PURSUANT TO THE DECISION OF THE COURT OF APPEAL ON 21 DECEMBER
2017, THIS DECISION NOTICE HAS BEEN SUPERCEDED BY A FINAL NOTICE
DATED 14 DECEMBER 2018.

DECISION NOTICE

1.
ACTION

1.1.
For the reasons given in this notice, the Financial Services Authority (“FSA”) has
decided to:

(1)
make an order prohibiting Angela Burns from performing any function in
relation to any regulated activity carried on by any authorised person,
exempt person or exempt professional firm pursuant to section 56 of the
Financial Services and Markets Act 2000 (“Act”); and

(2)
impose upon Angela Burns a financial penalty of £154,800 pursuant to
section 66 of the Act.

2.
SUMMARY OF REASONS

2.1.
Angela Burns held Controlled Function 2 (“CF2”) non-executive director (“NED”)
positions at:

(1)
Marine and General Mutual Life Assurance Society (“MGM”) from 19
January 2009 until she resigned on 22 May 2011; and

(2)
Teachers Provident Society (“Teachers”) from 5 May 2010 until she
resigned on 31 May 2011

(collectively, “Mutual Societies”).

2.2.
The FSA has decided to take action against Angela Burns because she breached
Statement of Principle 1 (An approved person must act with integrity in carrying
out his controlled function) by recklessly, and in breach of her fiduciary position
as a NED at the Mutual Societies:

(1)
failing to disclose her conflicts of interest to the Mutual Societies;

(2)
disregarding her duties under companies legislation and under the Mutual
Societies’ articles of association and rules and conflicts documentation to
declare her interest in the Mutual Societies’ contracts (whether past or
anticipated) with the investment manager (which, during the Relevant
Period, was the same investment manager for both Mutual Societies – the
“Investment Manager”);

(3)
telling the CEO and chairman of the board at MGM that there was no
commercial arrangement nor was there any prospect of her working for
the Investment Manager having suggested to the Investment Manager
that she could assist it in a consulting capacity or as a non-executive
director and reminding it of this; and

(4)
failing to update the declaration of interest she executed with Teachers to
inform it of her repeated attempts to engage in a business relationship
with the Investment Manager.

2.3.
These breaches began on 21 January 2009 (the first time Angela Burns attended
an MGM board meeting at which the board discussed the possibility of using the
Investment Manager and Angela Burns failed to declare that she was actively
seeking work with the Investment Manager) and continued until 31 May 2011
(the date Angela Burns resigned from Teachers) (“Relevant Period”).

2.4.
Angela Burns’ conduct is serious because she:

(1)
fell below the standards expected of a NED;

(2)
maintained throughout that she did not have a conflict of interest;

(3)
caused detriment to:

(a)
the Investment Manager because her behaviour caused it to
withdraw from the opportunity to secure an investment mandate
with Teachers; and

(b)
Teachers because the Investment Manager was its preferred
candidate.

2.5.
The FSA makes no criticism of the Mutual Societies or the Investment Manager in
relation to the findings against Angela Burns.

3.
DEFINITIONS

3.1.
The definitions below are used in this Decision Notice:

“2008 Proposal” – see paragraph 4.7.

“5 November email” – see paragraph 4.45.

“APER” means the part of the Handbook in High Level Standards which has the
title Statements of Principle and Code of Practice for Approved Persons.

“DEPP” means the Decision Procedure and Penalties Manual.

“FIT” means the part of the Handbook in High Level Standards which has the title
the Fit and Proper test for Approved Persons.

“Investment Manager” – see paragraph 2.2(2)

“MGM” – see paragraph 2.1(1)

“Mutual Societies” – see paragraph 2.1.

“Relevant Period” – see paragraph 2.3.

“Statement of Principle 1” – see paragraph 3.5 of the Annex.

“Teachers” - see paragraph 2.1(2).

4.
FACTS AND MATTERS

4.1.
Angela Burns is an experienced professional in the UK investment industry and
the chief executive of her own investment consultancy business. The FSA
approved her to perform a CF2 non-executive director role at MGM (on 19
January 2009) and Teachers (on 5 May 2010).

4.2.
It is her conduct in a personal capacity while a NED at MGM and Teachers, and
her use of those positions for her own longer term benefit, that is the subject of
this Decision Notice. She did not recognise, and therefore failed to disclose, that
her interest in working for the Investment Manager and her repeated attempts to
do so amounted to a conflict of interest.

The Investment Manager

4.3.
In 2006, Angela Burns, through her consultancy business, drafted a report for the
Investment Manager recommending its entry into the UK investment market.

4.4.
Having completed the report, Angela Burns emailed the Investment Manager and
asked it for the “opportunity to turn” her proposal into a “successful business” in
the UK.

4.5.
A person from the Investment Manager responded saying that, depending on the
direction the Investment Manager decided to take, he would be happy to discuss
next steps with Angela Burns including the role Angela Burns mentioned in her
note. Her interest and commitment were greatly appreciated.

4.6.
The Investment Manager contacted Angela Burns in around May 2008 to let her
know that it had decided to enter the UK investment market. Angela Burns met
the executive responsible for the Investment Manager’s retail and institutional
business in the UK in June 2008 and sent an email to him summarising the areas
in which she believed she could assist the Investment Manager to achieve its
goals.

4.7.
In September 2008, Angela Burns met the head of the Investment Manager’s UK
business again and following that meeting put forward (through her business

consultancy) a formal written proposal outlining the consultancy work she could
perform (the “2008 Proposal”) for the Investment Manager. Through her
business consultancy, she proposed to:

(1)
conduct private banking consultancy work in the UK and Switzerland;

(2)
“gather” assets in the institutional sector on an “ad valorem” basis; and

(3)
through “Governance Oversight” provide “non-executive services” to the
Investment Manager’s funds (including funds in Dublin), corporate entities
and management companies.

4.8.
The 2008 Proposal would have required the Investment Manager to pay Angela
Burns’ business consultancy, a third party, for helping it place funds under
management. The Investment Manager, however, did not pay third parties for
this work.

Angela Burns’ role at MGM

4.9.
By letter dated 9 December 2008, MGM notified Angela Burns that its board
wished to appoint her as:

(1)
a NED;

(2)
the chair of their investment committee; and

(3)
its NED representative at its Dublin based subsidiary.

The Companies Act 2006

4.10. MGM is governed by the Companies Act 2006. Section 177 of the Companies Act

2006 requires a director to do three things:

(1)
if a director of a company is in any way, directly or indirectly, interested in
a proposed transaction or arrangement with the company, to declare the
“nature and extent of that interest to the other directors” (section 177(1));

(2)
if the declaration becomes inaccurate or incomplete, to make a further
declaration (section 177(3)); and

(3)
make the declaration before the company enters into the transaction or
arrangement (section 177(4)).

MGM’s conflicts documentation

4.11. On joining MGM, the firm gave Angela Burns a copy of its Approved Persons

Manual. The section entitled “Responsibilities of Approved Persons” sets out,
among other things, its policies on conflicts of interest and the use of confidential
or sensitive information:

“Conflict of Interests

Approved Persons must exercise care to ensure that there is no conflict
between their personal interests and those of the Society or its customers.
If such a conflict arises, or appears likely to arise, an Approved Person

should discuss the matter with an appropriate person; for example, the
Chief Executive (for Society staff) or the chairman (for Non Executive
Directors).

