Tribunal disagrees with FCA on JBI individual bans

The Upper Tribunal has published its decision in relation to FCA’s decision to ban 3 individuals working for Julius Baer International for lack of integrity, following its finding that JBI had breached its rules in carrying out business under  “finder’s arrangement” with an individual who would introduce companies within a group (the Yukos group) to which he was connected to JB group companies, and would be remunerated for doing so. FCA had found several red flags arose during the arrangement between 2010 and 2012. Louise Whitestone was a relationship manager for the Yukos accounts and the principal point of contact for the “finder” and the director of one of the Yukos entities. Thomas Seiler was Mrs Whitestone’s functional line manager, and Gustavo Raitzin was the relevant regional head and Mr Seiler’s line manager.  He was responsible for final approval of the payments to Mr Merinson. FCA decided to ban all the individuals on the basis they had all acted recklessly and with a lack of integrity.  The three individuals all appealed the FCA decisions:

• Mrs Whitestone said she was junior, out of her depth and bullied by a toxic work culture and additionally that there were no effective written policies, including that it was not clear that the finder’s fee policy applied to JBI;
• Mr Seiler said he had understood that all arrangements had been agreed by a director of the client, were known about by numerous people within JB and had no reason to think the Yukos director might benefit personally from the arrangements, and moreover that his was a marketing role and he was not aware of a number of features of the relevant transactions;
• Mr Raitzin said he put faith in those he worked with to draw concerning matters to his attention, that critical information was withheld from him and that he insisted concerns were acted on when they came to his attention.

The Tribunal found that FCA had not properly made out its case that the 3 individuals acted recklessly and consequently with a lack of integrity in relation to the subject matter of the references, and remitted the question of whether any of them should be banned to FCA for it to reconsider its decisions. Predominantly, it based this on reasoning that acting recklessly does not always equate to acting without integrity. The Tribunal said that recklessness has both subjective and objective elements – with the subjective element focusing on the state of knowledge of the relevant individual and the objective on whether it was reasonable for the person to have ignored the risk. The Tribunal thought the FCA had sought to extend the concept of a lack of integrity “beyond its proper bounds”. It also criticised the FCA for not having called certain witnesses who could have been key, for having believed evidence given by JBI that unsurprisingly sought to clear itself by blaming individuals, and, while it noted that JBI’s activities clearly merited the substantial fine that was imposed, the FCA could have divorced the allegations against the firm from those against the individuals, given there was clearly a conflict. There was also significant criticism of the FCA’s decision not to ban Mrs Whitehouse’s immediate superior, apparently solely on the reason that he ultimately raised the suspicion.

FCA, responding to the decision, noted that it had already had a successful outcome through its fine on JBI. It was pleased the Tribunal had criticised many aspects of the conduct of the relevant individuals, although it considered the conduct was negligent rather than reckless. FCA also commented that one document that human error was the reason that one document that should have been disclosed was not – and that it takes seriously the Tribunal’s recommendations and it reviewing its disclosure process although human error can never be completely discounted. It also noted the criticisms on delays, although commented much of this was outside its control.