News
Print Article

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

26/01/2022

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

General