Such discussions should be recorded to ensure that the Approved Person’s
actions are transparent and cannot be misinterpreted.

Confidential or Sensitive Information

When undertaking a Controlled Function, an Approved Person may have
access to, or otherwise become aware of, confidential or market sensitive
information relating to the Society or another company outside the MGM
group.

In addition to keeping such information confidential, an Approved Person
must not use it for the purposes of personal gain or benefit.”

4.12. Angela Burns attended her first MGM board meeting as an observer in December

2008 in anticipation of her official appointment.

4.13. Shortly after attending MGM’s December board meeting, Angela Burns emailed

the Investment Manager on 13 December 2008 to let it know that she had joined
MGM’s board. In the same email she noted, “it will be helpful to keep up to date
with your plans and see where there may be opportunities.” She also attached
her 2008 Proposal to the email without commenting on it specifically.

4.14. In early January, Angela Burns sent three emails to other contacts at the

Investment Manager similar to the one sent on 13 December 2008.

4.15. On 19 January, the FSA approved Angela Burns as a CF2 at MGM.

4.16. On 21 January, Angela Burns attended her first MGM board meeting as a board

member. Following the discussion at that meeting about a passive fund provider,
she recommended that the board should consider using the Investment Manager.
Although MGM was aware that Angela Burns had done a consulting project for the
Investment Manager in the past, it was unaware that she was seeking consulting
work with the Investment Manager.

4.17. On 23 February at 19:38, Angela Burns responded to an email from MGM’s CEO in

an email string entitled “Reducing capital strain” and said that the Investment
Manager would be:

“a good, high profile choice for the passive investment options for [its
assets backed annuity] and maybe also one of several low cost passive
fund providers for the back book”.

4.18. The next morning at 9:05, Angela Burns responded to the managing director of

the Investment Manager in an email string entitled “MGM”. In her capacity as a
NED of MGM, she updated him on the process for (what the earlier emails in the
string had referred to as) the £1.5bn back book ‘opportunity’. On a personal
basis, she attached the 2008 Proposal she presented to the Investment Manager
five months earlier and suggested that she could:

(1)
perform consultancy work for the Investment Manager; and

(2)
serve as a NED for the Investment Manager’s Dublin funds.

4.19. Angela Burns said:

“I have in mind to have the new managers supporting our [MGM’s
Investment Product] come along to one of our Investment Committees …;
MGM execs will co-ordinate with your [i.e. the Investment Manager’s]
team in the coming weeks.

Had you had any further thoughts on the institutional/wealth management
fund raising proposal we exchanged last September, for the UK and Swiss
markets? An [sic] well-placed institutional advocate ‘on the ground’ here
could help to accelerate your [Assets Under Management] gathering in the
UK.

One aspect which has grown in importance since the Autumn has been the
FSA’s renewed emphasis on the importance of having appropriately
experienced non-executive directors (NEDs) on the board’s of financial
firms.

Have you made arrangements to have one or more NEDs on the board of
[the Investment Manager]? It’s a function I carry out for MGM and could
usefully provide for [the Investment Manager’s] UK operations, to support
your business growth and development here.”

4.20. MGM’s board met on 25 February. The attendees included Angela Burns. The

board agreed at that meeting to consider the appointment of the Investment
Manager and the board approved the business case for the annuity project.

4.21. On 26 February, the day after MGM’s board meeting, Angela Burns responded to

an email dated 20 February from the head of the Investment Manager’s European
and Asian business in an email string headed “MGM and [the Investment
Manager]”. Having addressed a matter in her capacity as a NED at MGM, she
reminded him of the 2008 Proposal and continued:

“One aspect of the proposal we discussed last year, which has grown in
importance since the Autumn, has been the FSA’s renewed emphasis on
the requirement to have appropriately experienced non-executive directors
(NEDs) on the board’s [sic] of financial firms.

Have you made arrangements to have one or more NEDs on the board of
[the Investment Manager], [first name of the person Angela Burns is
writing to]? It’s a function I carry out for MGM and would be pleased to
provide for [the Investment Manager]’s UK operations, to support your
business growth and development here.”

The underlining is added to show the differences from the email of 24 February
(paragraph 4.19).

4.22. On 10 June, MGM’s investment committee met and agreed to recommend to

MGM’s board the Investment Manager as one of the fund providers under an MGM
annuity product wrapper. Angela Burns was the chair of MGM’s investment
committee.

7


4.23. On 23 September, MGM’s investment committee met to consider the

recommendation to place its £350 million investment mandate with the
Investment Manager. The investment committee approved the recommendation
to place the £350 million mandate with the Investment Manager.

4.24. In August, the Investment Manager asked MGM if it would speak to a newspaper

about its experience using the Investment Manager’s indexed funds. A director
of MGM noted the request and emailed it to Angela Burns asking for her opinion.
The email noted:

“The only conflict I would see would be if we introduced to them to [sic] a
provider looking to put their funds into an annuity wrapper!”

4.25. Since MGM itself was also in the business of providing such annuity products, it

was sensitive about giving publicity to the Investment Manager in this respect.
With this one reservation, MGM, who had placed a £350m investment mandate
with the Investment Manager, had a strong interest in ensuring that the
Investment Manager succeeded in the UK.

4.26. On 10 August, Angela Burns forwarded the email string to the Investment

Manager (without copying MGM), including the email from the Investment
Manager suggesting that MGM could be ‘the story’, and said:

“I think it would be productive for us to have a serious talk re your UK
ambitions and my ability and willingness to help. When might you be
free?”

4.27. MGM only learned that Angela Burns had forwarded the email to the Investment

Manager at an FSA interview in June 2011. When the FSA showed Angela Burns’
email to MGM’s director, he explained that his email to her was “private” and he
was not pleased to discover that Angela Burns forwarded it to the Investment
Manager, a potential competitor in this area.

4.28. Angela Burns resigned as a NED of MGM effective 22 May 2011.

Conclusion for MGM

4.29. In February 2009, Angela Burns emailed the head of the Investment Manager’s

European and Asian business reminding him of the 2008 Proposal and offering to
provide the function of a NED for the Investment Manager’s UK operations “to
support your business growth and development here” (see paragraphs 4.18 and
4.19). Not only had Angela Burns not told MGM of her communications with the
Investment Manager, she had told MGM’s CEO in early 2009 that there was no
prospect of working for the Investment Manager.

4.30. In June and September 2009, Angela Burns participated in two significant MGM

decisions without declaring to anyone at MGM, including her fellow board
members and investment committee members, that she was in touch with the
Investment Manager with a view to entering into a business arrangement with
them (see paragraphs 4.22 and 4.23).

4.31. In 2010, Angela Burns maintained her contact with the Investment Manager in a

personal capacity and, in that capacity, felt free to copy to them an email from
MGM on a subject of some sensitivity to MGM (see paragraphs 4.24 to 4.27).

Angela Burns’ position at Teachers

4.32. By letter dated 10 June 2010, Teachers notified Angela Burns that it had accepted

the nomination committee’s recommendation to appoint her to Teachers’ board as
a NED, subject to approval by the FSA. Angela Burns:

(1)
had, in fact, received FSA approval for her CF2 position on 5 May 2010;

(2)
became a member of the risk, audit and compliance committee on 10 June
2010; and

(3)
was elected to and became the chair of Teachers’ investment committee in
August 2010.

