Tribunal finds FCA acted unreasonably and must pay firm’s costs

The Tribunal has rules on an application by a firm for FCA to pay the costs of a previous Tribunal hearing. FCA decided to cancel the authorisation of a firm that had failed to pay its fees and failed to satisfy FCA that it had appropriate PII cover. The firm and its sole director had also been under investigation by FCA for alleged breach of regulatory requirements. FCA had issued supervisory letters stating its view that the firm had inadequate financial crime prevention systems and controls and there was reason to suspect it was frequently being used to commit financial crime; and that the competence and capability of its director fell below the standards expected such that FCA had serious concerns over his suitability to be a director and approved person in a regulated firm. It had suggested the firm and its director might consider a voluntary cancellation of their status, which they refused to do.  FCA had therefore started investigations which had not concluded at the time it made its Decision Notice.

The firm and director contended a number of issues, not least that it had ceased trading because FCA told it to, and had been unable to obtain PII cover as a direct result of FCA’s initial actions, which it then failed to pursue. It had then presented the case to the RDC as a simple case of non-payment of fees. The Tribunal found these matters were relevant in deciding whether FCA should have considered a remission of fees or any alternative to the cancellation route. It required FCA to reconsider its decsion.

The firm then made an application for costs. The Tribunal could consider this only if it found that either or both FCA had acted unreasonably or the RDC’s decision was unreasonable.

The Tribunal rejected FCA’s submissions that background factors had nothing to do with the reasonableness or otherwise of the RDC’s decision. It was not a routine case, and FCA should have better considered whether its supervisory action was the problem, and should have considered whether to close the prior investigation. It also concluded that FCA acted unreasonably in seeking to defend its decision in the Tribunal.  On those bases, the Tribunal had power to make a costs decision, and in principle considered FCA should pay all the firm’s costs of and incidental to the Tribunal proceedings.

Emma Radmore