UT-2024-000094 - [2025] UKUT 00082 (TCC)

Threshold Condition 2E is that “A must be a fit and proper person having regard to all the circumstances”. This is an open-ended test, although FSMA lists a number of factors to be taken into account (where appropriate). These include:

“(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;”

Mr Macdonald repeats his submissions in relation to Threshold Conditions 2C and 2D: an applicant which refuses to cooperate with the Authority, fails to provide requested information and behaves from an early stage in a confrontational manner is not suitable for authorisation by the Authority.

Mr Macdonald stresses that the Authority is not suggesting that the Applicant is unsuitable because Mr Dalipi questioned its interpretation of its own financial resources rules as they apply to the Applicant. He entirely accepts that the Applicant (and any other firm seeking authorisation) is perfectly entitled to question the Authority’s requests for information and interpretations of rules in a reasonable manner. However, there is a distinction to be made between appropriate challenge and a refusal to cooperate with legitimate requests. As this Tribunal concluded in Lewis Alexander (at [196]):

“[I]t is not the role of the individual firm to dictate to the Authority how it should deal with the firm in question and, in particular, that it should depart from its business model for the firm’s own convenience. If the firm thinks that the regulatory approach taken by the Authority is inappropriate, then that is a matter to be raised with those who have ultimate responsibility for the regulatory structure, namely Parliament and the Government.”

The reasons given for the Applicant’s non-cooperation with the Authority (in its response to the Warning Notice) started with the Call, which Mr Dalipi described as “belligerent, accusatory in tone and clearly aimed at trying to ‘trip me up’ and ‘catch me out’”. As a result, he said that he was “not willing to cooperate with a body and a process which is clearly biased, out-of-control and demonstrating an obvious agenda to prevent most firms obtaining Limited Permissions - doing and saying whatever it takes to achieve this - and all completely unchecked”.

He then asserted that the Authority’s systems for vetting Limited Permission applications had “shifted dramatically” since 2021 and he described this as the “decimation of an already-struggling sector through the back door”.

He also said that the Authority’s systems and controls were not fit for purpose. He referred to the way the Authority was (in his opinion) seeking to “levy non-existent financial burdens on firms”, ignoring the purpose of the Limited Permission regime, not recording its calls and inadequately training its staff (referring to his question to the caseworker about what “consumer” means). The essence of his message to the Authority was (in his words), “Sort your own house out - and I will happily cooperate.”

We have already discussed the Call at some length. Clearly, something happened on the Call (in terms of what was said or how it was put) that unsettled Mr Dalipi. The proportionate response to this would be to initiate a complaint. Particularly once the Call was followed by the entirely positively worded Information Request, the appropriate response was not to make sweeping accusations against the caseworker and the Authority and refuse to continue with the application process.

Turning to the alleged “shift” in the Authority’s approach to authorising Limited Permission firms, Mr Sullivan’s evidence was that the Authority’s rules in relation to consumer credit firms have not changed, and the Authority has always expected Limited Permission firms to prepare documents and information such as regulatory business plans, policy documents and accounting forecasts. In the past, firms were required to confirm that they had robust policies, procedures, systems and controls in place. In recent years, the Authority’s Authorisations Division has started to routinely request these underlying documents as part of the application process, given its importance to achieving good consumer outcomes. The fact that the Authority may request and review a firm’s underlying policies and procedures is clearly indicated on the application form.

As far as broader criticisms are concerned, we have noted that the Call was not recorded, so no recording could be provided. We analysed the way the prudential rules apply to Limited Permission firms such as the Applicant and observed a modest (£5,000 share capital) capital requirement.

We consider that the point Mr Sullivan made, almost in passing, in his evidence about the application process seeking to achieve good consumer outcomes is a really important one. The application process is looking to make sure that those who are authorised are qualified, equipped and suitable to engage in regulated activities, in the case of the Applicant with retail customers.

Viewed through that prism, a failure to answer questions or provide information (assuming what is requested is reasonable and proportionate) or to engage honestly and transparently with the Authority during the application process marks an applicant out as unsuitable. Someone who behaves in that way (for whatever reason) has failed to grasp (or deliberately chosen to ignore) the primary importance of securing good outcomes for consumers (which the Authority secures by following its processes, reviewing information provided and asking questions to determine whether a person is appropriate to be authorised) and placed their own concerns ahead of that objective.

What this means here is that, whatever took place on the Call, however righteous Mr Dalipi’s indignation and however valid his other criticisms of the Authority, none of these factors can excuse the Applicant’s failure to engage with the authorisation process.

Mr Macdonald criticised the Applicant’s behaviour (in Mr Dalipi’s accusations against the Authority and its staff) as going beyond what is necessary to engage in proper debate and, given this behaviour has been repeated, he says that the Applicant is likely to demonstrate the same pattern of behaviour if authorised.

Whilst some of Mr Dalipi’s language is rather high flown and occasionally worse (for example, his suggestion that the Authority had a recording of the Call but deliberately lost or destroyed it), we do not consider that the tone of his dealings with the Authority alone marks the Applicant out as unsuitable. Nor is the Applicant unsuitable because some of the points it raised (for example, the financial resources requirement applicable to it) were wrong.

What marks the Applicant out as unsuitable is its seeming failure to understand that the application process is designed for a purpose (to achieve good consumer outcomes) and therefore requires the Applicant to engage with that process in an open, cooperative and transparent way, whatever it feels about the process, and to demonstrate a similar mindset when it comes to engaging with the regulatory regime post-authorisation. We can entirely understand why the Applicant’s behaviours during the authorisation process meant that the Authority was not persuaded that the Applicant was unequivocally prepared to do this.

For these reasons we are satisfied that the Authority’s conclusion, that it was not satisfied that the Applicant was a fit and proper person having regard to all the circumstances, was one which was reasonably open to it.