The Friendly Societies Act 1992 and the Building Societies Act 1986

4.33. Teachers is governed by the Friendly Societies Act 1992 (“Friendly Societies Act”).

Schedule 11, Part II of the Friendly Societies Act extends section 63 of the
Building Societies Act 1986 (“BSA”) to the Friendly Societies Act.

4.34. Section 63(1) (Directors to disclose interests in contracts and other transactions)

of the BSA provides:

“It is the duty of a director of a building society who is in any way,
whether directly or indirectly, interested in a contract or proposed contract
with the society to declare the nature of his interest to the board of
directors of the society in accordance with the procedure set out in this
section.”

Teachers’ conflicts documentation

4.35. On becoming a NED, Teachers required Angela Burns to:

(1)
review Teachers’ conflicts of interest policy (“Conflicts Policy”);

(2)
review Teachers’ ethics policy (“Ethics Policy”); and

(3)
declare her interests (“Declaration of Interests”).

4.36. Teachers’ Conflicts Policy provided the following examples (among others) of

conflicts of interest:

(1)
“During your work, recommending a supplier, managing or monitoring a
contract in which you have an interest”.

(2)
“A Financial Consultant making recommendations that serves their
financial interest, rather than the one most appropriate to customer
needs”.

(3)
“Being involved in a decision from which you personally gain”.

4.37. The Conflicts Policy also stated that Teachers:

“requires all staff at all times to act honestly and with integrity and declare
any conflicts of interest”

and stated that:

“The simple rule is, ‘Disclose always’”.

4.38. Teachers’ Ethics Policy identified the standards it requires of all staff. It expected

them:

“at all times to act honestly and with integrity”

and it requires that:

“at the earliest opportunity, staff should declare any relationship,
circumstance or business interest which may be seen by others to
influence or impair their judgement or objectivity”.

4.39. Teachers’ Ethics Policy also provided “Examples of Negative Unethical Behaviour”.

One example is:

“ignoring a potential conflict of interest”.

4.40. On 21 June 2010, Angela Burns executed a clean Declaration of Interests and

submitted it to Teachers’ group company secretary. In doing so, she gave
Teachers notice “in compliance with the Friendly Societies Act 1992 … and
sections 175 to 177 and 182 to 187 of the Companies Act 2006” that she had:

(1)
“no conflict, benefit from a third party or interest in proposed
transaction or arrangement”; and

(2)
“no
interest
in
contracts
between
the
Society
and
its

subsidiary/associated companies and a third party which should be
declared”.

4.41. Angela Burns knew that the investment manager which held Teachers’ entire

investment mandate had raised its fees and that Teachers wished to find a
suitable manager to replace it.

4.42. Following a request from Teachers to recommend some suitable investment

managers to include on a tender list, Angela Burns recommended three
investment managers, including the Investment Manager. By November 2010,
Teachers considered the Investment Manager to be the preferred candidate. The
size of the investment mandate was approximately £750m.

4.43. Teachers was aware that Angela Burns had done consultancy work for the

Investment Manager in 2006 but it was unaware that she was seeking
consultancy work from the Investment Manager.

4.44. The Investment Manager was scheduled to make its tender presentation to

Teachers on 22 November 2010.

4.45. However, on 5 November 2010, Angela Burns emailed the Investment Manager

(the “5 November email”) as set out below:

“Subject: New monies

… Later in the month, [the Investment Manager] will present to Teachers
Assurance, where I am NED and chair of the Investment Committee, with
a view to taking in a £700m+ passive equity and bond mandate. This
follows on from the £350m mandate secured from MGM Advantage, where
I am also chair of the Investment Committee.

I am delighted to help secure new institutional mandates for [the
Investment Manager], having played a role in introducing [the Investment
Manager] to the UK market via consultancy work in 2006.

Given that my NED positions have facilitated potentially some £1bn of new
assets to your new enterprise, I feel it appropriate to reprise our earlier
discussions. We had discussed previously both the prospect of my
receiving 1 bps [basis points] for new monies secured, on and [sic] ad
valorem basis, and my becoming a NED of your Dublin funds. The MGM
Advantage mandate would amount to £35k pa, with the TA mandate
taking it to £110k pa. An NED position in Dublin would add a further
£20k.

Could we progress matters with your counsel?”


4.46. The Investment Manager:

(1)
did not ‘progress matters’ with Angela Burns;

(2)
viewed Angela Burns’ email as a request for a payment and a NED role
from it in return for Angela Burns using her positions at the Mutual
Societies to facilitate the placement of investment mandates at those firms
with the Investment Manager;

(3)
viewed her email as a request for payment for using her influence at
Teachers to cause Teachers to place an investment mandate with the
Investment Manager; and

(4)
considered that the email showed that Angela Burns had a conflict of
interest.

4.47. In the circumstances, the Investment Manager decided that it would be unethical

to continue to participate in the tender and, on 18 November 2010, it formally
withdrew from the process, shortly before it was due to make its tender
presentation to Teachers on 22 November 2010.

4.48. On 19 November, the Investment Manager wrote to Angela Burns saying –

“I must say I was a bit surprised to receive this note, as I thought it would
have been clear from all the interactions you have had with the
[Investment Manager] over the years that we do not pay third parties for
distribution of our funds and we are not looking to add any NEDs to our
Irish fund range. I apologise if there has been any misunderstanding that
may have arisen out of your conversations with me or any other
[Investment Manager] crew member, but I thought I should be clear
about where we stand on the issue.”

4.49. On the same day, Angela Burns responded –

“Well obviously [name]. Hence it may be help [sic] to get some advice on
how we might co-operate in the future. One possible area which perhaps
might work is where the Investment Manager may be able to provide seed
capital to new funds, where no competitive/conflict of interest issues
arise…”

4.50. Angela Burns ceased acting as a NED at Teachers effective 31 May 2011.

Conclusion for Teachers

4.51. At no point while she was a NED at Teachers did Angela Burns tell anyone at

Teachers about her ongoing attempts to procure work with the Investment
Manager or her 5 November email.

4.52. Her view is that the requests to the Investment Manager set out in her 5

November email do not amount to a declarable conflict because they are
proposals or “mere preparatory steps to develop a relationship”.

5.
REGULATORY PROVISIONS

5.1.
The statutory and regulatory provisions relevant to this Decision Notice are set
out or referred to in the Annex to this notice.

6.
REPRESENTATIONS

6.1.
Angela Burns made representations in writing on 28 June 2012 and orally on 11
October 2012. What follows is a brief summary of the key representations. In
making the decision which gave rise to the obligation to give this notice, the FSA
has taken into account all of the representations, whether or not set out below.

6.2.
The FSA was urged to adopt a common sense approach to what Angela Burns
should have done in the circumstances. The general questions were ‘What is the
right thing for individuals to do when they have different roles or prospective
different roles?’ and ‘At what point should a person who is maintaining
relationships in a variety of sectors, and exploring ideas for future work, disclose
discussions as a conflict of interest?’ More specifically in this case, ‘Should Angela
Burns have disclosed something more to MGM and Teachers than she did about
her relationship with the Investment Manager?’

