UK: To Investigate Or Not To Investigate? No Need, Says The FSA, We'll Ban Him Anyway

Last Updated: 19 February 2013
Article by Rachel Couter

Executive Summary

Over recent months, the FSA has had a clear, albeit not specifically announced, agenda not only to hold individuals accountable for breaches of regulatory rules (and to impose significant fines on those individuals) but to ban them from future participation in the regulated financial services industry wherever the FSA believes it possible.  Apparently, this is all part of the FSA's credible deterrence strategy, notwithstanding the life-changing effect regulatory bans will (usually) necessarily have on the individuals concerned.

Consistent with that agenda, the FSA has gone two steps further than before in its decision notice dated 28 March 2012 (but published on 16 May 2012) issued to Mr Anthony Verrier, a former senior executive at BGC Brokers LP. 

In that case, the FSA decided to prohibit Mr Verrier from performing any function associated with any regulated activity as he was not a 'fit and proper person'.  The decision was based on the FSA's concerns as to Mr Verrier's honesty, integrity and reputation, as well as the severity of risk it believes Mr Verrier poses to confidence in the financial system.

What is notable about that decision, however, is that:

  1. the FSA based its decision solely on the decision of the High Court in a civil case in which Mr Verrier was involved, which was totally unrelated to any regulated activities that had previously been conducted by Mr Verrier.  In fact, the FSA itself did not conduct any independent investigation into Mr Verrier; and
  2. at the time, Mr Verrier was not an approved person, nor was he even employed by a UK regulated firm. 

The High Court Case

The High Court case relied upon by the FSA was that of Tullett Prebon plc (and two others) v BGC Brokers LP (and 13 others, including Mr Verrier) [2010] EWHC 484 (QB).  Tullett and BGC are rival companies in the business of inter-dealing broking.  When Mr Verrier left Tullett to join BGC, he took a significant number of Tullett employees with him. 

Tullett sued BGC and BGC's former employees, including Mr Verrier, alleging conspiracy, inducing breach of contract and misuse of confidential information. 

The Judge found in favour of Tullett.  In particular, the Judge found that Mr Verrier had participated in an unlawful means conspiracy, including the inducement of the broker defendants to breach their contracts of employment with Tullett by leaving early without lawful justification.  In acting as he did, Mr Verrier had considered that the commercial gain to BGC would outweigh the damages and costs for which BGC would be potentially liable.

In reaching that decision, the Judge was highly critical of Mr Verrier's behaviour, with regard to both his behaviour on his departure from Tullett and his testimony at trial.  In particular, Jack J said of Mr Verrier, that he "stuck to the truth where he was able to, but departed from it with equanimity and adroitness where the truth was inconvenient".  He also intimated that Mr Verrier may have destroyed relevant evidence, saying he was "satisfied that it was Mr Verrier's gambit to 'lose' blackberries whenever he thought they might contain inconvenient material".

Jack J's decision was subsequently upheld in the Court of Appeal.

The FSA Decision Notice

The decision in Tullett v BGC clearly came to the attention of the FSA's Enforcement Decision, which led to the FSA's decision to ban Mr Verrier from the regulated financial services industry.  It is patently clear (as the FSA acknowledges) that the FSA's decision was based solely on the contents of the judgment of the High Court and, in particular, the critical comments made by Jack J.  The FSA considered that, given the lengthy proceedings in the High Court, a further investigation would not have been an efficient use of its resources. 

It is, of course, right that the FSA's Fit and Proper Test for Approved Persons includes, as a relevant criteria in assessing the fitness and propriety of a candidate for a controlled function, that in determining a person's honesty, integrity and reputation, the FSA will have regard to whether the individual has been the subject of any adverse finding(s) in civil proceedings and whether the person has been criticised by a court (FIT 2.1.3G).

What is of note here, however, is that the FSA's consideration of Jack J's decision was not made in the context of Mr Verrier applying for permission to become an approved person, but in the context of the FSA deciding to issue a prohibition order to Mr Verrier.  The Upper Tribunal has already made it clear (in the case of David Thomas v The Financial Services Authority, 17 September 2004) that there is a distinction between assessment of fitness and propriety in the case of an application for approval under sections 59 to 61 of FSMA 2000 and that in the case of a withdrawal of approval under section 63 of FSMA. In the case of an application for approval, the burden of proof is on the applicant to satisfy the FSA that he or she is a fit and proper person to perform the function to which the application relates, whereas in the case of a withdrawal of approval, the burden of proof is on the FSA to prove that the individual is not a fit and proper person.  Whilst the Thomas decision was not expressly made in the context of a decision to prohibit an individual from performing regulated functions under section 56 of FSMA, it is hard to see why the burden of proof should be any different under section 56 from that under section 63. 

Also of significance here is that a prohibition order was issued against Mr Verrier, purportedly as a protective measure, due to the FSA's belief that he posed a risk to confidence in the financial system, in circumstances where Mr Verrier was neither an approved person nor, indeed, employed by a UK regulated firm.


The decision in the case of Mr Verrier appears to represent a significant expansion of previous practice by the FSA.

The lesson for regulated individuals, yet to be regulated individuals and even unregulated individuals, is to be fully conscious that everything you do in life, whether regulated or not, can and will be watched by the FSA and action taken accordingly, should it see fit to do so.  We can only wait to see if the Upper Tribunal agrees. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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