FINAL NOTICE

PROPOSED ACTION

1.
For the reasons given in this Final Notice, the Authority hereby:

(a)
imposes on Ewan King (“Mr King”), pursuant to section 66 of the Act, a
financial penalty of £19,900; and

(b)
makes an order against Mr King, pursuant to section 56 of the Act,
prohibiting Mr King from performing any function in relation to any
regulated activity carried on by any authorised person, exempt person or
exempt professional firm. This order takes effect from 30 January 2014.

2.
Mr King agreed to settle at an early stage of the Authority’s case. Mr King therefore
qualified for a 30% (Stage 1) discount under the Authority’s executive settlement
procedures. Were it not for this discount, the Authority would have imposed a
financial penalty of £25,734 on Mr King.

SUMMARY OF REASONS

3.
The Retail Distribution Review, launched by the Authority in 2006, was a wide
ranging review of the retail investment market. From the beginning of 2013, the
Authority implemented a new set of rules stemming from that review. Under those
rules, the minimum level of qualification for all retail investment advisers was
raised, and all individual retail investment advisers were required to hold a
Statement of Professional Standing. A Statement of Professional Standing is
evidence that an accredited body that meets the Authority’s criteria has
independently verified that the retail investment adviser holds an appropriate
qualification, has satisfied the appropriate continuing professional development
requirement and has met the requisite ethical standard.

4.
The Authority considers that Mr King, whilst approved to perform the CF30
Customer function as an Appointed Representative of an FCA authorised firm (the
“Firm”), fabricated two Statements of Professional Standing, in order to give the
Firm the impression that he had obtained the appropriate qualifications from the
Chartered Insurance Institute to provide investment advice to retail customers,
when, in fact, he had not.

5.
The Authority considers that Mr King’s behaviour amounted to a failure to act with
integrity in contravention of Statement of Principle 1 of the Authority’s Statements
of Principle and Code of Practice for Approved Persons (the “Statements of
Principle”).

6.
The Authority considers that Mr King poses a risk to consumers and to the financial
system and that the nature and seriousness of the breach outlined above warrants
the imposition of a financial penalty and the imposition of an order prohibiting him
from performing any function in relation to any regulated activities carried on by
any authorised or exempt person or exempt professional firm.

DEFINITIONS

7.
The following definitions are also used in this Warning Notice:

“the Act” means the Financial Services and Markets Act 2000;

“the Authority” means the body corporate previously known as the Financial
Services Authority and renamed on 1 April 2013 as the Financial Conduct
Authority;

“the CII” means the Chartered Insurance Institute;

“DEPP” means the Decision Procedure and Penalties Manual section of the
Handbook;

“EG” means the Enforcement Guide part of the Handbook;

“FIT” means the Fit and Proper Test for Approved Persons section of the
Handbook;

“the Handbook” means the Authority’s Handbook of rules and guidance;

“the relevant period” means the period between 14 February 2013 and 12 June
2013;

“the RDR” means the Retail Distribution Review;

“SPS” means Statement of Professional Standing;

“TC” means the Authority’s Training and Competence section of the Handbook;
and

“the Upper Tribunal” means the Upper Tribunal (Tax and Chancery Chamber).

FACTS AND MATTERS

8.
On 16 May 2011, Mr King, as a sole trader, became an Appointed Representative of
the Firm. On 24 May 2011, the Authority approved Mr King to perform the CF30
Customer function on behalf of the Firm. On 12 June 2013, following an
application by the Firm, the Authority withdrew Mr King’s approval to perform the
CF30 function.

The RDR

9.
The Authority launched the RDR in June 2006. The RDR was a wide ranging review
of the retail investment market. The proposals stemming from it were intended to
ensure that financial advice is given by appropriately qualified financial advisers
free from bias, and to ensure that the costs of their advice are clear to customers.

10.
On 31 December 2012, the Authority implemented the RDR, in part through the
introduction of new requirements in the TC. These new rules raised the benchmark
qualification level for all retail investment advisers and introduced an overarching
standard for continuing professional development, in order to raise professional
standards. All individual investment advisers were required to reach the
Qualifications Credit Framework (QCF) Level 4 or equivalent, hold an SPS, and
provide the SPS to their firm. An SPS is evidence that an accredited body, such as
the CII, has independently verified that the retail investment adviser holds an
appropriate qualification, has satisfied the appropriate continuing professional
development requirement and has met the requisite ethical standard.