6.3.
Although Angela Burns had aspirations of working for the Investment Manager,
and was seeking to ‘reignite’ the interest of the Investment Manager in her 2008
Proposal, she was firmly of the view that no disclosable interest had ‘crystallised’.
There was no ‘traction’ in the discussions. There was no engagement from the
Investment Manager. Her approaches were no more than ‘feelers’. As there was
nothing concrete to say to MGM and Teachers, there was nothing to disclose.

6.4.
Representatives from MGM and Teachers had said in interviews that they would
have expected Angela Burns to have made a further disclosure to them if she
had, or would have, benefitted financially from her discussions with the
Investment Manager by for example, soliciting fees. A director of one of them
made it clear that Angela Burns did not in any way influence the outcome of the
decision-making process.

6.5.
The 5 November email was badly worded and written in haste from a Blackberry
but it was not what it seemed on the face of it, namely a demand for payment.
The reference to fees was illustrative. The email was an attempt to resurrect or
reinvigorate the dormant discussions for future work as set out in the 2008
Proposal. It was an attempt to clarify the position. The suggestion that counsel
should be involved was made for this purpose. It was not unacceptable for an
email to be sent to further personal business interests so long as it was properly
couched.

6.6.
Given that the Investment Manager was ‘back on the radar’ after a period of
silence concerning the 2008 Proposal, it was the ideal time to raise the matter
again. The fact that the Investment Manager had not come back to Angela Burns
suggested that this was something they were still considering.

6.7.
Angela Burns said that the misunderstanding of the Investment Manager was
understandable even though the recipient understood the context in which the
email was written. As is evident from her email of 19 November (paragraph
4.49), Angela Burns tried immediately to correct the misunderstanding.

6.8.
In hindsight, the 5 November email would have been worded differently and
Angela Burns would have read through her emails more carefully. Also, she
would have asked for a separate email address for each of the Mutual Societies
rather than using the email address of her own business.

6.9.
When Angela Burns told a director of MGM in early 2009 that there was ‘no
prospect’ of working with the Investment Manager, it had to be seen in the
context of the failure of the Investment Manager to respond ‘yes’ or ‘no’ to the
2008 Proposal. The height of any declaration which she could have made,
namely that there had been some discussion which had led nowhere, would not
have amounted to a declarable interest. Any disclosure would have been very
nebulous.

6.10. Some of the emails did contain a mix of personal and NED business but they were

all unobjectionable when seen in context. There was nothing significant in the
timing of them.

6.11. The 2008 Proposal related to a different area of business to the business of the

Mutual Societies. There was always a separation between the two mandates
which were up for discussion and the 2008 Proposal.

6.12. There was clear evidence that Angela Burns did not play any inappropriate part in

any selection process. It was ironic that Teachers went out of its way to appoint
a firm to make the decision on the mandate so that there would be seen to be
independence and objectivity.

6.13. Most of the FSA cases involving a breach of Principle 1 involve deliberate or

intentional misconduct. Where they do not, it is where a person has turned a
blind eye to the very damaging obvious. There is no suggestion that Angela
Burns had been dishonest or engaged in deliberate misconduct. Nor is there any
evidence that Angela Burns deliberately closed her mind to the risk. Her conduct
should not be seen as reckless and improper conduct designed to further her
personal interests. Angela Burns accepts, however, that a finding of breach of
Principle 1 would lead to a prohibition. If a fine was to be imposed, it should be
proportionate and consistent with similar fines.

6.14. Angela Burns had over 25 years’ worth of experience as a professional. The

evidence is that she is well respected and trusted.

6.15. Angela Burns said that, as an experienced professional, her understanding of a

conflict of interest was that it arose when a person had more than one interest
and, in pursuing one interest, it negatively impacted upon the other. One interest
may impair the person’s judgement or be seen to impair the person’s judgement.
Or it may prevent the person in some way acting in the best interests of both of
the person’s interests.

6.16. The situations which are the subject of this notice involved judgement calls which

were not easy to make and Angela Burns took the view, based on her long
experience, that there was nothing to disclose.

6.17. The FSA had to be satisfied that there was evidence of the utmost clarity and

persuasiveness to support a finding that Angela Burns lacks integrity. That
evidence was not there. The case law spoke of a real and substantial interest
rather than one which is theoretical. Angela Burns had disclosed her previous
work for and contact with the Investment Manager. The interests here were too
remote. They were contingent on third parties and entirely prospective. There
was not a real, sensible possibility of conflict.

6.18. Angela Burns felt that she had conducted herself in a loyal way with MGM and to

the benefit of policy holders of which she was one. It is certainly true that MGM
benefitted in its dealings with the Investment Manager because of the past
relationship of Angela Burns with the company. Both MGM and Teachers were
tiny compared to the Investment Manager. If there was a pattern of conduct,
Angela Burns felt strongly that she had shown her loyalty to both companies in
terms of supporting them in dealing with an organisation such as the Investment
Manager.

7.
FINDINGS

7.1.
It is clear to the FSA that Angela Burns should have disclosed to MGM and
Teachers her communications with the Investment Manager. Given her role as a
director and chair of the investment committees, the interest of MGM and
Teachers in giving a significant investment mandate to the Investment Manager
and their interest in being given it, her role was pivotal and highly sensitive. She
gave no indication that she was alive to the sensitivities either at the time or
subsequently.

7.2.
The position of non-executive directors is critical to the effective functioning of a
board and to maintaining the confidence of customers. The essence of the non-
executive is that they have a degree of independence from the executive and can
challenge proposals with the benefit of an experience which generally has a wider
perspective than the focussed perspective of the executive. By almost uniform
practice, the non-executive will have a portfolio of interests and will have had to
have spent time building it up. The diverse and independent perspective is its
strength. When this happens properly and openly it brings benefit to the firm and
confidence to its customers: a focussed executive balanced and appropriately
challenged by a non-executive voice on the board.

7.3.
Both the executive and the non-executive director have the same duty to disclose
a conflict of interest but for the non-executive with a portfolio of appointments
there are more interests to consider. Whether the time spent building or
maintaining a portfolio gives rise to a conflict of interests, either personally in the
maintenance of the portfolio or one appointment with another, will depend wholly
on the circumstances. In a sense, as Angela Burns said in her representations,
for a professional person maintaining a number of appointments, everyone is a
potential client. The dividing line between acceptable contact and unacceptable

contact may sometimes be difficult to discern. Where there is doubt, as Teachers
say in their Conflicts Policy:

“The simple rule is, ‘Disclose always’”.

7.4.
Angela Burns made no adequate disclosure of her interest in working for the
Investment Manager and her repeated attempts to do so. No reason was given
for not disclosing her interest, other than that there was no conflict. Had the
matter been openly discussed, there is every reason to suppose that Angela
Burns would have complied with her duty of disclosure.

7.5.
In this case, a number of factors taken together make it quite clear that the
communications should have been disclosed, including:

•
the position of Angela Burns;

•
the importance of the mandates to both parties;

•
the unequivocal terms of some of the emails;

•
the extent of her contact with the Investment Manager;

•
the timing of some the initiatives to enter into a commercial arrangement with
the Investment Manager;

•
the evident attraction to Angela Burns, and her acknowledged aspirations, of
working for the Investment Manager;

•
the dominance in her thoughts that the Investment Manager had not
responded clearly one way or another to the 2008 Proposal; and

•
the leverage of her positions in her approaches to the Investment Manager.

