What you need concept, words on blackboard.

On 15 December 2014, the Financial Conduct Authority (FCA) issued a final notice in respect of Jonathan Burrows, a managing director and ‘Approved Person’ in a well-known investment company. This barred him from holding any further position of responsibility in a FCA-regulated business.  In a well-publicised case, Mr Burrows admitted to repeatedly and deliberately fare-dodging on his daily commute by rail from rural East Sussex to Central London.

Under the FCA’s regulatory regime, an ‘Approved Person’ is just that – an individual who is deemed fit and proper to carry out certain key roles of responsibility and influence the firms it regulates.  Mr Burrows held the ‘Customer’ function and would have been authorised, among other things, to provide advice to customers about investments and arrange for others to do so.

Whilst the FCA’s decision is likely to receive support from honest, fare-paying rail commuters, it has drawn attention to how the FCA applies its Fit and Proper test for ‘Approved Persons’ (known as FIT).

FIT has three limbs:

  1. Honesty, integrity and reputation;
  2. Competence and capability; and
  3. Financial soundness.

Competence and financial soundness are less subjective concepts than honesty, integrity and reputation (which are character judgments) and the FCA has, in its punishment of Mr Burrows, demonstrated how strictly this limb of the FIT will be applied.

In assessing honesty, integrity and reputation, the FCA, unsurprisingly, gives special prominence to any events of dishonesty and fraud. Clearly, the FCA gave significant weight to the deliberate and long-term nature of Mr Burrows’ dishonesty.  It also has a history of taking action against trophy transgressors so as to gain maximum publicity.

Whenever sanctions are made against an ‘Approved Person’, the FCA must publish whatever information about the matter it considers appropriate.  The only exceptions are where doing so would be prejudicial to the sanctioned person, the interests of consumers or stability of the UK financial system.  In its sanctions against Mr Burrows, the FCA states that it was doing what was “necessary and appropriate…to secure an appropriate degree of protection for consumers and to protect and enhance the integrity of the UK financial system.”

The FCA has clearly proved that it will enforce the ‘Approved Persons’ regime in a robust way.  In doing so, it will take into account both personal and professional conduct in its drive to ensure that the right people hold positions of responsibility in the firms it regulates.  For Mr Burrows, the sanction is effectively a red card which means that he can have no future involvement in the sector in a similar position of responsibility.

For more information, email blogs@gateleyuk.com.

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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.