“(1) The FCA may make a prohibition order if it appears to it that an individual is not a fit and proper person to perform functions in relation to a regulated activity carried on by — (a) an authorised person …”
“(1) A regulator may take action against a person under this section (whether or not it has given its approval in relation to the person) if— (a) it appears to the regulator that he is guilty of misconduct; and (b) the regulatoris satisfied that it is appropriate in all the circumstances to take action against him. (1A) For provision about when a person is guilty of misconduct for the purposes of action by a regulator— (a) see section 66A, in the case of action by the FCA, and (b) see section 66B, in the case of action by the PRA.… (3) If the regulator is entitled to take action under this section against a person, it may do one or more of the following — (a) impose a penalty on him of such amount as it considers appropriate; … (4) A regulator may not take action under this section after the end of the relevant period beginning with the first day on which the regulator knew of the misconduct, unless proceedings in respect of it against the person concerned were begun before the end of that period. (5) For the purposes of subsection (4)– (a) a regulator is to be treated as knowing of misconduct if it has information from which the misconduct can reasonably be inferred; and (b) proceedings against a person in respect of misconduct are to be treated as begun when a warning notice is given to him under section 67(1). (5ZA) “The relevant period” is— (a) in relation to misconduct which occurs before the day on which this subsection comes into force, the period of 3 years, and (b) in relation to misconduct which occurs on or after that day, the period of 6 years.” (a) it appears to the regulator that he is guilty of misconduct; and (b) the regulatoris satisfied that it is appropriate in all the circumstances to take action against him. (a) see section 66A, in the case of action by the FCA, and (b) see section 66B, in the case of action by the PRA.… (a) impose a penalty on him of such amount as it considers appropriate; (a) a regulator is to be treated as knowing of misconduct if it has information from which the misconduct can reasonably be inferred; and (b) proceedings against a person in respect of misconduct are to be treated as begun when a warning notice is given to him under section 67(1). (a) in relation to misconduct which occurs before the day on which this subsection comes into force, the period of 3 years, and (b) in relation to misconduct which occurs on or after that day, the period of 6 years.”
“(1) For the purposes of action by the FCA under section 66, a person is guilty of misconduct if any of conditions A to C is met in relation to the person. (2) Condition A is that— (a) the person has at any time failed to comply with rules made by the FCA under section 64A, and (b) at that time the person was— (i) an approved person, (ii) an employee of an authorised person, or (iii) a director of an authorised person.” (i) an approved person, (ii) an employee of an authorised person, or (iii) a director of an authorised person.”
‘The FCA's penalty-setting regime is based on the following principles: (1) Disgorgement - a firm or individual should not benefit from any breach; (2) Discipline - a firm or individual should be penalised for wrongdoing; and (3) Deterrence - any penalty imposed should deter the firm or individual who committed the breach, and others, from committing further or similar breaches.’
‘The FCA will seek to deprive an individual of the financial benefit derived directly from the breach (which may include the profit made or loss avoided) where it is practicable to quantify this. The FCA will ordinarily also charge interest on the benefit. Where the success of a firm’s entire business model is dependent on breaching FCA rules or other requirements of the regulatory system and the individual’s breach is at the core of the firm’s regulated activities, the FCA will seek to deprive the individual of all the financial benefit he has derived from such activities.’
“(5) In the case of a disciplinary reference or a reference under section 393(11), the Tribunal— (a) must determine what (if any) is the appropriate action for the decision-maker to take in relation to the matter; and (b) on determining the reference, must remit the matter to the decision-maker with such directions (if any) as the Tribunal considers appropriate for giving effect to its determination. … (6) In any other case, the Tribunal must determine the reference or appeal by either— (a) dismissing it; or (b) remitting the matter to the decision-maker with a direction to reconsider and reach a decision in accordance with the findings of the Tribunal. (6A) The findings mentioned in subsection (6)(b) are limited to findings as to— (a) issues of fact or law; (b) the matters to be, or not to be, taken into account in making the decision; and (c) the procedural or other steps to be taken in connection with the making of the decision. (7) The decision-maker must act in accordance with the determination of, and any direction given by, the Tribunal.”