Mr King’s provision of two fabricated SPSs to the Firm

11.
Mr King was a retail investment adviser. In early 2013, Mr King led the Firm to
believe that the CII would issue him with an SPS. Notwithstanding what he told
the Firm, however, Mr King was not eligible for an SPS, and did not apply to the CII
for one, because, having taken and failed the relevant examinations on more than
one occasion, Mr King had not obtained the necessary qualifications.

12.
On 13 February 2013, the Firm asked Mr King by email to chase the CII for his
SPS, and to provide a copy to the Firm by 28 February 2013. On the same day, Mr
King replied that he was “still chasing them for it”.

13.
On 14 February 2013, Mr King sent the Firm by email a fabricated document. This
purported to be an SPS issued by the CII in respect of Mr King on 13 February
2013, which would remain valid until 28 February 2013, the date by which Mr King
was required to renew his CII membership.

14.
On 8 April 2013, as the fabricated SPS purported to have expired, the Firm asked
Mr King for an up to date SPS. On 24 April 2013, Mr King sent the Firm another
fabricated document. This purported to be an SPS issued by the CII on 1 March
2013 in respect of Mr King, which would remain valid until 28 February 2014.

15.
On 21 May 2013, following enquiries by the Authority about the validity of Mr
King’s qualifications, the CII informed the Authority that it had no record of Mr King
applying for, or being issued with, an SPS. The CII also informed the Authority
that Mr King had not obtained the necessary Level 4 QCF qualification in order to
provide retail investment advice.

16.
On 8 August 2013, following an internal investigation, Mr King admitted to the Firm
that he had failed some of the examinations required for the Level 4 QCF
qualification. That same day, the Firm suspended Mr King. On 12 August 2013,
the Firm terminated its contract with Mr King.

Mr King’s conduct

17.
On 16 October 2013, the Authority conducted a compelled interview with Mr King
using its statutory powers. During the interview, Mr King said that:

a. contrary to what he told the Firm, he did not possess the appropriate
qualifications to provide retail investment advice, and he never applied to
the CII for a SPS;

b. he fabricated his SPSs by editing a template version of a CII SPS which he
found on the internet, in order to mislead the Firm into believing that he
had attained the qualifications necessary to be deemed competent to
provide retail investment advice;

c. in providing retail investment advice without the appropriate qualifications
to three customers during the relevant period, there was a risk that his
advice could have been unsuitable.

FAILINGS

18.
The statutory and regulatory provisions relevant to this Notice are set out in the
Annex.

19.
During the relevant period, Mr King, whilst approved to perform the CF30 Customer
function as an Appointed Representative of the Firm, acted in breach of Statement
of Principle 1 by failing to act with integrity, in that he fabricated two SPSs, in
order to mislead the Firm into believing that he had obtained the appropriate
qualifications to provide investment advice to retail customers, when he had not.

20.
The Authority therefore considers that Mr King is not a fit and proper person as he
lacks honesty and integrity, and that he poses a risk to consumers and to
confidence in the financial system.

SANCTIONS

Financial penalty

21.
The Authority hereby imposes a financial penalty on Mr King for breaching
Statement of Principle 1.

22.
The financial penalty is determined by a five-step framework, set out in DEPP,
having regard to all the circumstances of the case. The penalty therefore consists
of:

Step 1 – disgorgement

23.
Pursuant to DEPP 6.5B.1G, at Step 1 the Authority seeks to deprive an individual of
the financial benefit derived directly from the breach where it is practicable to
quantify this.

24.
Mr King’s direct financial benefit from his breach was £6,339 i.e. the sums that Mr
King received for advice which he was not properly qualified to give. The Step 1
figure is therefore £6,339.

Step 2 – the seriousness of the breach

25.
Pursuant to DEPP 6.5B.2G, at Step 2 the Authority determines a figure that reflects
the seriousness of the breach. That figure is based on a percentage of the
individual’s relevant income. As the breach lasted less than 12 months, DEPP
6.5B.2G(2) states that the relevant income is the amount earned in the 12 months
preceding the last day of the period of misconduct.

