a fine of £100,000 on him for alleged breaches of Principle 6 of the FSA's Statements of Principle for Approved Persons ("Statements of Principle").
The case for the claimant is that the Decision Notice is flawed and that it should be quashed because the RDC has failed to give proper or adequate reasons for its decision in breach of its duty to do so.
The FSA contends that adequate reasons were put forward, but their main ground for resisting this claim is that a claim for judicial review cannot be pursued on the grounds that the claimant has available to him an alternative remedy, namely a reference of his case to the Upper Tribunal pursuant to the provisions of Section 67(7) of the 2000 Act.
The claimant submits that a reference to the Upper Tribunal is not an adequate alternative remedy, because the central purpose of requiring reasons from the RDC was to enable him to decide whether or not to refer the matter to the Upper Tribunal because of the risks of taking that step which I will explain. So his case is that such a reference cannot therefore be an adequate remedy for the RDC's failure to provide proper reasons. It is also said on behalf of the claimant that the Upper Tribunal's task is to conduct a full de novo re-hearing of the substance of the matter, but crucially first that it had no jurisdiction to quash the decision of the RDC or to require that body to give reasons for its decision, and second that it can increase both the charges and the penalties imposed by the RDC.
II. The FSA's Disciplinary Process
(i) The role of the FSA
As is well known, the FSA regulates financial services markets in the United Kingdom. This entails authorising firms to conduct "regulated activities" as well as setting the standards that they must meet. The relevance of that to the present case is that Bank D was an authorised firm regulated by the FSA.
Under Section 59 of the 2000 Act, authorised firms, such as Bank D, are required to take reasonable care to show that no person performs a "controlled function" in relation to the regulated activities of that firm unless the FSA first approves that person to perform that controlled function. One such "controlled function" is the function of being a director of an authorised firm. Under section 61 of the 2000 Act, the FSA may only give that approval if it is satisfied that the person concerned is a fit and proper person to perform the relevant function. During the relevant period, the claimant was approved by the FSA to perform a controlled function of Bank D.
The FSA is empowered by section 64 of the 2000 Act to issue Statements of Principle setting out the conduct expected of approved persons, and among the seven statements of principle issued by the FSA there is: —
Statement of Principle 6
"An approved person performing a significant influence function must exercise due skill, care and diligence in managing the business of the firm for which he is responsible in his controlled function."
Section 66 of the 2000 Act empowers the FSA to take action against a person if it appears to the FSA that he or she has failed to comply with a Statement of Principle issued under section 64 of the 2000 Act and the FSA is satisfied that it is appropriate in all the circumstances to take action against him. The FSA may impose a penalty of such amount as it considers appropriate and may publish a statement of his or her misconduct. The process leading up to the imposition of a penalty has a number of prescribed stages.
(ii) The Investigation process
First, Part XI of the 2000 Act gives the FSA powers to gather information and to carry out investigations for the purpose of enabling it to fulfil its regulatory functions. Thus section 168 of the 2000 Act entitles the FSA to appoint one or more persons to conduct an investigation on its behalf where it appears to the FSA that there are circumstances suggesting that a person may not be a fit and proper person to perform a controlled function, or that he or she may have failed to comply with a statement of principle with the consequence that he or she may be guilty of misconduct under section 66 of the 2000 Act.
Substantial powers are given to investigators appointed pursuant to these provisions. The fact that an investigation is or is not being carried out or the findings of an ongoing investigation are all matters which are not normally published. In addition, the FSA notifies persons it contacts in relation to any investigation that the investigation is a confidential matter and that it should be treated by them as such. Those bodies which have been contacted, are required not to discuss or to disclose details of the investigation with any party other than their legal advisors.
At the conclusion of the investigation, the Enforcement Division of the FSA has to decide if disciplinary action is merited and, if so, it sends to the subject of the investigation a Preliminary Investigation Report ("PIR") setting out the findings of fact that the investigators consider to be relevant to matters that are under investigation and the preliminary conclusions of the Enforcement Division on those findings. It is common ground that the policy of the Enforcement Division is to provide the subject of the investigation with a reasonable period of time in which to provide comments on the PIR before determining whether to commence disciplinary proceedings.
(iii) The recommendations to the RDC
So it follows that if the Enforcement Division after considering any response to the PIR considers that disciplinary action is merited, it must make recommendations to the RDC that a warning notice be issued. The procedure adopted is that the Enforcement Division makes the recommendation by submitting the PIR, its submissions and a draft warning notice to the RDC for consideration. The RDC is the body of the FSA charged with the task of making decisions for the purpose of deciding whether or not to issue a warning notice or a decision notice under section 67 of the 2000 Act.
(iv) Review by the RDC
The RDC, which is a committee of the Board of the FSA, exercises regulatory powers and it is accountable to the Board of the FSA for its decisions, but it is important to bear in mind that it is separate from the FSA's executive management structure. Apart from its Chairman, none of the members of the RDC is employed by the FSA. The RDC has its own legal advisers and support staff, who are all separate from the FSA staff involved in conducting the investigation and in making recommendations to the RDC. Thus, there is a clear division between the RDC and the Enforcement Division.
When determining whether to issue a warning notice, the RDC must satisfy itself that the action recommended by the Enforcement Division is appropriate in all the circumstances. That means that the RDC has to consider the matter and it may seek additional information or clarification of any relevant matter.
(v) Issuing of the Warning Notice
If the RDC decides that the FSA should issue a warning notice proposing disciplinary action, it must settle the wording of the notice. Section 387 of the 2000 Act requires that the warning notice must be in writing and that it must:-
(a) state the action, which the FSA proposes to take and give reasons for the proposed action;
(b) specify a reasonable period for the recipient of the Warning Notice to make representations to the FSA regarding the approved action; and
(c) provide the recipient of the Warning Notice with access to material on which the FSA relies.
(vi) The representation process
The recipient of a warning notice has a right to make both written and oral submissions to the RDC concerning the action proposed in the warning notice. A period of at least 28 days has to be allowed to enable the recipient to make written representations, while if oral representations are requested, a...
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