“It was the FCA's submission, and I accept, that in determining any penalty under section 129, the starting point for the court should be to consider the relevant DEPP penalty framework that was in existence at the time of commission of the market abuse in question. To do otherwise would risk introducing an inequality of treatment of defendants depending upon whether the proceedings were taken against them under the regulatory route or the court route and depending upon how long the proceedings had taken to come to a conclusion. By the same token, however, in common with the Upper Tribunal, the court is not bound by that framework, or by the FCA's view of how it should be applied. But if the court intends to depart from the framework in a particular case, it should explain why it considers it appropriate to do so. It occurred to me that in this regard there is some analogy with the approach of the criminal courts to the application of the sentencing guidelines produced by the Sentencing Council.”
“As you know I am currently dealing with two IFA firms (Moneywise & Blue Ocean) which appear to be non-compliantly switching relatively low risk personal pensions into SIPPs with underlying high risk non-standard assets. Both IFA’s are promoting the Greyfriars Asset Management Portfolio 6, which purports to be a Discretionary Portfolio Management arrangement. I have serious concerns about this product which invests exclusively in non-standard investments, all of which are part of the Best Group. Greyfriars is also part of the Best Group. Marketing material attempts to promote the product as standard on the basis that liquidity issues will be overcome through a financial contribution from Best.”
“Ben Kent – Was actually a client. He is an ex-IFA who introduced a couple of cases. He asked VWM to get involved in a new product. VWM “wouldn’t deal with Ben because of the business he was trying to get involved in”
“The Pension Scams Team has become increasingly aware since 2015 of the Greyfriars Asset Management (“GAM”) Portfolio 6 which has been recommended in large numbers by a number of financial adviser firms, strongly supported by numerous unregulated firms. It is promoted as a Discretionary Fund Management Service (“DFM”), whilst in reality it would seem to be a fund raising mechanism for a range of high risk non-mainstream investments promoted by Best Asset Management (“Best”), the parent company to GAM. Consumers targeted are generally unsophisticated financially and are placing a significant portion of their pension pots at risk.”
“ … it would seem that a key strand of the GAM/Best marketing strategy is through the use of unregulated introducers. Of course, the difficulty here is that these introducers are almost certainly working for Best (as opposed to GAM) which makes it a more difficult line to pursue as Best is unregulated. The strategy is also potentially lucrative for the authorised financial advisers who are given a supply of leads for no effort on their part Typically, these might receive a fee of perhaps 3% of the fund value by way of a fee deductible from the fund. So a£50,000 fund could pay the adviser£1500 . Furthermore the adviser might agree an on-going servicing arrangement which might generate, maybe, another 1%pa. This strategy for identifying potential customers inevitably leads to customers who are financially unsophisticated and to advisers (IFAs) who are less discerning when considering customers’ needs. This combination has led to high volume and unsuitable distribution of a high risk and largely illiquid product to customers with limited resources for retirement provision.”
“The one area which does not appear to have been satisfactorily understood is that of the marketing strategy for P6. I sense that ATEB are themselves of the opinion that they do not have the full facts. The report mentions the relationships between Greyfriars and the various IFA and introducer firms it works with as well as marketing allowances / intermediation fees payable. However Greyfriars seemed to be inconsistent in their responses on this. There is an addendum to the report (2.6.2016) in which it is recorded that Greyfriars have explicitly stated that no payments are made to IFAs, although it does not mention unregulated introducers. Separately, Greyfriars concede that two (of eleven) unregulated introducers (SIPPclub and Stephen Cave) have been receiving payments of£250 for introductions and “checking documentation”
“Our principal interest is around the mass marketing of Greyfriars Asset Managers P6 DFM project. Consumer Wealth is of particular interest because we are aware of 400+ “advice” transactions @£8.6m in the last year. They have written no other business. So the key areas of interest are: … - What are the financial arrangements between CW and Best/GAM. We believe there are inducements to either IFA firms or introducer firms but our info is thin and largely anecdotal.”