26.
The last day of the period of misconduct was 12 June 2013. Mr King’s relevant
income in relation to the misconduct was £48,489.

27.
In deciding on the percentage of relevant income that forms the basis of the Step 2
figure, the Authority considers the seriousness of the breach and chooses a
percentage between 0% and 40%. This range is divided into five fixed levels which
represent, on a sliding scale, the seriousness of the breach; the more serious the
breach, the higher the level. For penalties imposed on individuals there are the
following five levels:

Level 1 – 0%

Level 2 – 10%

Level 3 – 20%

Level 4 – 30%

Level 5 – 40%

28.
In assessing the seriousness level, the Authority takes into account various factors
which reflect the impact and nature of the breach, and whether it was committed
deliberately or recklessly.

29.
DEPP 6.5B.2(12) lists factors likely to be considered ‘level 4 or 5 factors’. Of these,
the Authority considers the following factors to be relevant:

(a)
the breach caused a significant loss or risk of loss to individual consumers,
investors or other market users;

(b)
the individual failed to act with integrity; and

(c) the breach was committed deliberately or recklessly.

30.
The Authority considers Mr King’s failings to be Level 5 factors for the purposes of
Step 2 because:

(a)
in providing retail investment advice to three clients after 31 December
2012 without the appropriate qualifications, there was a significant risk
that Mr King’s advice would have been unsuitable, which could have
caused those clients significant financial loss;

(b)
Mr King admitted to the Authority in interview that he failed to act with
integrity during the relevant period, in that he fabricated two SPSs in order
to mislead the Firm about his suitability to provide retail investment advice
to customers.

31.
Taking these factors into account, the Authority considers the seriousness of the
failings to be level 5 on the scale of seriousness. The Step 2 figure is therefore
40% of £48,489, which is £19,395 (rounded down to the nearest £1).

Step 3 – mitigating and aggravating factors

32.
Pursuant to DEPP 6.5B.3G, at Step 3 the Authority may increase or decrease the
amount of the financial penalty arrived at after Step 2, but not including any
amount to be disgorged in accordance with Step 1, to take into account factors
which aggravate or mitigate the breach.

33.
The Authority considers there to be no mitigating or aggravating circumstances.
The penalty figure after Step 3 is therefore £19,395.

Step 4 – adjustment for deterrence

34.
Pursuant to DEPP 6.5B.4G, if the Authority considers the figure arrived at after Step
3 is insufficient to deter the individual who committed the breach, or others, from
committing further or similar breaches, then the Authority may increase the
penalty.

35.
The Authority considers that the penalty is sufficient for the purposes of credible
deterrence. Therefore, after including disgorgement of £6,339, the penalty figure at
Step 4 is £25,734 (rounded down to the nearest £1).

Serious financial hardship

36.
Pursuant to DEPP 6.5D.2G, the Authority may reduce the proposed penalty if
appropriate, if the penalty would cause the individual serious financial hardship.

37.
The Authority considers that the proposed penalty would not cause Mr King serious
financial hardship. The Step 4 figure therefore remains at £25,734.

Step 5 – settlement discount

38.
Pursuant to DEPP 6.5B.5G, if the Authority and the individual on whom a penalty is
to be imposed agree the amount of the financial penalty and other terms, DEPP 6.7
provides that the amount of the financial penalty which might otherwise have been
payable will be reduced to reflect the stage at which the Authority and the
individual reached agreement.

39.
The Authority and Mr King have reached an agreement at Stage 1. As a result a
30% reduction applies to the financial penalty. The penalty figure at Stage 5 is
therefore £19,900 (rounded down to the nearest £100).

Proposed financial penalty

40.
The Authority therefore proposes to impose a financial penalty on Mr King of
£19,900 for breaching Statement of Principle 1.

41.
The Authority considers that Mr King is not a fit and proper person and that he
poses a serious risk to consumers and to confidence in the financial system. The
Authority therefore considers it appropriate to prohibit Mr King from performing any
function in relation to any regulated activity carried on by any authorised person,
exempt person or exempt professional firm.

7

PROCEDURAL MATTERS

Decision Maker

42.
The decision which gave rise to the obligation to give this Warning Notice was
made by the Settlement Decision Makers.

