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Regulated people demonstrating a lack of honesty and integrity even if they are not at work may still be banned!!!

26/01/2022

A recent [JUNE 2021] FCA case about what it means to be dishonest and lack integrity [case at the bottom of this page] has reminded me about a London hedge fund manager who has been banned [2014] from working in the financial services industry

The 2014 case

BlackRock director Jonathan Paul Burrows was caught by inspectors at Cannon Street station last year and admitted to avoiding the £21.50 fare from Stonegate in East Sussex.

The senior executive is thought to have avoided paying full fares for five years. In total, Mr Burrows is believed to have dodged £42,550 in fares by exploiting a loophole which meant he only paid a third of the journey cost.

The City watchdog said he "demonstrated a lack of honesty and integrity".

"Mr Burrows has admitted that, on a number of occasions, he deliberately and knowingly failed to purchase a valid ticket to cover his entire journey," the Financial Conduct Authority (FCA) said.

"As Mr Burrows held a senior position within the financial services industry and was an approved person, he should have been a role model for others and his conduct has fallen short of the standard expected for someone in his position," the organisation added.

The hedge fund manager from Stonegate, in East Sussex, had an Oyster Travelcard and regularly travelled to and from London.

South-eastern said he commuted from Stonegate to London Bridge, where he caught another train to Cannon Street.

His Oyster was only used at Cannon Street so he paid a maximum £7.20 fare.

The rural station at Stonegate has no ticket barriers, so the man was able to avoid "tapping in" with his Oyster card, and only "tapped out" through the barriers once he reached Cannon Street.

He also managed to avoid ticket inspectors on the train, South-eastern said.

The then maximum fare of £7.20 was incurred when a passenger "tapped out" through a barrier without having "tapped in", a South-eastern spokesman said.

He paid back the £42,550 in dodged fares, plus £450 in legal costs, within three days as part of an out-of-court settlement.

South-eastern said it believed he had been dodging the fare for five years as his last annual season ticket from Stonegate expired in 2008 and within five days of being challenged he renewed his lapsed ticket.

The spokesman for the company said: "We recognise that this issue is important to customers who pay their way and expect the system to treat them with fairness by acting against people who don't buy tickets."

https://www.bbc.co.uk/news/business-30475232

https://www.bbc.co.uk/news/uk-england-27011497

2021 case

When personal conduct leads to a ban by the Regulator [FCA]

A recent FCA case provides clarification of what it means to be dishonest and lack integrity. In JUNE 2021 the Upper Tribunal (Tax and Chancery Chamber) agreed with a decision of the Financial Conduct Authority (the FCA) to ban an independent financial adviser, Mr Frensham following his conviction for sexual offences.

The decision is important because it demonstrates that personal misconduct outside of a financial adviser’s duties can impact fitness and propriety.

Case citation:

Tribunals Judgment

  • This is the first time that the Tribunal has had to consider a case where the FCA is seeking a prohibition order against an individual, which is based on a criminal conviction, but which does not involve dishonesty in circumstances where the behaviour concerned is related to the individual’s regulated activity.

Commentary

This judgment provides useful guidance on two areas.

Firstly,

  1. It provides clarification of what it means to be dishonest and lack integrity.
  2. The Tribunal considered previous case law, and determined that a person who is dishonest will always lack integrity and reputation, but it does not follow that a person who lacks integrity must also be dishonest.
  3. It was held in the case of Wingate v SRA [2018] 1 WLR 3696 that whilst honesty is a basic moral quality which is expected of all members of society, the term “integrity” is used to express the higher standards which society expects from professional persons and which the professions expect of their own members.
  4. The underlying rationale is, therefore, that the professions have a trusted role in society and in return they are required to live up to those standards.

Secondly,

  1. It highlighted the impact of personal misconduct which occurs outside of a financial advisers duties, and the relationship with fitness and properness in conducting ones professional obligations. This issue was recently explored in the High Court case of Ryan Beckwith v SRA [2020] EWHC 3231 (Admin).
  2. The case of Beckwith explored whether the requirements imposed on solicitors by the Solicitors Regulation Authority touch upon their private life.
  3. It was determined that the need to act with integrity and the need to behave in a way that maintains the public trust, may reach into the private life only when conduct that is part of a person’s private life realistically touches on their practice of the profession or the standing of the profession. Therefore, any such conduct must be qualitatively relevant.
  4. Whilst Mr Frensham’s conviction did not relate to his role in a direct way, the FCA did believe that there is a risk of erosion of public confidence if individuals who committed such misconduct, and do not have the requisite reputation, are permitted to continue working in the financial services industry.

https://www.birketts.co.uk/insights/legal-updates/personal-conduct-ban-by-the-fca

UNITED KINGDOM