7.6.
The common sense approach the FSA was invited to adopt is supported by the
position at law to which the FSA was directed in the representations. In
Dominion International Group plc (No 2) [1996] 1 BCLC 572, a ‘real and
substantial’ interest is contrasted to a theoretical and insubstantial interest.
Angela Burns had identified the areas of work in a written proposal and had
assumed, by an absence of response, that it was still being considered. In her
experience, it would be typical for the Investment Manager to be slow to respond.
Her interest was still very real, and it was substantial. Similarly, this was not a
situation where one could imagine some situation arising which might, in some
conceivable possibility in events, result in conflict (Boardman v Phipps [1967] 2
A.C. 46). The outcome had been described in detail and was being actively
pursued in the hope of success.

7.7.
On the difference between an actual conflict and a potential conflict, the FSA
follows what the Upper Tribunal has said:

“Nor do we accept that for this purpose there can be any distinction
between a conflict of interest and a potential conflict of interest. If the use
of “potential” is intended to denote a circumstance where a person may
become entitled to receive benefit from an interest that could be in conflict
with a duty, but at the material time there has been no such receipt, then
that in our judgment is a real and present conflict, notwithstanding that
the benefit has not crystallised, or indeed may never do so.” (First
Financial Advisers Limited v The FSA (FS/2010/0038))

7.8.
Angela Burns did not act deliberately or dishonestly. However, she was not only
aware of the risks of not declaring a conflict of interest but the evidence was that
she gave a talk on Corporate Governance which included a slide on conflicts of

interest. It was not clear from the evidence whether Angela Burns continuously
and consciously considered her position and came to the view that there was no
conflict or did not think about the issue, or a mixture of the two. The FSA has
come to the conclusion that she closed her mind to the issue and in doing so
acted recklessly. In essence, a person is reckless when he acts in the knowledge
that there is a clear and substantial risk of wrongdoing or where he deliberately
closes his mind to that risk (R v G [2004] 1 AC 1034, HL).

7.9.
The FSA accepts that the 5 November email was not a demand for money. In
coming to this conclusion, the FSA has accepted the frank admission that the
email was poorly worded. The extent of how poorly worded it was is measured by
the reaction of the Investment Manager and their withdrawal of interest from
seeking the mandate. However, it does not matter whether this was a demand
for money or not. The conflict is in the motive behind the communication without
disclosure. The fact that Angela Burns tried immediately to correct the
misunderstanding does not affect this.

7.10. In considering whether a conflict arose, the FSA was particularly conscious of the

importance of the mandates. The investment mandate for MGM was worth
£350m (paragraph 4.23). The investment mandate for Teachers was worth
£750m (paragraph 4.42). When anyone has a part to play in the process for such
contracts, the utmost sensitivity is called for. When the person having the part to
play has a responsibility as a director and chair of the investment committee, the
need for utmost sensitivity is all the more. The evidence of the conduct and
representations of Angela Burns gives no sense of an appreciation of the
sensitivity which was called for. Instead, she concentrated on the silence from
the Investment Manager and the need to resolve what to her was an unresolved
matter. There was no indication that she ever considered that silence since
September 2008 could itself have indicated the level of their interest in her
proposal.

7.11. Whether viewed from the point of view of her fiduciary position as a director, the

legislative provisions applying to her or the very clear contractual obligations
applied to her under the internal policies of MGM and Teachers, it is clear that the
obligations on Angela Burns were high. There is no evidence, or no adequate
evidence, that she considered her position in the light of these duties placed upon
her. Although this was presented to the FSA as giving rise to difficult decisions
involving judgement calls, there is no evidence that she discussed her position
with anyone else to resolve any uncertainty as to whether her communications
amounted to a disclosable interest. The FSA was invited to rely on her judgement
borne out of many years of experience in the financial services sector (see
paragraphs 6.15 and 6.16). If she did consider her position in this respect, her
judgement fell short of the standards expected of a non-executive director in her
position. In reaching this conclusion, the FSA acknowledges the evident regard
held for Angela Burns by others in the testimonials given on her behalf but does
not feel that these can displace the clear conclusions it has come to on the
evidence before it.

7.12. The reaction of those interviewed from MGM and Teachers was used in support of

the argument that there was no expectation of a declaration of conflict to be
made. The FSA does not accept that there is no other interpretation of their
evidence but whatever the response, and whatever the circumstances in which
the responses were made, the test for a conflict is not the reaction of others. The
point of disclosure is to give others the opportunity of considering what effect, if
any, the disclosure has. The point is the interest of the other party, not the
judgement of the person in, or possibly in, conflict nor the reaction itself of the
person to whom the disclosure is made. A disclosure gives the other person a

choice. No disclosure denies that person the opportunity of coming to a view on a
matter which is of interest to them. In Angela Burns’ representations (see, for
example, paragraph 6.15), the acknowledgement of the interests of MGM and
Teachers was absent.

7.13. Looking more particularly at the Facts and Matters in section 4 of this notice,

Angela Burns breached Statement of Principle 1 by failing to disclose her conflicts
of interest to the Mutual Societies when she:

(1)
attended her first meeting with MGM on 21 January 2009 and suggested
that MGM consider using the Investment Manager, but failed to declare
that she was trying to obtain work with the Investment Manager (see
paragraph 4.16);

(2)
reiterated her view that the Investment Manager would be an appropriate
choice to provide investment management in two areas of MGM’s business
in an email she sent to MGM’s CEO on 23 February 2009, but failed to
declare that she was trying to obtain work with the Investment Manager
(see paragraph 4.17);

(3)
participated in discussions concerning the Investment Manager at MGM’s
board meeting on 25 February 2009, but failed to declare that she was
trying to obtain work with the Investment Manager (see paragraph 4.20);

(4)
participated in a decision to use the Investment Manager at an MGM
investment committee meeting on 10 June 2009, but failed to declare that
she was trying to obtain work with the Investment Manager (see
paragraph 4.22);

(5)
participated in a decision to use the Investment Manager at an MGM
investment committee meeting on 23 September 2009, but failed to
declare that she was trying to obtain work with the Investment Manager
(see paragraph 4.23); and

(6)
recommended to Teachers that it include the Investment Manager on the
tender list, but failed to declare that she was trying to obtain work with the
Investment Manager (see paragraph 4.42).

7.14. Angela Burns further breached Statement of Principle 1 by attempting to use her

fiduciary position as a NED at the Mutual Societies to benefit herself when she:

(1)
notified the Investment Manager of the potential business opportunity at
MGM and in the same email (dated 24 February 2009) reminded the
Investment Manager of her interest in obtaining consultancy work and a
NED position from the Investment Manager (see paragraph 4.18);

(2)
reminded the Investment Manager of the potential business opportunity at
MGM and in the same email (dated 26 February 2009) asked the
Investment Manager to consider her for a role as a NED (see paragraph
4.21); and

(3)
attempted to use her fiduciary position as a NED at the Mutual Societies to
benefit herself when, with bad timing and ambiguous language, she
reminded the Investment Manager of the 2008 Proposal (see paragraphs
4.45 and 4.7).

7.15. Angela Burns disregarded her duties under the relevant companies legislation,

articles of association and conflicts documentation to declare her interest in
obtaining work from the Investment Manager to both Mutual Societies (see
paragraphs 4.16, 4.17, 4.20, 4.22, and 4.42).

7.16. Angela Burns breached her fiduciary position of trust when she told MGM’s CEO

that she had no “prospect” of working for the Investment Manager while at the
same time she was trying to obtain work from the Investment Manager (see
paragraph 4.29).