43.
This Final Notice is given under, and in accordance with, section 390 of the Act.

Manner of and time for Payment

44.
The financial penalty must be paid by Mr King to the Authority in the following
instalments:

1) £3,000 by no later than 27 February 2014, 28 days from the date of the Final
Notice;

2) £3,000 by no later than 29 August 2014;

3) £4,000 by no later than 27 February 2015; and

4) £9,900 by no later than 26 February 2016.


If the financial penalty is not paid

45.
If all or any of the instalments are outstanding on 28 February 2014, 30 August
2014, 28 February 2015 or 27 February 2016, the Authority may recover the
outstanding amount as a debt owed by Mr King and due to the Authority.

46.
Sections 391(4), 391(6) and 391(7) of the Act apply to the publication of
information about the matter to which this Final Notice relates. Under those
provisions, the Authority must publish such information about the matter to which
this Final Notice relates as the Authority considers appropriate. The information
may be published in such manner as the Authority considers appropriate.
However, the Authority may not publish information if such publication would, in
the opinion of the Authority, be unfair to Mr King or prejudicial to the interests of
consumers.

47.
The Authority intends to publish such information about the matter to which this
Final Notice relates as it considers appropriate.

Authority contact

48.
For more information concerning this matter contact Alexander Banerjea at the
Authority (direct line: 0207 066 7206).

Enforcement and Financial Crime Division

ANNEX

RELEVANT STATUTORY PROVISIONS

1.
Section 1A(1) of the Act states that the body corporate previously known as the
Financial Services Authority is renamed as the Financial Conduct Authority. The
Authority’s operational objectives established in section 1(B) of the Act include
protecting and enhancing the integrity of the UK financial system and the
protection of consumers.

2.
The Authority has the power, pursuant to Section 56 of the Act, to make a
prohibition order against an individual prohibiting that individual from performing a
specified function, any function falling within a specified description, or any
function, if it appears to the Authority that the individual is not a fit and proper
person to perform functions in relation to a regulated activity carried on by an
authorised person.

3.
Section 66 of the Act provides that the Authority may take action against a person
if it appears to the Authority that he is guilty of misconduct and the Authority is
satisfied that it is appropriate in all the circumstances to take action against him.
Misconduct includes failure, while an approved person, to comply with a statement
of principle issued under section 64 of the Act. The action that may be taken by the
Authority pursuant to section 66 of the Act includes the imposition of a penalty on
the approved person of such amount as it considers appropriate.

RELEVANT HANDBOOK PROVISIONS

Fit and Proper Test for Approved Persons (FIT)

4.
The section of the Authority’s Handbook entitled FIT sets out the Fit and Proper test
for Approved Persons. The purpose of FIT is to outline the main criteria for
assessing the fitness and propriety of a candidate for a controlled function. FIT is
also relevant in assessing the continuing fitness and propriety of an approved
person.

5.
FIT 1.3 provides that the Authority will have regard to a number of factors when
assessing the fitness and propriety of a person. The most important considerations
will be the person’s honesty, integrity and reputation, competence and capability,
and financial soundness.

6.
FIT 2.1.1G provides that in determining a person’s honesty and integrity, the
Authority will have regard to all relevant matters.

Statements of Principle and Code of Practice for Approved Persons (APER)

7.
APER sets out the fundamental obligations of approved persons and sets out
descriptions of conduct, which, in the opinion of the Authority, does not comply
with the relevant Statements of Principle. It also sets out, in certain cases, factors
to be taken into account in determining whether an approved person’s conduct
complies with a Statement of Principle.

8.
APER 2.1.2P sets out Statement of Principle 1. This states that an approved person
must act with integrity in carrying out his controlled function.

9.
APER 3.1.3G provides that, when establishing compliance with, or a breach of, a
Statement of Principle, account will be taken of the context in which a course of
conduct was undertaken, including the precise circumstances of the individual case,

the characteristics of the particular controlled function and the behaviour expected
in that function.

10.
APER 3.1.4G provides that an approved person will only be in breach of a
Statement of Principle if they are personally culpable, that is, where their conduct
was deliberate or where their standard of conduct was below that which would be
reasonable in all the circumstances.

