On 9th October 2012 the Financial Services Authority (“FSA”) issued a Final Notice to Ms Ewa Karczewska in respect of her acquisition, on 14th September 2010, of 70% of the shareholding of Think Finance.com.
Section 178(1) of the Financial Services and Markets Act 2000 (“FSMA”) provides that a person who acquires control over a relevant UK authorised person must notify the FSA in writing in advance of the acquisition. Where such a notice is given, the FSA will determine whether to approve the acquisition (unconditionally or conditionally) or whether to object to the acquisition, whilst having regard to assessment criteria specified in s. 186 FSMA.
Think Finance.com is an authorised firm and has been such since 2nd January 2008. Think Finance.com is a relevant UK authorised person and as such notice of Ms Karcewska’s acquisition was required.
The FSA allege that Ms Karczewska:
- lacks honesty and integrity (contrary to s. 186(a)(b) and (d) FSMA);
- lacks reputation and experience in directing the business (contrary to s. 186(b) FSMA);
- acquired control of the firm without giving notice to the FSA (contrary to s. 191A(2)(a) FSMA); and
- repeatedly failed to comply with FSA requirements (contrary to s. 191A(3)(b) FSMA).
A number of facts to support the above assertions are set out within the Final Notice as well as within the Warning Notice issued by the FSA on 8 December 2011.
Following the Warning Notice, Ms Karczewska made representations orally and in writing to the FSA. These were considered by the FSA. However, a Decision Notice was issued on 7 February 2012 which concluded that the FSA had reasonable grounds to object to the acquisition. Ms Karczewska exercised her right on 9 March 2012 to make a reference to the Upper Tribunal (Tax and Chancery Chamber) in respect of the Decision Notice. However, she subsequently withdrew this reference on 14 September 2012.
Having had regard to the facts presented to the FSA and the representations made by Ms Karczewska, the FSA continues to rely on the majority of the original facts outlined within the Decision Notice and has determined that:
- It has reasonable grounds to object to the acquisition on the basis of the assessment criteria set out in s. 186 FSMA; and
- The tests set out in s. 191A(2)(a) and (c) FSMA, namely that notice was not given when it was in fact required and that there are grounds for objecting in accordance with s. 186, are met and as such the FSA objects to Ms Karcewska’s control of Think Finance.com
It is not specified within the Final Notice what action the FSA will now take. The options available include:
- Issuing a restriction notice in accordance with s. 191B FSMA, which can impose certain restrictions regarding the sale of the shares and/or which restrict the voting powers exercisable by virtue of those shares; or
- Making an application to the High Court for an order for the sale of shares in accordance with s. 191C FSMA.
It should also be noted that acquiring control of a relevant UK authorised firm without giving notice to the FSA under s. 178(1) FSMA is a criminal offence contrary to s. 191F(1) FSMA, for which a fine can be imposed. The FSA has not, however, indicated that it intends to pursue criminal actions at this time against Ms Karczewska.
If a restriction notice is issued and not complied with this is also a criminal offence (s. 191F(7) FSMA) for which a fine can be issued.
It is clear from this particular case that the FSA is taking its powers under the change of control regime seriously and will act where necessary to ensure that relevant authorised firms are controlled by individuals who it deems to be “fit and proper”. It is important that individuals making any form of application to the FSA, whether it be in respect of change in control or for authorised status, provide full and accurate disclosure to the FSA, even in circumstances where you believe the FSA is already in possession of certain information.