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

Before examining the more contentious issues, which arose out of the Tenet termination, we summarise the other issues relevant to the Application in relation to which there is less controversy.

Firstly, Mr Ashraf will be the only proposed adviser at the Applicant. Mrs Ashraf will be employed by the Applicant, but she has no qualifications or experience in this field, and it was not established either that she would be an alternative source of regulated advice for clients or that she would represent a robust counterweight to or check and balance on Mr Ashraf.

Dealing with identified issues of concern in chronological order, we start with the reference from HSBC in April 2015. This reported to the Authority that, although it had not been necessary to discipline Mr Ashraf, there had been three justified complaints against Mr Ashraf relating to unsuitable or misleading advice. It was suggested that one of these incidents may have been “double reported”, so that in fact there are only two justified complaints. Subject to this point, the accuracy of the HSBC reference was not disputed by the Applicant.

In March 2015 Mr Ashraf was terminated by SJP. As reported by SJP to the Authority, Mr Ashraf had not completed client reviews and suitability letters before proceeding to give advice. He had also not been transparent. What not being transparent means here is that Mr Ashraf had, as he admitted at the time, fabricated documents provided to Ms Egan as part of her internal investigation. Although Mr Ashraf claimed that he had simply been recreating documents he was sure existed, it is nevertheless the case that, without admitting this until confronted with the evidence of what he had done, he deliberately falsified documents during an investigation. Ms Egan’s evidence was that SJP is prepared to retain and retrain advisers where file quality is the concern. However, with Mr Ashraf there was the additional concern around his honesty.

We do not accept that very serious matters such as this will ever cease to need to be considered when dealing with an authorisation application, although we do accept that an individual’s subsequent behaviour may lessen or even completely purge the impact of past failings. Here, however, we have an individual who has fabricated documents seeking effectively to be allowed to operate without oversight. Not only that, we also see the same individual continuing to be less than transparent with the Authority, both in writing and in interview, in relation to this behaviour.

Whilst at Tenet Mr Ashraf’s DB licence was withdrawn. Mr Ashraf suggested that Tenet were withdrawing all DB licences from advisers, but the evidence from Ms Ford is that decisions to take away advisers’ DB licences were based on the quality of their work. We found Ms Ford to be a fair and balanced witness, as can be seen from some of her comments (for example at [53]). For that reason and because she would be more likely than Mr Ashraf to know why Tenet withdrew DB licences from advisers, we prefer her evidence and find as a fact that Mr Ashraf’s DB licence was withdrawn from him because of the quality of his work.

In addition, we have the pension switching cases. The reviewer’s comments, set out at [35], are scathing. We accept Mr Ashraf’s point that Tenet had not reported any of this to the Authority (which is something we are troubled by, as this seems to us to be a potentially very serious allegation involving actual or potential customer detriment), but we are not prepared to ignore it on that basis. The evidence, at [35] and [50], suggests that Mr Ashraf was switching clients from one pension provider to another for no good reason, potentially risking poor client outcomes, when the only effect of the switch would be to generate a fee.

We should note the other points identified by Ms Ford. Although Mr Fatchett suggested that her meeting with Mr Ashraf might have been something of an ambush, there was no serious dispute around the concerns Ms Ford identified. These were the pension transfers we have just discussed, Mr Ashraf’s inconsistent charging policy and use of unapproved introducers. With the exception of the pension switching cases (which seem to us to at least have the potential of being quite serious), we accept, as Ms Ford herself did, that these are relatively minor issues which could be addressed by training, although the inconsistent charging point does engage the regulatory duty to deal with clients fairly. At [45] we have noted the shortcomings in Mr Ashraf’s engagement with clients and compliance with process requirements which became apparent after he left Tenet.

Finally, we have the narrative given by Mr Ashraf to the Authority in relation to his plans. We accept Mr Fatchett’s submission that the statement in Mr Ashraf’s witness statement was correct when it was given. We do not accept that the statement that Mr Ashraf made to the Authority in his competency interview was correct when it was made. The narrative in Mr Ashraf’s witness statement makes it abundantly clear that, when the Applicant applied for authorisation, it did so because of difficulties Mr Ashraf was encountering in finding employment in this sector. His regulatory history was, to put the point colloquially, making him too hot to handle. Mr Ashraf was asked a direct question by the case officer about what his plans would be if the Application were turned down. In order not to look desperate in front of the Authority (as Mr Ashraf put it), he suggested to the Authority that he had lots of alternative avenues open to him, whereas the truth of the matter was that none of the other regulated businesses he had approached were prepared to employ him once they understood his regulatory history and every avenue he explored turned into a cul-de-sac. The attitude of the wider financial services community to Mr Ashraf was something the Authority would have an obvious interest in understanding, but Mr Ashraf hid that from the Authority.

If we pause here and take stock of the evidence we have just reviewed, we can see why the Authority might be concerned with the idea of Mr Ashraf conducting regulated business effectively on his own and unsupervised. He has a history, evidenced by the terms of his departure from SJP and what Ms Ford told us Tenet had discovered after he left, of not documenting advice in the way required or following procedures established to secure good outcomes for clients. He also has a history, evidenced by HSBC’s reference, the withdrawal of his DB licence by Tenet and their findings in relation to his pension switching advice, of giving advice of a doubtful quality. These features of Mr Ashraf’s record would justify the Authority being concerned about features (b), (c) and (g) of Threshold Condition 2E. In addition, we have the evidence of his lack of transparency during the SJP investigation and (much more recently) in the way he disclosed to the Authority the circumstances around his departure from SJP and his plans were the Application to be unsuccessful. These features would justify the Authority being concerned about feature (b) of Threshold Condition 2D and features (d) and (e) (and in consequence (a)) of Threshold Condition 2E.

We can see, based on these factors alone, why the Authority would be concerned by the idea of allowing Mr Ashraf to work effectively unsupervised. They harboured a similar concern in 2015, but in that case their worries were allayed by Tenet’s promise to exercise appropriate supervision of Mr Ashraf. Concerns about advice quality, compliance with required processes and transparency remain, but no equivalent oversight to that promised by Tenet in 2015 is available here. Based on these considerations alone, we would be satisfied that the Decision was one which was reasonably open to the Authority.