UT-2024-000094 - [2025] UKUT 00082 (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”).

The Threshold Conditions are (by section 55B(1) FSMA) those set out in Schedule 6 of FSMA. Relevant for these purposes are 2C (Effective Supervision), 2D (Appropriate Resources) and 2E (Suitability). We set out the terms of the Threshold Conditions later, when we come to discuss their applicability here.

If a firm conducts only “relevant credit activity” (as defined in paragraph 2G of Schedule 6 to FSMA), it is referred to by the Authority as a ‘limited permission’ (“Limited Permission”) firm. The activities covered by the definition of “relevant credit activity” include credit broking, debt counselling, credit information services, debt adjusting and agreeing to carry on certain activities so far as relevant to those activities carried on by a person in connection with a supply of goods by that person to a customer. They would, therefore, cover the activities for which the Applicant sought authorisation.

An application for Limited Permission is still an application for authorisation under Part 4A of FSMA. It follows that, as with any other Part 4A application, in order to grant such an application the Authority must first ensure that the Threshold Conditions are met. However, reflecting that Limited Permission firms are carrying on regulated activity in support of their main business, the Threshold Conditions for such firms are adjusted. In particular (i) certain provisions of the effective supervision Threshold Condition do not apply; (ii) the appropriate resources Threshold Condition is modified so that a firm is deemed to have adequate financial resources if it can meet its debts as they fall due; and (iii) the ‘business model’ Threshold Condition does not apply. However, the suitability Threshold Condition is not modified for Limited Permission firms.

The section of the Authority’s Handbook entitled the “Principles for Businesses” (or ‘PRIN’) comprises a general statement of the fundamental obligations of firms and the other persons to whom they apply under the regulatory system. Principle 11 provides that a firm must deal with its regulators in an open and cooperative way and must disclose to the Authority appropriately anything relating to the firm of which that regulator would reasonably expect notice.

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

Section 133 FSMA contains some general provisions regarding the proceedings before the Tribunal.

By section 133(4) FSMA, on consideration of a reference the Tribunal may consider evidence relating to the subject matter of the reference whether or not such evidence was before the decision-maker at the time of the decision. In this context the “subject-matter” of the appeal has a broad meaning; see Markou v FCA [2023] UKUT 101 (TCC) at [136].

By section 133(6) and (6A) FSMA, which apply in the current proceedings:

“(6)

… , 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.”

The Tribunal in Hussein v FCA [2018] UKUT 0186 (TCC) described the Tribunal’s jurisdiction on a reference such as this as “a supervisory rather than a full jurisdiction; in that unless the Tribunal believes the reference to have no merit and therefore dismisses it its powers are limited to remitting the matter to the Authority with a direction to reconsider its decision in accordance with the findings of the Tribunal.”

The Tribunal further explained the extent of its powers on a reference such as this in Carrimjee v FCA [2016] UKUT 0447 (TCC) at [38] and [39] as follows:

“38.

If, having reviewed all the evidence and the factors taken into account by the Authority in making its decision, and having made findings of fact in relation to that evidence and such other findings of law that are relevant, the Tribunal concludes that the decision to prohibit is one that is reasonably open to the Authority then the correct course is to dismiss the reference.

39.

Alternatively, if the Tribunal is not satisfied that in the light of its findings that the decision is one that in all the circumstances is within the range of reasonable decisions open to the Authority, the correct course is to remit the matter with a direction to reconsider the decision in the light of those findings. For example, that course would also be necessary were the Tribunal to make findings of fact that were clearly at variance with the findings made by the Authority and which formed the basis of its decision. That course would also be necessary had there been a change of circumstance regarding the applicant which indicated that the original findings made on which the decision was based, for example as to his competence to undertake particular activities, had been overtaken by further developments, such as new evidence which clearly demonstrated the applicant’s proficiency in relation to the relevant matters. Such a course would not usurp the Authority’s role in making the overall assessment as to fitness and propriety but would ensure that it reconsidered its decision on a fully informed basis. In our view such a course is consistent with the policy referred to at [31] and [32] above as it leaves it to the Authority to make a judgment as to whether a prohibition order is appropriate.”

Although Carrimjee concerned the imposition of a prohibition order, the Tribunal has confirmed that the principles to be applied are the same in an authorisation case: see Przemyslaw Soszynski t/a Phenix Consultancy v FCA [2022] UKUT 00247 (TCC)] at [33] to [35], Lewis Alexander Ltd v FCA [2019] UKUT 0049 (TCC) at [33] to [34] and Köksal v FCA [2016] UKUT 478 (TCC) at [25] to [28].

The effect of all this is that the Tribunal must dismiss the Reference unless it makes findings of fact and/or law which indicate that the Decision was not one that was reasonably open to the Authority. Furthermore, even if the Tribunal finds flaws in the Authority’s decision-making process, it should not remit the Reference if it is of the view that despite such failings, it is inevitable that if the matter were remitted, the Authority would come to the same conclusion.

Turning to the burden and standard of proof (see Köksal at [37] and Lewis Alexander at [36]): the initial legal burden is on the Authority to show, on the balance of probabilities, why the Authority cannot ensure that, if the application were granted, the Applicant would not satisfy and continue to satisfy the Threshold Conditions. This is not to be equated with a requirement that the Authority proves positively that the Applicant does not satisfy those Conditions. Once this is established, the burden then switches to the Applicant, who must establish that there are matters that justify remitting the matter to the Authority for further consideration.