Upper Tribunal upholds UK financial adviser ban

Out-Law News | 03 Sep 2021 | 1:25 pm | 2 min. read

The Upper Tribunal has backed a decision by the UK’s Financial Conduct Authority (FCA) to ban Jon Frensham from carrying out regulated activities for criminal behaviour unrelated to his work as an independent financial adviser.

However the tribunal, in its decision (45-page / 481KB PDF), disagreed with some aspects of the approach taken by the FCA. In particular, it said that the FCA had been unable to demonstrate that Frensham’s behaviour meant that he lacked ‘professional’, rather than personal, integrity.

Employment law expert Anne Sammon of Pinsent Masons, the law firm behind Out-Law, said that the decision would be of interest to financial firms required to assess the fitness and propriety of their staff and senior managers under the Senior Managers and Certification Regime. The case is the first in which the tribunal has had to consider whether the FCA is entitled to seek a prohibition order against an individual for a criminal offence not involving dishonesty, in circumstances where the behaviour concerned is unrelated to the individual’s work.

“Behaviour outside of work may be relevant to an employer’s assessment of fitness and propriety, but it is likely that employees subject to adverse determinations may now seek to argue that the Upper Tribunal’s decision means that there must be some linkage to the relevant regulatory standards, and that a lack of personal integrity alone is insufficient for an adverse finding on fitness and propriety,” she said. “These are challenging issues where employers will need to show that there has been proper consideration of all relevant factors.”

Frensham was convicted in March 2017 of attempting to meet a child following acts of sexual grooming. Earlier this year, the FCA issued a decision notice withdrawing its approval for Frensham to perform regulated functions on the grounds that he was not a “fit and proper person”. Frensham referred the notice to the Upper Tribunal, on the grounds that the FCA had “wrongly applied the fitness and properness test to the facts” and had “allowed irrelevant considerations to affect its judgment”.

Sammon Anne_26 Feb 2020

Dr Anne Sammon

Partner

These are challenging issues where employers will need to show that there has been proper consideration of all relevant factors

The Upper Tribunal acknowledged that there was “considerable distance” between Frensham’s criminal conduct and his professional work. It said that the FCA had not been able to “forge the necessary link” between the offence and Frensham’s work as a financial adviser, and that it would have asked the FCA to reconsider the ban had it been asked to decide the case on the basis of the conviction alone.

However, in the tribunal’s view, the FCA’s decision was one that was “reasonably open” to it based on Frensham’s behaviour in connection with the offence, and due to his failure to be “open and cooperative” with the regulator.

Of relevance was the fact that Frensham had committed the offence when on bail for another suspected offence, in breach of bail conditions, which the tribunal said was evidence on which the FCA was entitled to rely when considering whether there was a significant risk that he would disregard his regulatory obligations in future. He had also failed to report certain matters to the FCA including his first arrest and imposition of bail conditions, his second arrest and his remand in custody.

“Mr Frensham took a deliberate decision to disregard the law in order to satisfy his own interests,” the tribunal said. “That is directly relevant to the question as to whether Mr Frensham would put his own interests above those of complying with his duty of candour and his obligation to be open and transparent with his regulator.”

“[I]n his dealings with the Authority Mr Frensham decided to put his own interests and those of [his business] before the need to comply with the clear obligations to be open and transparency with the Authority. It matters not that the Authority did in fact find out about some of the matters concerned from other sources nor that the Authority was not as diligent as it should have been in following up with Mr Frensham after it became aware of those matters,” it said.

The tribunal also acknowledged that the FCA is “fully entitled to take into account non-financial misconduct which occurs outside the work setting” as a general principle.