“As of May 2016 firm has transacted 189 Greyfriars P6 SIPP switches @ 14.6m. This firm was previously authorised as Active Investment Services (FRN 501900) and had transacted 98 x P6 @£6.6m . Total P6 = 287 @£21.2m (Data supplied by GAM).”
“331. The two- year period runs from the time at which the Authority either knew of the misconduct or had information from which the misconduct could reasonably be inferred (s 66(4), (5)). 332. The first of these is a subjective test which looks at the actual knowledge of the Authority. It relates to actual knowledge of the misconduct. That has to be construed by reference to s 66(1). For time to start running in this respect the Authority must have actual knowledge that the particular person against whom action is to be taken has either failed to comply with a statement of principle issued under s 64, or has otherwise contravened as provided by s 66(2)(b). 333. The second test – the inference test – is an objective test. It is whether, absent actual knowledge, the Authority ought, on the basis of the information available to it, and applying a test of reasonableness, to have inferred that the relevant person had failed to comply with a statement of principle or had otherwise contravened. 334. There is a particularity to each of these tests. It is not sufficient that the Authority has information in its hands that would give rise to a mere suspicion. Nor is it enough that the information might suggest that there was misconduct, but that the person in question has not been identified as the apparently guilty party. The Authority must either know or be treated, by reasonable inference, as knowing of the misconduct by a particular person. The reference in s 66(4) to “the misconduct” (our emphasis) clearly refers to the particular misconduct in respect of which action is to be taken against a particular person, and not to conduct of a similar nature in respect of which information may have been obtained earlier. 335. Questions will arise as to the degree of certainty required before time can be regarded as running. There is a clear purpose in s 66 that the Authority should be allowed a reasonable period to investigate before being required to issue a Warning Notice. Consistent with that purpose, and to provide a balance for the affected person, the time at which the limitation clock is set cannot be when the case has been fully investigated and the Authority is ready to proceed. Time must start running at an earlier stage in the process. … 337. … for time to start running it is not necessary that the Authority has the full picture that would justify the issue at that stage of a Warning Notice. Although the Authority may only take action under s 66(1) if it appears to it that the relevant person is guilty of misconduct, the limitation period starts to run from an earlier time, when the Authority knows or has information from which the misconduct can reasonably be inferred. The Authority must, however, have sufficient knowledge of the particular misconduct, or such knowledge must be capable of being reasonably inferred, to justify an investigation. Mere suspicion is not enough, nor is any general impression that misconduct may have taken place. 338. There will be cases where information about possible misconduct will be received by the Authority piecemeal and over an extended period. At an early stage in the process such information may be inadequate for the Authority to know of a particular misconduct by a particular person, or to be able to infer such misconduct. A mere allegation or assertion unsupported by evidence would be unlikely to be regarded as sufficient to amount to knowledge of misconduct or as information from which it would be reasonable for the Authority to have inferred misconduct, although it might be expected to give rise to further enquiry. Knowledge of an allegation of misconduct is not the same as knowledge of the misconduct. As an investigation progresses more information may come to light as a result of which there comes a time when the Authority either knows, or it can reasonably be inferred from information which the Authority has, that there is substance to an allegation of misconduct in relation to a particular person. It is only at the latter stage that the time limitation begins to run in respect of that misconduct. Provided a Warning Notice is issued in respect of the misconduct within two (now three) years from the earliest time when the Authority knew of the misconduct or the misconduct could be reasonably inferred, the Authority may rely on all the information it has obtained, both before and after that time. 339. Where the Authority becomes aware of more than one act of misconduct of which a particular person appears to be guilty, the time limit operates separately in respect of each. The Authority may not take action in respect of misconduct of which it knew or which could reasonably be inferred more than two (now three) years before the issue of a Warning Notice. But if it also comes to know of misconduct, whether or not of the same nature as the misconduct it knew of earlier, or such misconduct can reasonably be inferred at a time not earlier than two (three) years before the Warning Notice, action in respect of that misconduct may be taken, notwithstanding the earlier failure to act in time in respect of similar misconduct. The fact that the Authority fails to take action in respect of certain misconduct cannot shut the Authority out from taking action, by issuing a timely Warning Notice, in relation to other misconduct, whether of the same or a different nature. … 342. It follows from this analysis that we agree … that the correct way to approach the issue of limitation is, first, to determine what the misconduct is that the Authority contends that an applicant is guilty of, and secondly to determine the earliest date on which the Authority knew of the misconduct or had information from which the misconduct could reasonably be inferred. The misconduct in question in this case comprises the specific incidents of misconduct set out in the Warning Notice. Any knowledge of other misconduct, whether of the same nature or not, or other facts not referable to the specific incidents of misconduct so set out are not relevant to the question of limitation bearing upon those specific incidents, and cannot accordingly inhibit the action that may be taken by the Authority in relation to those specific incidents.”
