The UK’s Financial Conduct Authority (FCA) has just published a brief Final Notice, addressed to Stephen Robert Allen, formally recording and implementing its decision to ban him from carrying on any controlled function on the grounds that he’s not a fit and proper person to do so. The Notice itself is dull. Rather more interesting is the Upper Tribunal Decision on which it rests. The story (for it raises a number of novel points) goes like this.

Mr Allen was an insurance broker.

At one time, he was a director of Fabien Risk Services Limited (FRS), but that firm collapsed in 2005 “despite the improper use of clients’ money in an attempt to support it”. In December 2009, Mr Allen – who, notwithstanding the allegations made against him, didn’t know about the misuse of FRS’ client money, and wasn’t reckless as to the facts – was found by the Financial Services & Markets Tribunal (a) to lack competence and capability; and (b) to have failed in his duties as a director. So, in January 2010, he was prohibited by the Financial Services Authority (FSA, as the FCA then was) from performing any management or control “controlled functions“; a prohibition that still stands.

In about 2011, Mr Allen – who was still working as an insurance broker – got himself into a second scrape with the FSA. On this occasion, the FSA alleged that he had: (a) secretly added a fee to an insurance premium that he’d charged to a client (S); (b) used money that was due to a broker (L) for his own benefit; and (c) used a rebate that L owed to S for his own benefit. On 25 July 2012, the FSA imposed a second prohibition on Mr Allen – this time banning him from carrying on any regulated activities at all, on the grounds that he was not a fit and proper person to do so.

Mr Allen, who denied the FSA’s allegations then, and still denies them now,  sought to challenge the FSA’s decision before the Upper Tribunal. During the skirmish that followed, Mr Allen produced a redacted, single page extract of a 2011 High Court judgment, which seemed to show that the witness being relied upon by the FCA was “unreliable“, and that the case against Mr Allen could not therefore realistically succeed. The FCA asked for an unredacted copy of the whole judgment, but Mr Allen refused to provide it; so the FCA got a copy of the judgment from the transcibers. That judgment showed that it wasn’t only the FCA’s witness who was disbelieved by the judge; …Mr Allen too was disbelieved by the judge, who concluded that Mr Allen had knowingly advanced an untrue case, had produced at least one forged document and had originally colluded with [the witness] to advance [an] untrue case…”

When this became apparent, the FCA abandoned its original allegations (that Mr Allen was not a fit and proper person because he’d charged secret fees and used other people’s money for himself), in favour of an alternative set (that Mr Allen was not a fit and proper person because he’d advanced an untrue case before the High Court, and relied on a forged document as he did so).

During the course of a 4 day hearing before the Upper Tribunal, which took place in February 2014, Mr Allen (a) argued that the High Court had wrongly found that he’d advanced an untrue case and relied on a forged document; and (b) sought permission to rely on a lie detector test to demonstrate his honesty. But his request was rejected. When it handed down its Decision in August 2014, the Upper Tribunal found that:

  • It is, of course, possible that a different judge, hearing and seeing the same evidence as [the High Court in 2011], would reach a different conclusion but … in the absence of a successful appeal against the … judgment, the judge’s findings … are binding on Mr Allen … and we … cannot simply disregard them. [The] judge heard much more comprehensive evidence than we have been able to hear, and … he was in … a better position than are we to judge the truth … in that case. We accept that if there were some evidence, of undoubted reliability, which shows that [the] judge … must have been wrong in one material finding or another it might be open to us … to reach the view that the criticism of Mr Allen was unfounded … but nothing before us is of that character …
  • …even if we had accepted that there was any merit in Mr Allen’s attack on the … judgment, we would be bound to agree with [the FCA] that the production of a redacted page from the judgment … amounts to … a calculated attempt to mislead a regulator“;
  • … both the findings against Mr Allen in the [High Court] and his attempt to mislead are serious and recent enough … to warrant prohibition; together they allow … of no other outcome. Mr Allen’s challenges to the [High Court] judgment are not sufficient to displace, or even call into question, the findings in it that he knowingly advanced and gave untrue evidence, including a forged document, findings which demonstrate that he cannot be fit and proper … His attempt to divert the [FCA] by discrediting [their witness] and concealing his own wrongdoing is … an indication of his inability to understand the need for complete candour in his dealings with a regulator and that attempt, too, shows that he is not a fit and proper person … to perform any function in relation to regulated activities and that he should be prohibited from doing so

The Upper Tribunal’s decision was issued on 6 August 2014. Mr Allen applied for permission from the Court of Appeal to appeal the decision of the Tribunal but his application was dismissed in February 2015. The latest ban took effect 2 days ago.

This is the first time the FCA has abandoned one argument and set of evidence in favour of another, and used the second argument and evidence to show that the original allegations – a lack of fitness and propriety – could still be made out.