On 9th November 2012, the Financial Services Authority issued a Final Notice to Mr Malcolm Green following his guilty plea, on 30th January 2012, in respect of:

  • 20 counts of obtaining money by deception;
  • 19 counts of fraud by abuse of position; and
  • 3 counts of false accounting.

Mr Green was sentenced, at Derby Crown Court, to 5 years and 6 months imprisonment on 24th February 2012.

The Final Notice (which refers to a Decision Notice issued on 3rd October 2012) states that the FSA has determined it to be appropriate to make an order prohibiting him from performing any function in relation to any regulated activity carried on by any authorised person, exempt person or exempt professional firm (the “Order”).

The Order

The Order was made following the FSA’s conclusion that Mr Green “is not a fit and proper person to perform any functions as his conduct demonstrates a lack of honesty and integrity”. The nature of the crimes he has admitted is such that his honesty and integrity is rightly called into question. The Order took effect from 9th November 2012.

The Order was made pursuant to s. 56 of the Financial Services and Markets Act 2000 (“FSMA”). Section 56 FSMA enables the FSA to make a prohibition order where it appears to the FSA that “an individual is not a fit and proper person to perform functions in relation to a regulated activity carried on by an authorised person” (s. 56(1) FSMA). Such prohibition orders can prohibit an individual from performing a specified function or can provide for a blanket prohibition in respect of any regulated activity, as in the case of Mr Green and in the recent Final Notice issued in respect of Mr Ryan Burnside.

Engaging in regulated activities in breach of a prohibition order is a criminal offence which can result in a fine being issued (s. 56(4) FSMA). Mr Green will, therefore, have to ensure that he no longer engages in, or offers to engage in, any regulated activity otherwise he may face further legal action.

An individual subject to a prohibition order can apply to the FSA for the order to be varied or revoked (s. 56(7) FSMA). However, in the case of Mr Green it is highly unlikely that the FSA would consider revoking the Order. The total alleged loss which resulted from the actions of Mr Green reportedly stands in the region of £1m. His actions were conducted whilst he was working as a financial advisor. He was engaging in the regulated activities which he was authorised to carry out by the FSA and was essentially exploiting the authorisation that he had. As detailed within a previous blog, the nature of the fraud offence, and indeed the other numerous offences admitted by Mr Green, means that it would be highly unlikely that Mr Green could demonstrate honesty and integrity to a level which is sufficient for authorisation to re-obtained.

A criminal conviction is not an absolute barrier to FSA authorisation however; the cases of Mr Green and Mr Burnside demonstrate the level of importance the FSA will attach to criminal convictions which demonstrate a clear lack of honesty and integrity. When an individual faces charges of fraud, false accounting and other similar criminal offences they must not only consider the repercussions in respect of their liberty and potential Proceeds of Crime proceedings, they must also consider the effect such allegations and potential convictions will have on their FSA authorisation and the potential impact on their future if they are subject to a prohibition order.