ON APPEAL FROM UPPER TRIBUNAL
(TAX AND CHANCERY CHAMBER)
Strand, London, WC2A 2LL
B e f o r e :
|(1) Andrew Greystoke
(2) Atlantic Law LLP
|- and -
The Financial Services Authority
WordWave International Limited
A Merrill Communications Company
165 Fleet Street, London EC4A 2DY
Tel No: 020 7404 1400 Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
The Respondent did not appear and was not represented.
Crown Copyright ©
Lloyd Justice Lloyd:
"A firm must not communicate or approve a specific non real time financial promotion which relates to an investment or service of an overseas person, unless...
(2) the firm has no reason to doubt that the overseas person will deal with private customers in the United Kingdom in an honest and reliable way."
"At various points in the Tribunal's determination, express or implicit criticism is made of the conduct of the FSA in failing to give guidance as to the meaning of the rules or assistance to Mr Jones when he asked for it."
And the FSA complained about that. At paragraph 41 the court said this:
"If and to the extent that the Tribunal used this criticism of the FSA's conduct to justify their conclusions that the promotions were clear, fair and not misleading and that there was no reason to doubt the honesty and reliability of the overseas companies, I would accept that the FSA's appeal in respect of the Tribunal's criticism would be largely justified. Even if the basic findings of fact underlying the criticisms are correct, I do not think it would be right to say that the FSA should be criticised. Regulators may often find themselves in a somewhat difficult position when they are expressly asked to supply for advice or guidance. It cannot be a legitimate criticism of a regulator that he decides not to give advice or guidance. It is the duty of the authorised person to comply with any relevant rule not the duty of the regulator to advise whether conduct of a particular kind does or does not constitute compliance with or contravention of a rule."
"We therefore have no verifiable evidence of the Applicants' real financial situation and less material than would generally be before a court in similar circumstances. We recognise that there is a possibility that imposition of financial penalties of the range fixed by the RDC may result in the insolvency of the Applicants and in Atlantic Law going out of business. The decision as to payment of these and other debts is it seems dependent on whether Mr Greystoke's wife chooses to lend more money."
"The purpose of a penalty is not to render a person insolvent or to threaten the person's solvency. Where this would be a material consideration, the FSA will consider, having regard to all other factors, whether a lower penalty would be appropriate."
It goes on, not so relevantly for present purposes. Mr Greystoke submits that in the light of that guidance it is simply wrong, unprincipled and, to say the least, disproportionate to impose a penalty which is known to be something which the person subject to the penalties cannot pay. The tribunal addressed this point at paragraph 110 as follows:
"The fact that the purpose of imposing a financial penalty is not to bring about insolvency does not mean that the Tribunal cannot and should not fix a penalty which may have that unfortunate result. Victims of boiler room schemes have to take the financial consequences of the losses perpetrated upon them. Those who help cause those losses do not deserve special protection. The need for the seriousness of breaches of the rules to be publicly recognised may outweigh the potential consequences for individuals. In our view it does so in this case. It would send out the wrong message for the Tribunal not to impose a substantial financial penalty."
They then referred to what was said in the Fox Hayes case about the amount of penalty, and they go on:
"But it is our duty to impose a suitable penalty, not extrapolate in detail from the facts of other cases. Having regard to the gravity and consequences of the breaches in this case but also giving some recognition to the Applicants' financial position, the right course is neither to increase nor decrease the penalty imposed by the RDC."
They therefore left the penalty in place.
Order: Application refused