In September 2007, the FSA cancelled Khan’s permission for failing to submit an retail mediation activities return form by the due date on five occasions and lodging the form up to 263 days after the deadline.
The breaches occurred between November 2005 and November 2007.
Khan argued that he should be shown leniency as the failure was due to a death in the family which required him to return to Pakistan periodically, and a flood at his office which destroyed a computer.
The tribunal agreed, saying the appropriate progression of sanction would be a warning followed by financial penalty and then withdrawal of permission.
It ruled that to “skip from one to three may not be appropriate”.
It told the FSA to instead impose a 2,000 fine on Khan, as well as the 250 administration fee for late forms.
The FSA is looking to appeal against the tribunal’s decision. A spokesman for the regulator says: “We consider that the tribunal has not correctly applied the law in this case.”
Compliance consultant Adam Samuel says that the regulator spends a great deal of time chasing up RMARs and will be irritated by the decision. He says: “It issued two warnings and proposed to cancel Mr Khan’s permissions on two more occasions. It will now have to fine firms initially and wait until the money is not paid before having permissions cancelled.”
John Joseph Financial Services director John Joseph believes the FSA acted harshly in the case. He says: “We are not talking about a criminal offence, it is more of a statutory offence. The FSA should have at least given him the choice of a fine or leaving the industry.”