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High Court quashes £100k FSA fine against ex-banker

The High Court has quashed an FSA decision to levy a £100,000 fine against a former senior banker over failures in supervision and risk management during the financial crisis.

The claimant, who has been granted anonymity, brought the judicial review proceedings to challenge a decision made by the Regulatory Decisions Committee to issue a decision notice against him in October 2010.

Where the FSA investigates a firm and believes action is justified, case papers are submitted to the RDC. The RDC decides whether to send out a warning notice informing the party involved that the FSA takes further action.

The firm or individual then has 28 days to argue its case to the RDC, after which point the RDC decides on the case and if appropriate issues a decision notice.

The RDC is separate from the FSA staff who investigate enforcement cases, but members of the RDC are accountable to the FSA board.

In this case, the claimant challenged the proposed £100,000 fine and decision notice on the basis that the RDC failed to provide the reasons behind the fine, which it has a duty to do.

The FSA argued it gave adequate reasons for the fine. It also argued a claim for a judicial review could not be pursued as the claimant could have taken his case to the Upper Tribunal, which hears appeals after the decision notice stage, and therefore there was no need for a judicial review.

The case was heard in private at the Royal Courts of Justice in London on April 3 and April 4, with a redacted version of the judgment published on May 25.

The judgment says following an RDC hearing the FSA issued a decision notice which stated that during a two week period in 2008, the claimant should have been aware of certain information which he failed to escalate.

The failure was said to have resulted in an incorrect public statement made about the bank the claimant worked for. The bank is also unnamed in the judgment.

The presiding judge in the case, Mr Justice Silber, found in favour of the claimant and agreed the RDC had not provided adequate reasons for its decision. It also agreed that the Upper Tribunal was not a suitable remedy for this case, as the Upper Tribunal cannot force the FSA to comply with its duty to explain why it is taking a particular action.

He also noted the claimant could not decide whether or not to go to the Tribunal without being armed with the reasons why action was being taken against him. Taking the case to Tribunal also poses the risk of higher penalties being imposed.

In the judgment Mr Justice Silber says: “The fundamental flaw in the decision notice is that it attempted to summarise the representations made by the claimant in great detail, but crucially did not explain why those representations had been rejected.

“I quash the decision of the FSA because the reasons in the decision notice were inadequate and the alternative remedy to a claim for judicial review of remitting the case to the Upper Tribunal is not suitable to determine the issue.”

The case will now have to be reconsidered by a different RDC.

The FSA says it is considering the judgment. It has not yet decided whether it will appeal the judgment.


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There are 8 comments at the moment, we would love to hear your opinion too.

  1. About time the intellectually bankrupt bully had his nose bloodied.
    Job done.
    Now why don’t we all take this approach regarding the longstop and just get on with it.

  2. Should the FSA appeal this decision?

    Hell why not?

    It’s only our money their spending when they rack up these enormous legal fees – what does it matter if the appeal fails…

    The levy’s paid by IFA’s and Networks have to be costed into the advice we give – so it’s really our clients’ money that the FSA are using to fill the pockets of lawyers.

    Makes you feel warm inside!

  3. Samantha Jones 6th June 2012 at 6:09 pm

    Much as I love to see the FSA having its nose rubbed in it (let’s face it, they’ve made enough mistakes to warrant it), we do have to remember that behind this story is another banker, who allegedly misled the markets about information relating to the bank in which he worked. If this brought about changes in share price or something that affected shareholders/investors/customers adversely, then I have no delight in seeing him being ‘let off’ on a technicality. What message does this send to people who hold positions of power in our banks who may be a little less, let’s say, moral in their stature?
    Let’s hope that justice is properly done – if the man is guilty, then the punishment must fit. If he is innocent, then let due process and proper investigation determine that.

  4. A great shame that the bank and defendant have not been named. Justice obviously needs to be done but it should also be SEEN to be done and this can only really happen if the people, the business and the facts are available.

  5. This was only overturned because someone at the FSA got their procedures wrong and the party involved could not determine a route for appealing.
    I wonder if the person responsible for this cock up will face disciplinary action and possible dismissal for the expense they’ve incurred for the tax payer, companies and IFA’s in losing this case because of their individual errors? It beggars belief they can impose a fine but fail to properly clarify in great detail why the fine is being levied. This regulator feels empowered to do just what it wants and it’s time they started looking at their capability and removing the poor performers. The guy could be guilty as sin but incompetence makes a good bed fellow.

  6. There are real judges able to stop the regulators insidious pursuit of topping up its funds without justification.
    Good luck to the guy I say, too much of what the FSA does is unaccountable.

  7. Exasperated Me 7th June 2012 at 8:32 am

    All the mysteries so far this year are no longer mysterious.

    And they pay no price for being wrong!

  8. Becoming a headcase IFA 7th June 2012 at 8:37 am

    V @5:57 pm
    I can’t see your logic in saying it is our client’s money V, unless I am missing your point. Don’t I have any money that is my own? Does it all belong to my clients? If so what happens if they want it back? I know I earned it from my clients but maybe I am actually just borrowing it.

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