In November 2012, the Financial Conduct Authority (FCA) imposed on Angela Burns a financial penalty of £154,800 and a prohibition order preventing her from performing any function in relation to any regulated activity. Ms Burns denied the FCA’s allegations and referred the matter to the Upper Tribunal (Tax and Chancery Chamber).
In December 2014, the Tribunal found that Ms Burns had “failed to act with integrity” in the performance of her CF2 controlled function as a non-executive director of the mutual societies MGM and Teachers, by seeking to solicit a position as a non-executive director with Vanguard, a US asset manager that she had worked for previously, and by notifying Vanguard of potential business opportunities with the mutual societies. The Tribunal upheld four and dismissed six of the allegations brought against Ms Burns, concluding that she had breached APER Principle 1 and was not a “fit and proper person” to carry out the CF2 function.
At a more recent hearing, the Tribunal was asked to determine what action was appropriate for the FCA to take against Ms Burns. Notwithstanding that six out of the ten allegations the FCA had made against Ms Burns were dismissed by the Tribunal, the FCA had sought to impose its original sanction of a total prohibition order and a financial penalty of £154,800. The Tribunal decided that the appropriate action for the FCA to take was to make a prohibition order preventing Ms Burns from carrying out a CF2 function in relation to any regulated activity and to impose a penalty of £20,000.
In reaching its decision, the Tribunal was in “wholesale disagreement” with the FCA’s assessment of the seriousness of the proven breaches and found that the financial penalty it sought to impose was “wholly excessive”. The Tribunal was critical of the FCA and found a number of its allegations to be “unsatisfactory and unpersuasive”. For example, the FCA had painted a picture of misconduct by Ms Burns over a period of two years, rather than isolated instances over three days in 2009 and one day in 2010. The FCA also misinterpreted the Tribunal’s decision for failing to make proper disclosure, as a decision that Ms Burns misused her position to benefit herself.
Ultimately the Tribunal agreed with Ms Burns that a prohibition of the CF2 function, rather than the total prohibition sought by the FCA, would be more appropriate. However, the Tribunal noted that it did not have the jurisdiction to limit the time period of the prohibition order and considered that it was difficult for the FCA to consider any application for the prohibition order to be lifted whilst Ms Burns maintained her denial that she was in breach of the proper standards of conduct. The financial penalty imposed of £20,000 reflected “the limited extent to which the allegations against Ms Burns were upheld, and [contained] a discount in recognition of the burden upon her and prejudice suffered through facing substantial allegations which ... were unfounded”.
A number of lessons can be taken from this case. Firstly, the case serves as a useful reminder to directors of the consequences of failing to make up-to-date declarations of interest, particularly in financial services sectors which are subject to strict regulation. Secondly, the case highlights the overzealous approach taken by the FCA in its approach to enforcement against Ms Burns and also demonstrates that, in such an event, the Tribunal will not shy away from overturning the FCA’s decisions.