“ … whilst the email exchange of7 July 2007 did provide the Authority with some basic information, it was not information from which the Authority knew at that stage that there had been a failure on the part of Mr Jeffery to act with integrity, or such a failure could reasonably have been inferred. At the stage of receipt of the FOS’s email, the information consisted of nothing more than an allegation or assertion unsupported by evidence. Even if the facts stated had been accepted, they were not such as could have resulted in any reasonable inference that there had been misconduct on the part of Mr Jeffery. It may have been enough to justify further investigation, but there was at7 June 2007 insufficient material available to the Authority to give rise to any proper inference of a lack of integrity on the part of Mr Jeffery in respect of his dealings with Mrs Coxon.”
“407. The provisional and final decisions of the FOS referred to the FOS’s concerns that the Firm had invited renewal of a policy with Folgate when that agency had been terminated, when it had no idea what the premium would be, and failed to provide a refund of the difference between the premium paid of£825.85 and the premium for the Home and Legacy policy of£465.44 . It was concerned also that the Firm did not make clear to Mrs Coxon that the Folgate policy could not be renewed and that it had arranged an alternative policy, nor had the Firm informed Mrs Coxon that the policy had been cancelled in early February 2006. It referred to the implication that the fresh proposal had been completed and submitted by someone other than Mrs Coxon and that, although the Firm had implied that it had been completed and signed by Mr Coxon, the FOS did not consider that the signature on the form matched that of Mr Coxon. 408. Had the provisional and/or final decisions been in the hands of the Authority prior to29 May 2008 , we would have taken the view that misconduct in relation to Mrs Coxon, and the forgery of Mr Coxon’s signature, could each reasonably have been inferred from the information those decisions provided to the Authority. There is, however, no evidence that those decisions were sent to the Authority at any time prior to26 August 2008 , and we are satisfied that the first time the Authority had information from which it could reasonably have inferred Mr Jeffery’s misconduct in this respect was26 August 2008 .”
“322. The decision in Jeffery indicates that in order for the limitation period to start running the Authority must know enough for it to be reasonable to investigate further, and that what is necessary is not a full appreciation of all the relevant facts but “a broad knowledge of the essence”: see [336] of the decision. However, these principles need to be applied in the context of the particular misconduct that is being alleged. In this case, the relevant misconduct is Mr Burns’s failure to appreciate that there was a conflict, and consequently the failure on the part of TMI to manage that conflict. It is apparent from our findings on the facts that the Authority had no knowledge of those matters until its further investigations that commence with its letter of20 December 2012 . As the Tribunal in Jeffrey said at [337] of its decision, the Authority must have sufficient knowledge of the particular misconduct, [emphasis added] or such knowledge must be capable of being reasonably inferred, to justify an investigation. 323. Clearly the Authority had no knowledge of the particular misconduct in this case. Neither in our view was such knowledge capable of being reasonably inferred from the information that it did have. It certainly had enough information on which it could take steps to find out whether the conflicts of interest which it had identified by9 December 2012 were being properly managed, but, in our view, it could not be inferred from the information it had that they were not being managed. We therefore characterise the information that the Authority did have before9 December 2012 as giving rise to no more than mere suspicion, and, as explained by the Tribunal in Jeffery at [337] of its decision, that is not enough.”
