Upper Tribunal endorses view that could see third party references delay Final Notices

The Upper Tribunal (UT) referrals of FCA Banque Havilland actions are already bearing fruit in the form of consequential judicial authority.

The FCA issued Decision Notices to the firm and three individuals.  One of the individuals (Weller) didn't make an Upper Tribunal reference.  The firm's honorary president David Rowland has made a third party reference ("TP Reference") of all four Decision Notices.

Oh no you didn't

Here the plot thickens.  Because the FCA then went ahead and issued Weller with a Final Notice (a Final Notice that hasn't yet been published).

David Rowland contended (with the other Applicants' support) that it was unlawful for the FCA to do so until the UT determined his TP Reference.

Not my problem

In the UT's decision, it:

• Decided that the publication of the Final Notice didn't interfere with the UT's jurisdiction to determine the TP Reference (and David Rowland's right to make the TP Reference).  Similar to e.g. the Julius Baer case, the Final Notice can be published with a note that the FCA's findings have not been considered judicially and are the subject of consideration insofar as they concern David Rowland.
• Observed that a third party reference is made in relation to a Warning Notice or Decision Notice not a Final Notice (per FSMA s.393(1) and (4)) - whatever the Final Notice might say.
• Determined that the UT has no statutory power in relation to a Final Notice.  Any challenge to a Final Notice would need to be brought in the Administrative Court.

Though if it was…

Having decided it had no jurisdiction, the UT then said "it is very tempting to go no further and express no view on the matter".  

Can you guess what happened next?  Yep - it expressed a view.  Apparently the parties "urged" it to do so.  

It's not good for the FCA: the UT's view is that FSMA doesn't envisage the issue of a Final Notice until the UT has determined any third party reference of the underlying Decision Notice - whether or not the subject of the Decision Notice has referred the matter to the UT.  Why?

• The FCA must issue a final notice if it has given a person a decision notice and "the matter" was not referred to the UT (s.390(1)).
• "The matter" includes any third party references under s.393(9).
• Parliament must be assumed to have "accepted the consequences of providing third party rights and the possible delay to determination of regulatory proceedings that could result" - including delay to the issuing of Final Notices.

The UT did have sympathy for the FCA's public policy arguments to the contrary, which included that delay to finality of a enforcement action simply as a result of a third party reference is to the detriment of the subject, the FCA and the wider public.  But the UT's role is "to interpret the law as it is".

Now go away

Where does that leave the parties?  

Well, they're now preparing for the UT hearing of the references, including David Rowland's TP Reference.  

On the issue of the Weller Final Notice, though, they're basically still in limbo.  The Weller Final Notice stands for now.  The UT has expressed a view but without jurisdiction to do anything about it.  

The UT has suggested that the FCA either lobby Parliament to change the law, or test the matter in the Administrative Court.  Something the FCA might be keen on if this may affect numerous enforcement cases going forward.

We await their next move.  

Firms vs individuals

And one can't help but think the PRA will be interested too.  

Almost simultaneously, in the Julius Baer case, the UT made it more difficult for regulators to settle with firms before individuals, where the settlement is based upon a view of events taken by the firm in potential conflict with the interests of related individuals.  

This in the context of the PRA proposing an Early Account Scheme.  

When it comes to the debate between concurrent vs consecutive action against firms and individuals, this is just more fuel to the fire.