Upper Tribunal Tax and Chancery Chamber

UT-2023-000053/54 - [2025] UKUT 00087 (TCC)

Fecha: 25-Feb-2025

Introduction

Introduction

This is our second decision in relation to the references (“the References”) made to this Tribunal by Ms Fox-Bryant and Mr Price of two Decision Notices (“the Decision Notices”) dated 3 May 2023, by which the Authority decided to:

(1)

impose on Ms Fox-Bryant a financial penalty of £681,536 under section 66 of the Financial Services and Markets Act 2000 (“FSMA”), a prohibition order under section 56 FSMA and to withdraw Ms Fox-Bryant’s approvals to perform senior management functions at CFP Management Limited (“CFP”) under section 63 FSMA; and

(2)

impose on Mr Price a financial penalty of £632,594 under section 66 FSMA, a prohibition order under section 56 FSMA and to withdraw Mr Price’s approvals to perform senior management functions at CFP under section 63 FSMA.

In a decision (the “November Decision” - Neutral Citation [2024] UKUT 00357 (TCC)) released on 13 November 2024 we dismissed the References as to the prohibition orders and withdrawals of approval. We noted that we agreed with the Authority that significant financial penalties should be imposed on both Applicants, but we decided that the size of those penalties needed to be reviewed in the light of our concern that the disgorgement element of the penalty should take account of the incidence of taxation and further consideration should be given to how interest should be charged on the benefits the Applicants derived from CFP, a company owned 50:50 by the two Applicants. At paragraph [239] of the November Decision we gave directions regarding submissions to be made by the parties on those issues.

At paragraphs [32]-[35] and [216]-[218] of the November Decision we summarised the principles applied by the Authority in determining financial penalties under section 66 FSMA. So far as relevant for us, one of the principles (referred to as “Disgorgement”) is that a firm or individual should not benefit from any breach.

Paragraph 6.5B.1 of the Authority’s Decision Procedure and Penalties manual (“DEPP”) sets out the Authority’s position on disgorgement:

‘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.”

So far as the charging of interest is concerned, DEPP 6.5B.1 says that the FCA will ordinarily charge interest when calculating disgorgement but does not set out a rate. In PS10/4, the FSA stated that it would:

“determine the relevant interest rate, and the date from which it will apply, on a case by case basis. In deciding what interest rate to use, we may have regard to the interest rates applied by the Financial Ombudsman Service and the civil courts.”

Following the release of the November Decision, the Applicants challenged our refusal to allow them to raise a third issue which they said was relevant to the penalty calculation. This issue was the extent of the economics derived by the Applicants from CFP’s “traditional” advisory business and whether it was right for the Authority to regard all the benefits derived from CFP as amounts derived from the flawed business model which should be disgorged. The Applicants described our refusal to allow this issue to be raised as an “exercise of discretion [which] has resulted in one very narrow element of the disposal of the matter being ultra vires”. A dialogue on this issue with the Applicants’ representative and (to a more limited extent) the Authority followed, the upshot of which was that just after the New Year we refused the Applicants permission to appeal to the Court of Appeal against our decision.

The Applicants did not seek permission to appeal against any aspect of the November Decision from the Court of Appeal.

Instead, on 21 January the Applicants’ representative sent three emails to the Tribunal and the Authority enclosing 26 pdf files (discussed below) and commenting (in a fourth email sent to the Authority on 22 January):

“…we are expecting you to re-calculate the disgorgement net of the tax paid. Our clients have had no benefit from the gross monies. I did that that was implicit in our production of the documents for you. In terms of interest, we would argue that you should charge at the bank base rate during the relevant period. The rate you are applying is a penal rate.
239(2) – requires the Authority to make representations on the two discrete issues (tax & interest rate) within 30 days. That is what we are expecting from you. We have provided you the information on tax paid, so you can review the figures. If you require anything else, please let us know.”