UT (Tax & Chancery) UT-2023-000064 - [2025] UKUT 00203 (TCC)

It follows from those objectives that the Authority must ensure that senior managers of the firms that the Authority regulates are fit and proper to carry out their roles. As the Authority submitted, the provision of accurate, complete and frank information which relates to their regulated role by senior managers to the Authority is critical to its function in ensuring that individuals carrying out controlled functions are fit and proper persons.

The Authority has established the Senior Managers and Certification Regime (“SMCR”) which is designed to charge those individuals at the apex of the financial services sector with personal responsibility for their actions and those of the entities they manage, and to enable the Authority to hold them accountable in this regard.

The SMCR is underpinned by the Authority’s Individual Conduct Rules (“ICR”) and Senior Manager Conduct Rules (“SMCR”).

The Code of Conduct in the Authority’s Handbook of Rules and Guidance (“COCON”) sets out the rules that apply to the conduct of a person approved by the Authority to carry out senior management and other functions (an “approved person”) in relation to the performance of functions relating to the carrying on of activities by the firm on whose application approval is given to that person.

Individual Conduct Rule 1 (ICR 1) states: You must act with integrity.

Relevant guidance as to the meaning of “integrity” is to be found in the authorities referred to below.

Individual Conduct Rule 3 (ICR 3) states: You must be open and cooperative with the [Authority], the PRA and other regulators.

Senior Manager Conduct Rule 4 (SMCR 4) states: You must disclose appropriately any information of which the [Authority] or the Prudential Regulation Authority (“PRA”) would reasonably expect notice.

COCON gives specific guidance on the ICRs and in relation to ICR3 includes a non-exhaustive list of conduct which the Authority considers would breach the rule, including failing without good reason to inform a regulator of information of which the approved person was aware in response to questions from that regulator.

As this Tribunal has recognised, the Authority cannot carry out its responsibilities effectively without having an open and cooperative relationship with firms and approved individuals and being able to rely on regulated bodies and individuals bringing matters relating to their ability to comply with relevant rules and requirements to its attention: see Eversure Financial Services Ltd & Frederick George Young v Financial Services Authority (April 2006) at [58] (“Eversure”) and Frensham v Financial Conduct Authority [2021] UKUT 0222 (TCC) at [69-70] (“Frensham”).

SMCR 4 imposes a duty on a senior manager to disclose appropriately any information of which the appropriate regulator would reasonably expect notice, including making a disclosure in the absence of any request or enquiry from the appropriate regulator.

In determining whether a person's conduct complies with SMCR4, the standard is an objective one. COCON sets out the factors which the Authority would expect to take into account which include:

COCON 4.2.29 (G) provides that in determining whether or not a person’s conduct complies with SMCR4, the factors the Authority would expect to take into account include: whether it would be reasonable for the individual to assume that the information would be of material significance to the regulator concerned; whether the information related to the individual themselves or to their firm; and whether any decision not to report the matter was taken after reasonable enquiry and analysis of the situation.