7.17. Angela Burns failed to update the declaration of interest she executed with

Teachers to inform it of her ongoing attempts to procure work with the
Investment Manager from the period she originally recommended the Investment
Manager to Teachers until she resigned as a NED (see paragraphs 4.42 and 4.50).

7.18. The FSA is satisfied that the evidence before it is clear and persuasive. Angela

Burns was a director and chair of the investment committee in both Mutual
Societies. By failing to declare her conflict of interest to them, she acted in
breach of her fiduciary position as a non-executive director and breached
Statement of Principle 1.

8.
SANCTION

8.1.
As an approved person carrying out the controlled function of a non-executive
director (CF2) for both MGM and Teachers, Angela Burns failed to act with
integrity within the meaning of Statement of Principle 1 for the reasons given in
section 7 above.

8.2.
This conduct warrants the imposition of a prohibition order and a financial
penalty.

Prohibition order

8.3.
Under section 56 of the Act, the FSA is able to impose a prohibition order on a
person who is not a fit and proper person. FIT guidance sets out the criteria for
assessing fitness and propriety. The criteria include the person’s honesty and
integrity.

8.4.
Angela Burns demonstrated a lack of integrity for the reasons given above.
Angela Burns’ conduct is serious for the reasons set out in paragraph 2.4.

8.5.
For these reasons, it is appropriate to prohibit Angela Burns from carrying out any
function in relation to any regulated activity carried out by an authorised person,
exempt person or exempt professional firm.

Financial penalty

8.6.
The conduct at issue took place both before and after 6 March 2010. As set out
at paragraph 2.7 of the FSA Policy Statement 10/4, when calculating a financial
penalty where the conduct straddles penalty regimes, the FSA must have regard
both to the penalty regime which was effective before 6 March 2010 (the “old
penalty regime”) and the penalty regime which was effective after 6 March 2010
(the “new penalty regime”).

8.7.
The FSA adopted the following approach:

(1)
calculated the financial penalty for Angela Burns’ misconduct from January

2009 to 5 March 2010 by applying the old penalty regime to that
misconduct;

(2)
calculated the financial penalty for Angela Burns’ misconduct from 6 March
2010 by applying the new penalty regime to that misconduct; and

(3)
added the penalties calculated under (1) and (2) to produce the total
penalty.

Financial penalty under the old regime

8.8.
The FSA’s policy on the imposition of financial penalties relevant to the
misconduct prior to 6 March 2010 is set out in the version of Chapter 6 of DEPP
that was in force prior to 6 March 2010. All references to DEPP from this
paragraph to paragraph 8.15 are references to that version of DEPP.

8.9.
For the purpose of the calculating the penalty under the old regime, Angela Burns’
relevant misconduct is that described at paragraphs 4.16 to 4.23 of this Notice.

8.10. To determine whether a financial penalty is appropriate, the FSA considers all the

relevant circumstances of a case. DEPP 6.5.2G sets out a non-exhaustive list of
factors that may be relevant to determine the level of a financial penalty.
Applying those factors here, the appropriate level of penalty to be imposed under
the old regime is £75,000. The following factors are particularly relevant to this
case.

Deterrence (DEPP 6.5.2G(1))

8.11. The FSA has had regard to the need to ensure that those who are approved

persons exercising significant influence functions act in accordance with
regulatory requirements and standards. The principal purpose of the imposition of
this penalty is to promote high standards of regulatory conduct by deterring
persons who have committed breaches from committing further breaches, helping
to deter other persons from committing similar breaches and demonstrating
generally the benefits of compliant behaviour.

The nature, seriousness and impact of the beaches (DEPP 6.5.2G(2))

8.12. Angela Burns’ conduct was serious because she was in a position of trust and

responsibility and she abused that position of trust over an extended period.

The extent to which the breach was deliberate or reckless (DEPP 6.5.2G(2))

8.13. Angela Burns was reckless in the way she used her fiduciary position. Her conflict

of interest at MGM was obvious and she failed to act in accordance with MGM’s
conflicts procedures. DEPP 6.5.2G(2) notes that where the FSA decides that a
breach was deliberate or reckless it is more likely to impose a higher penalty on a
person than otherwise.

Whether the person on whom the penalty is to be imposed is an individual (DEPP
6.5.2G(4))

8.14. When determining the appropriate level of financial penalty, the FSA will take into

account the fact that: an individual will not always have the same resources as a
body corporate; an enforcement action may have a greater effect on an
individual; and that it may be possible to achieve effective deterrence by
imposing a smaller penalty on an individual rather than a body corporate. The

FSA will also consider whether the status, position and/or responsibilities of the
individuals are such to make a breach committed by the individual more serious
and whether the penalty should therefore be set at a higher level.

8.15. The FSA recognises that the financial penalty is likely to have a significant effect

on Angela Burns as an individual. However, given Angela Burns’ position as a
significant influence function holder and professional experience, the level of
penalty is proportionate.

Financial penalty under the new penalty regime

8.16. All references to DEPP in from this paragraph to paragraph 8.34 are references to

the version of DEPP implemented as of 6 March 2010 and currently in force.
Under the new penalty regime, the FSA applies a five-step framework to
determine the appropriate level of financial penalty. DEPP 6.5B sets out the
details of the five-step framework that applies to financial penalties imposed on
individuals in non-market abuse cases.

8.17. For the purpose of calculating the penalty under the new penalty regime, Angela

Burns’ relevant misconduct is that described at paragraphs 4.32 to 4.50 of this
Notice.

Step 1: disgorgement

8.18. DEPP 6.5B.1G provides that at Step 1, the FSA will deprive an individual of the

financial benefit he derived from the breach where it is practicable to quantify it.

8.19. The FSA has not identified any financial benefit that Angela Burns derived as a

result of her breaches. The Step 1 figure is therefore £0.

Step 2: the seriousness of the breach

8.20. DEPP 6.5B.2G provides that at Step 2 the FSA determines a figure that reflects

the seriousness of the breach. That figure is based on a percentage of the
individual’s relevant income. The individual’s relevant income is the gross
amount of all benefits the individual received from the employment (if any) in
connection with the breach and for the period of the breach.

8.21. The period of Angela Burns’ breach for the purposes of calculating her penalty

under the new penalty regime is the period from 6 March 2010 to 31 May 2011.
Angela Burns’ relevant income for this period is £66,500. This figure is her
combined annual remuneration from MGM and Teachers. This figure does not
take into account earnings from any other positions Angela Burns held.

8.22. In deciding on the percentage of the relevant income that forms the basis of the

step 2 figure, the FSA considers the seriousness of the breach and chooses a
percentage between 0% and 40%. This range is divided into five fixed levels
which increase with the seriousness of the breach. For penalties imposed on
individuals in non-market abuse cases, there are five levels:

Level 1 – 0%

Level 2 – 10%

Level 3 – 20%

Level 4 – 30%

Level 5 – 40%

8.23. To assess the seriousness level, the FSA takes into account various factors which

reflect the impact and nature of the breach, and considers whether the subject
committed the breach deliberately or recklessly. DEPP 6.5B.2G(12) lists factors
likely to be considered ‘level 4 or 5 factors’. Of these, the following are relevant:

(1)
Impact of breach:

(a)
as noted above, Angela Burns did not receive any payment as a
result of her emails including the 5 November email. Had the
Investment Manager made a payment calculated along the lines
suggested in the 5 November email, she would have earned
approximately £120,000 per annum (£100,000 as a result of the
investment mandates placed with MGM and Teachers and
approximately £20,000 as a result of a NED position); and

(b)
as a result of the 5 November email, the Investment Manager
withdrew from the Teachers tender process (paragraph 4.47). The
Investment Manager was Teachers’ preferred investment manager
(paragraph 4.42).

