UT-2023-000032 - [2024] UKUT 00265 (TCC)

There is no dispute as to the legal framework relevant to the Application, the Decision or the Reference, which we summarise below.

By section 55A FSMA, an application to carry on regulated activities must be made to the appropriate regulator (here, the Authority).

By section 55B(3) FSMA, in giving permission to carry out regulated activities, the appropriate regulator “must ensure that the person concerned will satisfy, and continue to satisfy, in relation to all regulated activities for which the person has or will have permission the threshold conditions…” .

The “threshold conditions” are (by section 55B(1) FSMA) those set out in Schedule 6 of FSMA. Relevant for these purposes are Threshold Conditions 2D (Appropriate Resources) and 2E (Suitability).

As regards Threshold Condition 2D, an applicant’s resources must be appropriate in relation to the regulated activities that the applicant carries out or intends to carry out. This specifically involves a consideration of non-financial resources. In particular:

“(4)

The matters which are relevant in determining whether A has appropriate non-financial resources include—

(a)

the skills and experience of those who manage A's affairs;

(b)

whether A's non-financial resources are sufficient to enable A to comply with—

(i)

requirements imposed or likely to be imposed on A by the FCA in the exercise of its functions, or

(ii)

any other requirement in relation to whose contravention the FCA would be the appropriate regulator for the purpose of any provision of Part 14 of this Act.”

In respect of Threshold Condition 2E, an applicant:

“…must be a fit and proper person having regard to all the circumstances, including—

(a)

A's connection with any person;

(b)

the nature (including the complexity) of the regulated activities that A carries on or seeks to carry on;

(c)

the need to ensure that A's affairs are conducted in an appropriate manner, having regard in particular to the interests of consumers and the integrity of the UK financial system;

(d)

whether A has complied and is complying with requirements imposed by the FCA in the exercise of its functions, or requests made by the FCA, relating to the provision of information to the FCA and, where A has so complied or is so complying, the manner of that compliance;

(e)

whether those who manage A's affairs have adequate skills and experience and have acted and may be expected to act with probity;

(f)

whether A's business is being, or is to be, managed in such a way as to ensure that its affairs will be conducted in a sound and prudent manner;

(g)

the need to minimise the extent to which it is possible for the business carried on by A, or to be carried on by A, to be used for a purpose connected with financial crime.”

By section 55Z3(1) FSMA, an applicant who is aggrieved by the regulator’s decision may refer the matter to the Tribunal.

Section 133 FSMA contains some general provisions regarding the proceedings before the Tribunal, notably:

The approach to be taken under section 133(6) and (6A) FSMA is set out in Carrimjee v FCA (No.2), [2016] UKUT 447 (TCC), at [37]-[38]. The question for the Tribunal is whether the decision reached by the Authority is one that falls within the range of reasonable decisions that it was open to the Authority to make. In concluding on this point the Tribunal can consider developments after the relevant decision was made, as well as evidence which was not available to the Authority when it reached its decision. This is because, as the Tribunal explained in Carrimjee v FCA(No.1), [2015] UKUT 0079 (TCC) at [60], “… a reference is not an appeal against the Authority’s decision, it is a determination of what is the appropriate action to take in the circumstances falling within the subject matter of the reference, that is the circumstances that have been the subject of the prior regulatory proceedings, rather than the particular outcome as found in the Decision Notice.”

If the Tribunal concludes, on an assessment of all the evidence and relevant findings of law, that the decision was reasonably open to the Authority, it must dismiss the Reference. If the Tribunal concludes that the decision was not reasonably open to the Authority, it must remit the matter to the Authority with a direction to reconsider its decision in the light of findings made by the Tribunal. What the Tribunal cannot do is substitute its decision for the Authority’s.

Whilst Carrimjee concerned a prohibition order made under section 56 FSMA, it was confirmed in Lewis Alexander Limited v FCA [2019] UKUT 49 (TCC) at [34] that this approach equally applies to questions of whether the Authority can be satisfied that, if the Application is granted, the Applicant would satisfy the Threshold Conditions.

On 30 November 2023 Judge Jones summarised the issue to be determined by us as follows:

“Was the decision that the Authority was not satisfied the Applicant was and would continue to be a fit and proper person with appropriate non-financial resources reasonably open to it?”

Turning to the burden and standard of proof (see Köksal v FCA [2016] UKUT 478 (TCC) at [37] and Lewis Alexander at [36]):