Laura WilesThe Upper Tribunal made its decision on the reference to it in respect of the FCA’s decision that the only proposed financial adviser of a firm did not meet the ‘fit and proper’ test, such that the firm itself did not meet the threshold conditions required to be approved to carry out regulated activities, in Ashraf Wealth Management Limited v Financial Conduct Authority [2024] UKUT 265 (TCC).
The FCA had refused the application of Ashraf Wealth Management Limited (AWML) to carry out regulated activities on the basis that Mr Ashraf had not demonstrated that he was a ‘fit and proper’ person. Therefore, AWML itself did not satisfy the threshold conditions as required by section 55B(3) FSMA, namely the conditions of appropriate resources and suitability.
As per Schedule 6 FSMA, threshold condition 2D requires an applicant’s resources to be appropriate in relation to the regulated activities it carries out, or intends to carry out. Threshold condition 2E requires that the applicant be a fit a proper person having regard to a range of circumstances, including its connection with any other person, whether those who manage its affairs have adequate skills and experience and may be expected to act with probity, and whether its business is, or will be, managed in such a way as to ensure its affairs will be conducted in a sound and prudent manner.
The FCA’s decision notice was founded on regulatory references from Mr Ashraf’s former principal firms, which had both terminated his appointed representative agreements following internal investigations which identified breaches in relation to non-compliance with internal procedure. The FCA considered that the alleged findings indicated a pattern of non-compliance with procedures, and that Mr Ashraf had not demonstrated his ability to comply with all regulatory requirements should AWML’s application have been approved. This was reinforced by the competency interview with Mr Ashraf, from which the FCA concluded that he did not appreciate the seriousness of the issues identified and potential for consumer harm.
Upper Tribunal decision
AWML argued that the former principals” investigations and findings should be given little weight. The Tribunal disagreed that the first reference was too dated to be considered. It acknowledged that this might be a factor, but noted that Mr Ashraf had omitted reference to his fabrication of suitability letters as a reason for his dismissal, and also admitted to telling the FCA a “white lie” relating to the availability of alternative appointments.
The Tribunal noted that as the only proposed financial adviser of AWML, Mr Ashraf would have effectively been carrying on regulated activities unsupervised. It did not accept that the serious matter of Mr Ashraf’s honesty would ever cease to be relevant to an authorisation application, although it accepted that an individual’s subsequent behaviour may lessen or even completely purge the impact of past failings. However, Mr Ashraf had fabricated documents and continued to be less than transparent with the FCA, both in writing and in interview, in relation to this behaviour.