Upper Tribunal Dismisses Three FCA Enforcement Actions in 2 months
Three FCA enforcement decisions have been rejected and sent back in quick succession by the Upper Tribunal after defendant appeals. The rejections, known as “references” sent back to the regulator for reconsideration, raise pertinent questions about the FCA’s enforcement approach. In April, the Upper Tribunal unequivocally rejected the FCA’s basis for fining a sole director in a mortgage broker firm for governance failings. Addressing each line of argument by the regulator, the Upper Tribunal scorned the FCA for the lack of witness evidence. 2 months later, the Upper Tribunal roundly rejected the FCA’s recklessness case seeking to ban former Julius Baer Employees. The Tribunal criticised the FCA for having "[swallowed] hook, line and sinker" the account by a person whose veracity was subsequently doubted. In June, the UT labelling an FCA’s Decision Notice against an asset manager as “not an impressive document”, demonstrating “muddled thinking”. On both matters of law and evidence, the regulator fell completely short of satisfying the burden of proof statutorily imposed on them.
Like many regulators around the world, the FCA operate a highly principle-based set of rules in many areas of their remit. The approach has its benefits, offering flexibility for ever-looming industry shifts and a higher likelihood of capturing previously unanticipated forms of misconduct. But this string of rejected cases highlight a key downside of the principle-based approach. It ramps up the risk of imprecise reasoning which, upon appeal, gets punished by courts. After being struck out three times in a row, some commentators have called for a serious recalibration of the regulator’s enforcement strategy. Adam Epstein of Mishcon de Reya writes that the UT’s Julius Baer decision will bare “implications on how the FCA runs investigations”. Writing in the FTAdvisor (link below), James Alleyne and Phil Taylor write that the thread of rejected cases will necessitate reform internally.
