UT/2023/37 - [2024] UKUT 00229 (TCC)

Mr McGruer authorised the issue of the First Supervisory Notice on 11 April 2023 under s55L FSMA. A bundle of evidence was also served on Promethean. Mr McGruer’s grounds for imposing the requirements were to advance the Authority’s operational objective of securing an appropriate degree of protection for consumers (section 55L(2)(c) and section 1B(3)(a) FSMA), and because it appeared to him that Promethean was failing, or was likely to fail, to satisfy the threshold conditions in Schedule 6, FSMA (section 55L(2)(a)). In particular, it appeared to him that Promethean was failing, or likely to fail, the suitability threshold condition that it must be a fit and proper person (paragraph 2E of Schedule 6). Mr McGruer also considered that Promethean was failing to comply with the requirements of the PRIN sourcebook, in particular Principle 6 (customer interests) and Principle 7 (communications with clients), as well as other rules and guidance contained in the Authority’s Handbook and guidance published on the Authority’s website. He considered the matter sufficiently urgent that the requirements should be imposed with immediate effect, and with specified dates. The fact that the IPs might be “exempt” under article 55B, Financial Services and Markets Act 2000 (Financial Promotion) Order or article 72H, Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 was irrelevant to the question of whether IPs’ websites registered as trading names were indeed genuine trading names of the Promethean.

In summary, Mr McGruer’s reasons for imposing the requirements set out in the First Supervisory Notice were that (a) the trading names registered by Promethean on the Register were not owned, controlled, or used in the carrying out of debt advice by Promethean, and (b) Promethean’s ARs had issued financial promotions which appeared to contravene the Authority’s rules and guidance. Mr McGruer was concerned that the registration of NGTNs could result in consumers being misled into believing that they are dealing with a business authorised and regulated by the Authority (and benefiting from the protections available to customers of authorised firms), when in fact they are dealing with an entity which is not regulated under FSMA. As regards Promethean’s ARs, the Authority had identified breaches of its rules relating to financial promotions, which Promethean had failed to identify or remedy. Mr McGruer was concerned that that the breach of the Authority’s rules and guidance may result in consumer harm – for example as a result of consumers entering into transactions which they would not have otherwise entered into. In Mr McGruer’s opinion, Promethean had failed to address the Authority’s concerns, despite the Authority having communicated their significance and the risk of harm to consumers on a number of occasions.

The requirements set out in the First Supervisory Notice are virtually identical to those in the Second Supervisory Notice. As it is the Second Supervisory Notice (and not the First) that is the subject of this Reference, we have not set out all the terms of the First Notice in this decision.

Requirement 1 of the First Supervisory Notice required Promethean to remove all NGTNs from the Register by 4.30pm on 12 April 2023. As it had not done so, on 18 April 2023 Mr McGruer decided that the NGTNs should be removed from the Register in order to prevent further risk of consumer harm. In consequence, the Register still included the NGTNs but showed that the names were no longer in use. According to Mr McGruer, this is consistent with how they would be displayed on the Register had Promethean complied with Requirement 1. The Authority notified Promethean that it had taken this action on 18 April 2023.

The deadline for making representations in respect of the First Supervisory Notice was 25 April 2023. As no such representations had been received, the Authority wrote to Promethean on 28 April 2023 noting that Promethean was in breach of the requirements – and potentially, as a consequence – of the Threshold Conditions.

The First Supervisory Notice was referred to the Tribunal by Promethean on 5 May 2023, and the reference included an application to suspend its effect.

Mr McGruer granted Promethean an extension of time for the submission of representations, and Promethean submitted written representations to the Authority on 18 May 2023. In these representations Promethean:

The Authority’s Supervision Division considered the representations and made recommendations to Mr McGruer. He decided not to amend any of the requirements, and issued the Second Supervisory Notice on virtually identical terms to the First Supervisory Notice. Mr McGruer considered that the imposition of Requirements continued to be desirable in order to secure an appropriate degree of protection for consumers, or, alternatively, that Promethean was continuing to fail, or continuing to be likely to fail, to satisfy the suitability threshold condition. In addition, he considered that events since the First Supervisory Notice was issued indicated a continuing failure by Promethean to address the concerns that had been raised by the Supervision Division.

The Second Supervisory Notice was issued on 1 June 2023. The Notice was referred to the Tribunal by Promethean on 15 June 2023 and the reference included an application to suspend its effect. Promethean later withdrew the suspension application.

Correspondence took place between Promethean and the Authority following the issue of the Second Supervisory Notice concerning compliance with the various requirements, including the terms of the notice to appear on Promethean’s website under Requirement 12 and the notifications to be made to customers under Requirement 13.

The Authority was concerned about the effect on consumers of the length of time during which Promethean had not complied with notification provisions contained in Requirements 9 and 10, and that some of the IPs’ websites continued to state that they were trading names of Promethean despite having been removed from the Register on 18 April 2023. The Authority was concerned that consumers may be misled that they were dealing with an authorised firm. In addition, the Authority considered that the IPs may be in breach of s24 FSMA, which makes it an offence for an unauthorised person to describe themselves as, or hold themselves out in a manner which indicates that they are, authorised. On 9 June 2023, the Authority informed Promethean that it intended to publish a consumer warning in relation to the NGTNs, and that it would also notify the operators of the relevant NGTNs that it is a potential breach of s24 FSMA to purport to be a trading name of an authorised firm where that is no longer the case. Promethean objected to the Authority’s proposed course of conduct. But on 15 June 2023, the Authority published a consumer warning stating that it had removed the NGTNs from the Register. The text of the warning is as follows:

The warning included a statement that Promethean had referred this matter to the Upper Tribunal, which would consider representations from the Authority and Promethean, and either dismiss the reference or ask the Authority to reconsider its decision. On 16 June the Authority wrote to the various IPs that it had identified as continuing to state on their websites that they were trading names of Promethean, drawing their attention to the removal of the trading names from the Register, and referring to s24 FSMA. Further letters were sent in some cases on 7 and 10 July 2024. On 16 June 2024, the Authority wrote to one of the NGTNs which was continuing to state that it was an AR of Promethean, when it had ceased to be so on 31 May 2023.

It is not disputed, and we find that: