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Tribunal slams FSA on approval process

The Upper Tribunal has ruled that the FSA’s CF1 application form is “poorly designed” and overturned an FSA decision to refuse an application for director approval.

The Upper Tribunal, formerly the Financial Services and Markets Tribunal, published its decision in the case of Mandeep Panesar and the FSA last week.

Panesar applied for approval to perform the controlled function of director at Burlington Associates in early September 2008 and put the effective date of the controlled function as September 1, 2008.

In November 2009, the FSA refused Panesar’s application, saying he lacked the competence and capability to understand and comply with regulatory standards.

The FSA argued that Panesar acted as managing director without the FSA’s approval while it assessed his application and that he had wrongly signed a declaration saying he had read the accompanying notes.

In its decision, the tribunal says: “We would comment that the form seems poorly designed in asking for a date to be filled, when the notes contain the somewhat contradictory and Delphic comment indicating that ordinarily a date should not be filled in.”

The tribunal says the fact that Panesar did not realise he should not start his duties prior to approval was an “unfortunate instance of carelessness rather than an indication of any lack of honesty or integrity, or of the appropriate competence to perform the function of director.”

An FSA spokesman says it has since introduced an online application system, which addresses the tribunal’s concerns.

He says: “With the introduction of the online notifications and applications system, the issues raised by the tribunal have largely been addressed. The FSA will consider carefully the tribunal’s comments and, if necessary, look to enhance the system.”

He adds that the FSA is “unlikely” to review past applications that the regulator rejected in light of the tribunal’s decision.


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There are 19 comments at the moment, we would love to hear your opinion too.

  1. The FSA is unlikely to review past applications that have been rejected. So something they have done wrong iin the past is ignored, whilst they expect IFA,s to work with hindsight. As usual one rule for them and one rule for the rest of us, despite possibly destroying peoples livelehood.

  2. One in the eye for the FSA, I hope they now know what it feels like to be got at for not totally getting red tape right.

  3. The FSA don’t care because they are not ultimately accountable. If the make a mistake, they don’t lose bonuses or jobs.

    Why should they care?

  4. An “unfortunate instance of carelessness” that Panesar acted unlawfully. It’s rare that ignorance is a successful defence against a statutory requirement; bit of an odd decision by the Tribunal there.

  5. Was there any common sense applied by the FSA in this case? Or was “it rules is rules”?
    Somone, not something made a decision at the FSA which ahs been foudn to be unfair in this case and that “someone” should not receive an FSA bonus.
    Anyone believe there will be any justice there?
    No I think not.

  6. Adam – The point was I think that the FSA’s decision to deem him not “fir and proepr” to be a director for what was a mistake in part compounded by poor wording on the part of the FSA itself was excessive.
    No common sense on the face of it appeared to have been appliaed and it was used as an excuse for withdrawing approval.
    But then Al Capone was done for tax evasion as they could not get him on anything else.
    I don’t know the facts of this case, but if the Tribunal thought it was a wrong decision on the part of the FSA, I would hope they looked for fire to go with smoke, didn’t find any and therefore that was the reason for their decision implying the FSA had used NO discretion or common sense and simply used their bully boy tactics.

  7. It is about time that the FSA became more transparent but I also think that Mr Panesar was in the wrong here.

    You can’t just carry on regardless on the off chance that your application is accepted.

    Debatable that I want some with such ‘unfortunate incidence of carelessness’ in the industry. There’s being human and pushing your luck.

    I feel that the reason we’re in this mess is because of people who try to get around the system like this.

    If they now get reassessment and approval, god help their clients if they manage to be so careless with their application. Not a great start is it.

  8. @Adam Smith | 4 Nov 2010 10:22 am

    It interesting to see Adam Smith apply legalistic terminology to the actions of the FSA when the FSA is unelected, unaccountable quasi judicial body that is above the law by virtue of the FSMA granting it Statutory Authority. There are many lawyers who consider this authority a breach of the Human Rights Act and to my mind it’s a great pity that more energy could not be put into challenging the very legitimacy of this regulatory abomination.

  9. Having just had to endure a protracted CF4 application where the allegation made by the FSA was similar to the above plus dishonesty thrown in for good measure I can only say well done to Mr Panesar. Our solicitors and barristers fees were in the region of £8,000 for the FSA to eventually approve the application without restriction! A colossal waste of time and money. Accountable – not them.

  10. As we see so wearyingly often with so much of what the FSA does (despite the FSA costing us a fortune in levies every year), common sense appears here to have been MIA.

    Might we not reasonably expect the very first paragraph of the FSA’s letter acknowledging receipt of an application such as this to point out in absolutely unequivocal terms that until the FSA says otherwise, the applicant is NOT approved to undertake ANY of the functions which form the subject of his application? That way, there could be no misunderstanding or “unfortunate carelessness”.

    Personally, I consider Panesar’s claim that he didn’t realise he shouldn’t take up his duties prior to approval to be rubbish. It’s a bit like driving a car solo before you’ve passed your test, on the grounds that you’re working towards it. But, if the FSA’s paperwork and procedures are defective, then what can they expect? All they get.

    I wonder if the FS&MT might be interesting in examining the FSA’s wilful disregard for the entire content of the Statutory Code of Practice For Regulators ~ plenty in there for it [the Tribunal] to get its teeth into. Oh well; we can but dream…

  11. reply to 4th November 2010 at 3:30 pm

    Poor design and process is not limited to FSA forms. The GABRIEL system is the antichrist to efficiency and funtionality. By any measure this could not servive as an information delivery system if it faced competition and the need to retain customers. Got that off my chest.

  12. The guy applied in September 2008 and it took until November 2009 for the FSA to decide on the application. Surely the tribunal should be questioning why it takes 14 months to get approval.

  13. Unhappy Adviser/Director 5th November 2010 at 8:22 am

    I feel sorry for mr Panesar as I am in the middle of applying for CF1 Director of a new company. I’ve been running fs companies for the last 10 yrs, had either a good or excellent compliance rating from our network throughout that time. I sold my previous business 2 yrs ago and the director of the company basically ran it into the ground. I feel the FSA are making my life difficult due to others actions. The application has been in for approximatly 2 months now and they will not give us any indication as to how long it will take or what else they require from me. Financially very sound, no issues with any debt at all, 3 properties owned out right……… with no debt at all………. How do you get them to hurry up!!!!!!!

  14. 12 months next week since Park Row closed and nearly 13 months since my application for authorisationa dn still waiting. The FSA should somehow be held accountable for ruining honest hard working peoples lives through a lack of care and attention.

  15. Thanks for the feedback, chaps. I can’t help but feel you miss the point that the requirement for prior approval is a statutory one (s59 FSMA) rather than just some rule dreamt up at Canary Towers, and it also provides that the onus is on the applicant to demonstrate his fitness rather than the FSA to prove the contrary.

    And I have little sympathy for people whose comments include “I don’t know the facts of the case”; at least I bothered to track down the judgement and read it before I posted – it wasn’t a very big one.

  16. In answer to: reply to | 4 Nov 2010 3:30 pm

    Well said. The GABRIEL system is a cobbled together piece of junk that if launched in the commercial world would not be fit for purpose. Did they get a 6th former to knock this up on a spread sheet.

  17. Economies of Scale 5th November 2010 at 10:30 pm

    Having read the judgement as suggested I think the point to note is this seems a trivial point in a bigger case where the FSA have deemed someone not Fit and Proper. There is obviously more to the case than this point which seems to have been picked up as the most significant, when it is evidently not.

    The Approved persons regime, obviously in play, it is the company that makes the application on behalf of an individual so where did they come in to this?

    Having read it I think hats off to the guy he has represented himself and won against a judgement passed by the FSA and some very complimentary points made about him by the Tribunal which is why they obviously deemed him fit and proper to undertake the role he applied for.

  18. It is pointless attacking the FSA, for they can fund the most expensive lawyers in the world, using fees paid by members,

    Parliament is bnorn again and members secure for the moment in their new found security are more interested in their expenses.

    Therefore either get the media on side, which is unlikely, for although the media is funded by industry advertising, the industry is not prepared to track the problem.

    The other option is to use your new found professional qualification and get a life

  19. All those who have been robbed by the dubious activities of Mr Panasars company have a very different view to the tribunal. The FSA was right to try to shut down this organisation, it is bringing the financial services industry into serious disrepute. In the investment I am involved in alone, 1,000 investors have lost £100 million due to them.

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