“The Authority had knowledge of an execution only model, perhaps being used by Mr Henderson. It knew that HJL were in some form of arrangement with HCA and that cold calling might be taking place. Put together, those were all matters that merited further enquiries, but the Authority would need considerably more information to trigger any kind of investigation, let alone an investigation as to whether Mr Henderson had been guilty of misconduct which breached Statement of Principle 1. None of the information available to the Authority at that point indicated that a breach of that Principle by Mr Henderson could reasonably have been inferred. 1162. In particular, none of the information available to the Authority, or which it ought to have known at that point, could lead to an inference that Mr Henderson had been reckless in relation to the conflicts of interest in the Execution-Only Process, reckless as to the adoption and use of the Pension Review and Advice Process or dishonest in respect of the statements made in the Service Proposition and the Brochure. Put at its highest, the Authority was aware of certain factual elements relating to those matters.”
“[A]t least to the extent that it is permanent (clearly, if the payment of the penalty reverses the tax liability triggered by the receipt of the benefit, so that the tax can be reclaimed, no credit should be given for it) and capable of being calculated (or, at least, reasonably estimated), a liability to tax which erodes the value of a benefit should be taken into account in the calculation of the amount to be disgorged.”
“We agree with Mr Temple’s submission that the amount to be disgorged should reflect the secondary benefits derived by the wrongdoer from the way they invested or used the benefits they obtained directly because of their wrongdoing. This would include investment returns obtained or (the example we gave in our November Decision) money saved by paying off an expensive debt. Where there are no investment or other measurable economic benefits derived by the subject or these do not fully reflect the value to the subject of having received benefits some time previously, interest should be charged on the amounts directly derived by the subject, in order (if nothing else) that what is disgorged is the present value of a benefit derived some time ago. “Disgorgement” is looking to deprive a wrongdoer of any benefit from their wrongdoing, not to compensate a person they have wronged or to penalise the wrongdoer, and so the rate of interest used in such a case should reflect prevailing deposit interest rates over the relevant period. This may mean, as it did in Da Vinci Invest, that in a time of ultra-low interest rates no interest should be charged.”
“The phrase “financial benefit” should not be construed in an overly legalistic fashion. The policy should not be construed in the same way as a statutory provision and should be capable of being applied flexibly, depending on the facts. Therefore, for instance, in a case where the firm is legally entitled to receive the full amount of the income it derives from the misconduct in question in circumstances where it is obliged to meet certain expenses out of the amount received, the fact that it had a legal entitlement to the whole amount should not be decisive as to the amount of the financial benefit. Whether the “financial benefit” is the gross amount, or a lesser amount to take account of expenses, needs to be considered on a case-by-case basis.”
“528.We do not accept the Authority’s submission to the effect that the use of the term “earned” in DEPP 6.5B.2G(3) shows that the term “received” always includes sums to which an individual may become entitled subject to the satisfaction of any contingencies. It is important to note that DEPP 6.5B.2G(3) is merely guidance and as we have said, should not be construed in an overly legalistic fashion. In any event, there is nothing in this provision which clearly indicates that the use of the term “earned” was intended to be a wider scope than “received”, bearing in mind that the opening line of the provision refers to an individual who “receives remuneration”. 529.We understand that there may be occasions when it is appropriate to calculate relevant income on the basis of an estimate of what is likely to be received in respect of benefits where their receipt is dependent upon the satisfaction of conditions. We do not criticise the Authority for having taken that approach at the Decision Notice stage on the basis of the information available to the Authority at the time or its approach of applying a contingency adjustment to the value of the deferred shares based on the average percentage of LTIPs awarded to Mr Staley in previous years. 530.However, if, as in this case, the matter is referred to the Tribunal, in our view it is clear that the Tribunal must look at all the circumstances that exist at the time it comes to determine the reference. If circumstances change, as in this case, and benefits which the Authority considered were likely to be received will not in fact be received, then the Tribunal must take that into account. As the authorities demonstrate, whilst the Tribunal should pay due regard to the provisions of DEPP and its application in the circumstances of the case by the Authority, it is able to depart from the Authority’s calculation where it is in the interests of justice to do so.”