(2)
Nature of breach:

Angela Burns is an experienced industry professional. She held a senior
position with the Mutual Societies, failed to act with integrity and abused a
position of trust as indicated in section 7 of this notice.

(3)
Whether the breach was reckless:

(a)
Angela Burns sent the 5 November 2010 email recklessly without
giving consideration to whether it was, or might be taken as, an
obvious and considered request for payment from which Angela
Burns expected to benefit financially.

(b)
Angela Burns acted recklessly throughout the Relevant Period by
failing to recognise and declare obvious conflicts of interest.

(c)
Angela Burns did not (and still does not) recognise that she had
obviously declarable conflicts of interest at MGM and Teachers and
that her 5 November 2010 email was an obvious sign of such
conflict. Her failure to manage such conflicts was reckless.
Guidance in DEPP notes that “factors which are likely to be
considered ‘level 4 factors’ or level 5 factors’ include … the
individual failed to act with integrity.”

8.24. The FSA has taken the factors identified in paragraph 8.23 into account, identified

the seriousness of the breach as level 4 (paragraph 8.22), and applied the level 4
seriousness percentage (30%) to the relevant income £66,500 (paragraph 8.21).

8.25. This results in a Step 2 figure of £19,950 (30% of £66,500).

Step 3: mitigating and aggravating factors

8.26. DEPP 6.5B.3G provides that at Step 3 the FSA may increase or decrease the

amount of the financial penalty arrived at after Step 2, but not including any
amount to be disgorged as set out in Step 1, to take into account factors which
aggravate or mitigate the breach.

8.27. There are no relevant mitigating or aggravating factors that justify a change to

the Step 2 figure.

Step 4: adjustment for deterrence

8.28. DEPP 6.5B.4G provides that if the FSA considers that the Step 3 figure is

insufficient to deter the individual who committed the breach, or others, from
committing further or similar breaches, the FSA may increase the penalty.

8.29. Angela Burns was a NED who had a significant level of responsibility at the Mutual

Societies. One of the key obligations of a NED is to act with integrity and in the
best interests of a company at which she holds a significant influence function.
Angela Burns failed to discharge this obligation.

8.30. Given the importance of the role of non-executive directors in the financial sector,

the Step 3 figure of £19,950 is insufficient to meet the FSA’s credible deterrence
objective. Consequently, it is appropriate to apply a Step 4 multiple of 4 to the
Step 3 figure. In doing so, the FSA takes into account that this notice means that
Angela Burns is unlikely to be in a position to work as a NED in the financial
sector again and that deterrence for her is less of an issue. For others, not
heeding the lessons of this notice, the multiple may be higher.

8.31. On this basis, the penalty at Step 4 increases to £79,800 (4 x £19,950).

8.32. DEPP 6.5D.2G provides that the FSA will consider reducing the amount of a

penalty if an individual will suffer serious financial hardship as a result of having
to pay the entire penalty. Angela Burns has confirmed she does not wish to
provide any evidence of serious financial hardship and the FSA does not therefore
propose to reduce the Step 4 figure.

Step 5: settlement discount

8.33. This is not applicable so the step 5 figure remains £79,800.

Conclusion on financial penalty

8.34. The FSA considers that combining the two separate penalties calculated under the

old and new penalties regimes produces a figure which is proportionate and
consistent with similar fines. The FSA therefore imposes on Angela Burns a
financial penalty of £154,800.

9.
PROCEDURAL MATTERS

Decision maker

9.1.
The decision which gave rise to the obligation to give this Decision Notice was
made by the Regulatory Decisions Committee.

9.2.
This Decision Notice is given under sections 57 and 66 of the Act and in
accordance with section 388 of the Act. The following statutory rights are
important.

The Upper Tribunal

9.3.
Angela Burns has the right to refer the matter to which this Decision Notice
relates to the Upper Tribunal (the “Tribunal”). The Tax and Chancery Chamber is
the part of the Upper Tribunal, which, among other things, hears references

arising from decisions of the FSA. Under paragraph 2(2) of Schedule 3 of the
Tribunal Procedure (Upper Tribunal) Rules 2008, Angela Burns has 28 days from
the date on which this Decision Notice is given to refer the matter to the Tribunal.

9.4.
A reference to the Tribunal is made by way of a reference notice (Form FTC3)
signed by Angela Burns (or on her behalf) and filed with a copy of this Notice.
The Tribunal’s contact details are The Upper Tribunal, Tax and Chancery
Chamber, 45 Bedford Square, London WC1B 3DN (tel: 020 7612 9700; email:

financeandtaxappeals@tribunals.gsi.gov.uk).

9.5.
Further details are contained in “Making a Reference to the UPPER TRIBUNAL (Tax
and Chancery Chamber)” which is available from the Upper Tribunal website:

9.6.
A copy of Form FTC3 must also be sent to Anthony Monaghan at the FSA, 25 The
North Colonnade, Canary Wharf, London E14 5HS at the same time as filing a
reference with the Tribunal.

Access to evidence

9.7.
Section 394 of the Act applies to this Decision Notice. Angela Burns the right to
access to:

(1)
the material upon which the FSA has relied on in deciding to give this
Notice; and

(2)
any secondary material which, in the opinion of the FSA, might undermine
that decision.

9.8.
There is no such secondary material.

Confidentiality and publicity

9.9.
Angela Burns should note that this Decision Notice may contain confidential
information and should not be disclosed to a third party (except for the purpose
of obtaining advice on its contents). The effect of section 391 of the Act is that
neither Angela Burns nor a person to whom this notice is copied may publish it or
any details concerning it unless the FSA has published the notice or those details.
The FSA must publish such information about the matter to which a Decision
Notice or Final Notice relates as it considers appropriate. Angela Burns should be
aware, therefore, that the facts and matters contained in this notice may be made
public.

FSA contacts

9.10. For more information concerning this matter generally, contact Anthony

Monaghan (direct line: 020 7066 6772) or Maria Gouvas (direct line: 020 7066
3552) of the Enforcement and Financial Crime Division at the FSA.

Acting Chairman, Regulatory Decisions Committee

(paragraphs 3.1 and 5.1)

STATUTORY AND REGULATORY PROVISIONS

1.
Statutory objectives

1.1.
Section 2(2) of the Act sets out the FSA’s statutory objectives. The statutory
objectives relevant to this matter are: the protection of consumers and the
reduction of financial crime.

2.
The prohibition order

2.1.
The citations in this section relate to the prohibition order the FSA has decided to
impose against Angela Burns. It begins with section 56 of the Act and then
examines the relevant regulatory guidance in FIT and the Enforcement Guide
(“EG”).

Statutory provisions related to the prohibition order

2.2.
Section 56 of the Act gives the FSA the power to issue an order prohibiting
Angela Burns from performing any function in relation to any regulated activity
carried on by any authorised person, exempt person or exempt professional firm.
Section 56 of the Act provides that:

“(1) Subsection (2) applies if it appears to the Authority that an individual
is not a fit and person to perform functions in relation to a regulated
activity carried on by an authorised person.