11.
APER 4.1 sets out examples of behaviour which the Authority considers does not
comply with Statement of Principle 1. An example of such conduct is falsifying
documents (APER 4.1.4E).

OTHER RELEVANT REGULATORY PROVISIONS

The Authority’s policy on the imposition of financial penalties

12.
The Authority's policy in relation to the imposition of financial penalties is set out in
Chapter 6 of DEPP which forms part of the Handbook.

13.
DEPP 6.1.2G provides that the principal purpose of imposing a financial penalty is
to promote high standards of regulatory and/or market 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.

14.
The Authority will consider the full circumstances of each case when determining
whether or not to impose a financial penalty. DEPP 6.2.1G sets out guidance on a
non-exhaustive list of factors that may be of relevance in determining whether to
impose a financial penalty, which include the following:-

(a)
DEPP 6.2.1G(1): The nature, seriousness and impact of the suspected
breach, including whether the breach was deliberate or reckless, the
duration and frequency of the breach, the amount of any benefit gained or
loss avoided as a result of the breach, the loss or risk of loss caused to
consumers or other market users, and the nature and extent of any
financial crime facilitated, occasioned or otherwise attributable to the
breach;

(b)
DEPP 6.2.1G(2): The conduct of the person after the breach, including how
quickly, effectively and completely the person brought the breach to the
attention of the Authority, the degree of co-operation the person showed
during the investigation of the breach, and the nature and extent of any
false or inaccurate information given by the person and whether the
information appears to have been given in an attempt to knowingly
mislead the Authority; and

(c)
DEPP 6.2.1G(5): Action taken by the Authority in previous similar cases.

15.
DEPP 6.5.1G(1) provides that the Authority will consider all the relevant
circumstances of a case when it determines the level of financial penalty (if any)
that is appropriate and in proportion to the breach concerned.

16.
DEPP 6.5B sets out the five steps for calculation of financial penalties to be
imposed on individuals.

The Authority’s policy for exercising its power to make prohibition orders

17.
EG 9.1 provides that the Authority’s power under section 56 of the Act to prohibit
individuals who are not fit and proper from carrying out functions in relation to

regulated activities helps the Authority to work towards achieving its regulatory
objectives. The Authority may exercise this power to make a prohibition order
where it considers that, to achieve any of those objectives, it is appropriate either
to prevent an individual from performing any functions in relation to regulated
activities, or to restrict the functions which he may perform.

18.
EG 9.4 sets out the general scope of the Authority’s powers in respect of prohibition
orders, which include the power to make a range of prohibition orders depending
on the circumstances of each case and the range of regulated activities to which
the individual’s lack of fitness and propriety is relevant.

19.
EG 9.5 provides that the scope of a prohibition order will depend on the range of
functions that the individual performs in relation to regulated activities, the reasons
why he is not fit and proper, and the severity of risk which he poses to consumers
or the market generally.

20.
EG 9.17 provides guidance on the Authority’s approach to making prohibition
orders against an individual other than an individual referred to in EG 9.8 to 9.14
(an approved person). The Authority will consider the severity of the risk posed by
the individual, and may prohibit the individual where it considers this is appropriate
to achieve one or more of its regulatory objectives.

21.
When considering whether to exercise its power to make a prohibition order against
an approved person, the Authority will consider all the relevant circumstances of
the case. These may include, but are not limited to, where appropriate the factors
set out in EG 9.9.

22.
EG 9.9 states that, when deciding whether to make a prohibition order, the
Authority will consider all the relevant circumstances of the case which may
include, but are not limited to, the following factors (among others):

(1)
whether the individual is fit and proper to perform functions in relation to
regulated activities. The criteria for assessing the fitness and propriety of
an approved person are contained in FIT 2.1 (Honesty, integrity and
reputation); FIT 2.2 (Competence and capability); and FIT 2.3 (Financial
soundness);

(2)
whether, and to what extent the approved person has failed to comply with
the Statements of Principle;

(3)
the relevance and materiality of any matters indicating unfitness;

(4)
the length of time since the occurrence of any matters indicating unfitness;
and

(5)
the severity of the risk which the individual poses to consumers and to
confidence in the financial system.

23.
EG 9.23 provides that in appropriate cases the Authority may take other action
against an individual in addition to making a prohibition order including the use of
its power to impose a financial penalty.