(2) The Authority may make an order (‘a prohibition order’) prohibiting the
individual from performing a specified function, any function falling within
a specified description or any function”.

Regulatory guidance related to the prohibition order

2.3.
FIT 1.2.4G states “The Act does not prescribe the matters which the FSA should
take into account when determining fitness and propriety. However, section 61(2)
states that the FSA may have regard (among other things) to whether the
candidate or approved person is competent to carry out a controlled function.”

2.4.
FIT 1.1.2G states that “The purpose of FIT is to set out and describe the criteria
that the FSA will consider when assessing the fitness and propriety of a candidate
for a controlled function (see generally SUP 10 on approved persons). The criteria
are also relevant in assessing the continuing fitness and propriety of approved
persons. The criteria that the FSA will consider in relation to an authorised person
are described in COND.”

2.5.
FIT 1.3.1G states that “The FSA will have regard to a number of factors when
assessing the fitness and propriety of a person to perform a particular controlled
function. The most important considerations will be the person's:

(1) honesty, integrity and reputation;

(2) competence and capability; and

(3) financial soundness.”

Honesty, integrity and reputation under FIT

2.6.
FIT 2.1.1G states, in part, that “In determining a person’s honesty and integrity
and reputation, the FSA will have regard to all relevant matters including, but not
limited to those set out in FIT 2.1.3G which may have arisen either in the United
Kingdom or elsewhere.”

The Enforcement Guide’s policy on the prohibition order

2.7.
Two chapters of EG are relevant to these proceedings, i.e. Chapter 2 (The FSA’s
approach to enforcement) and Chapter 9 (Prohibition Orders and withdrawal of
approval).

2.8.
EG 2.31 states that: “… where senior managers are themselves responsible for
misconduct, the FSA will, where appropriate, bring cases against individuals as
well as firms.”

2.9.
EG 2.32 states that: “… the FSA is mindful that an individual will generally face
greater risks from enforcement action, in terms of financial implications,
reputation and livelihood than would a corporate entity. As such, cases against
individuals tend to be more strongly contested, and at many practical levels are
harder to prove. They also take longer to resolve. However, taking action
against individuals sends an important message about the FSA’s regulatory
objectives and priorities and the FSA considers that such cases have important
deterrent values. The FSA is therefore committed to pursuing appropriate cases
robustly, and will dedicate sufficient resources to them to achieve effective
outcomes.”

2.10. EG Chapter 9 describes the FSA’s policy on making prohibition orders under

section 56 of the Act.

2.11. EG 9.3 states that: “In deciding whether to make a prohibition order . . . the FSA

will consider all the relevant circumstances including whether other enforcement
action should be taken or has been taken already against that individual by the
FSA. As is noted below, in some cases the FSA may take other enforcement
action against the individual in addition to seeking a prohibition order and/or
withdrawing its approval. The FSA will also consider whether enforcement action
has been taken against the individual by other enforcement agencies or
designated professional bodies.”

2.12. EG 9.9 states that when it decides whether to make a prohibition order against

an approved person the FSA will consider all the relevant circumstances. The
considerations relevant to this matter are set out below.

(1)
The matters set out in section 61(2) of the Act.

(2)
Whether the individual is fit and proper to perform functions in relation to
regulated activities. The criteria for assessing the fitness and propriety of
approved persons are set out in FIT 2.1 (Honesty, integrity and
reputation); FIT 2.2 (Competence and capability) and FIT 2.3 (Financial
soundness).

(3)
Whether and to what extent, the approved person has “failed to comply
with the Statements of Principle issued by the FSA with respect to the
conduct of approved persons”.

(5)
The relevance and materiality of any matters indicating unfitness.

(7)
The particular controlled function the approved person is (or was)
performing, the nature and activities of the firm concerned and the
markets in which he operates.

(8)
The severity of the risk which the individual poses to consumers and to
confidence in the financial system.

2.13. EG 9.11 explains that due to the diverse nature of firms the FSA regulates, it is

not possible to produce a definitive list of matters which the FSA might take into
account when considering whether an individual is not a fit and proper person to
perform a particular, or any, function in relation to a particular, or any, firm.

2.14. EG 9.12 provides examples of the types of behaviour which have previously

resulted in the FSA deciding to issue a prohibition order including, at EG 9.12(5),
serious breaches of the Statements of Principle for approved persons.

2.15. EG 9.13 explains that “Certain matters that do not fit squarely, or at all, within

the matters referred to above may also be considered. In these circumstances
the FSA will consider whether the conduct or matter in question is relevant to the
individual’s fitness and propriety.”

3.
The financial penalty

3.1.
The following citations relate to the penalty the FSA against Angela Burns.

Statutory provisions related to the penalty (section 66 of the Act)

3.2.
The FSA has imposed a financial penalty against Angela Burns under section
66(3)(a) of the Act.

3.3.
Section 66(1) of the Act provides that the FSA may take action against a
person under this section if: (a) it appears that he is guilty of misconduct; and (b)
the Authority is satisfied that it is appropriate in all the circumstances to take
action against him.

3.4.
Section 66(2)(a) of the Act provides that a person is guilty of misconduct if,
while an approved person he has failed to comply with a statement of principle
issued under section 64.

3.5.
The relevant Statement of Principle is Statement of Principle 1 which provides
that:

“An approved person must act with integrity in carrying out his controlled
function.”

3.6.
APER 4.1.2E sets out a non-exhaustive list of examples of behaviour which fall
outside of compliance with Statement of Principle 1. APER 4.1.13E: Deliberately
failing to disclose the existence of a conflict of interest in connection with dealings
with a client falls within APER 4.2.1E.

4.
FSA policy in relation to financial penalties

4.1.
Section 201(8) of the Act provides that when the FSA imposes a financial
penalty it must "have regard to any [statement of penalty policy] published and
in force at the time when the contravention in question occurred".

4.2.
Chapter 6 of DEPP sets out the FSA’s statement of policy with respect to the
imposition and amount of penalties under the Act.

4.3.
The FSA has revised Chapter 6 of DEPP. One version of Chapter 6 was in force up
to and including 5 March 2010, and another version was in force on and after 6
March 2010.

4.4.
In this matter, the conduct at issue occurred between January 2009 and May
2011. So, it was necessary to determine which version of DEPP applied.

4.5.
Policy Statement 10/4 (March 2010) relates to enforcement financial penalties.
At paragraph 2.7 relating to the transitional application of the new penalties
regime it was noted that, “…when a breach begins before 6 March 2010 (when
the new penalties regime takes effect) and continues after that date, two different
penalty regimes will apply. The penalty regime in place before 6 March 2010 will
apply to conduct before that date and the new penalties regime will apply to
conduct from that date onwards.”

4.6.
As the conduct at issue in these proceedings occurred between January 2009 up
to and including May 2011, the FSA must apply both regimes to assess the
penalty.

4.7.
To calculate the penalty under the old regime, the FSA had regard to Chapter 6 of
the version of DEPP which was in force up to and including 5 March 2010.

4.8.
To calculate the penalty under the new regime, the FSA had regard to Chapter 6
of the version of DEPP which was in force on and after 6 March 2010.