Decision Notice
Mr Frensham has referred this Decision Notice to
the Upper Tribunal (the Tribunal) where he and
the FCA will each present their cases. The
Tribunal will determine what, if any, is the
appropriate action for the FCA to take, and will
remit the matter to the FCA with such directions
as the Tribunal considers appropriate for giving
effect to its determination. The Tribunal’s decision
will be made public on its website. Accordingly,
the proposed action outlined in this Decision
Notice will have no effect pending the
determination of the case by the Tribunal.
DECISION NOTICE
To:
Jon Frensham (formerly known as Jonathan James Hunt)
Individual
Reference
Number:
JJH00031
1.
ACTION
1.1.
For the reasons given in this Notice, the Authority has decided to:
1.1.1. withdraw, pursuant to section 63 of the Act, the current approval given to
Mr Frensham under section 59 of the Act to perform the SMF3 (Executive
Director), SMF16 (Compliance Oversight) and SMF17 (Money Laundering
Reporting Officer) senior management functions; and
1.1.2. make an order, pursuant to section 56 of the Act, prohibiting Mr Frensham
from performing any function in relation to any regulated activity carried on
by an authorised person, exempt person or exempt professional firm.
2.
SUMMARY OF REASONS
2.1.
As set out in more detail in the facts and matters described below, Mr Frensham
was convicted of attempting to meet a child following sexual grooming. He
committed this offence whilst he was an approved person.
2.2.
Given the nature and circumstances of his offending, the Authority considers that
Mr Frensham is not a fit and proper person to perform any function in relation to
any regulated activity carried on by any authorised or exempt persons or exempt
professional persons. This is because he lacks the necessary integrity and
reputation.
2.3.
As a result of his lack of integrity and reputation, Mr Frensham poses a risk to
consumers and to confidence in the financial system. Therefore, it is appropriate,
in order to advance the Authority’s statutory objectives (which include protecting
consumers and the integrity of the UK financial system), to withdraw his approval
to perform senior management functions and to impose a prohibition order on him,
as detailed above.
3.
DEFINITIONS
3.1.
The definitions below are used in this Notice:
“the Act” means the Financial Services and Markets Act 2000;
“the Authority” means the Financial Conduct Authority;
“EG” means the Authority’s Enforcement Guide;
“Firm A” means the authorised firm at which Mr Frensham is currently the director
and is currently approved to perform senior management functions;
“FIT” means the Authority’s Fit and Proper Test for Employees and Senior
Personnel;
“the Handbook” means the Authority’s Handbook of rules and guidance;
“Mr Frensham” means Mr Jon Frensham (formerly known as Jonathan James
Hunt);
“RDC” means the Regulatory Decisions Committee of the Authority (see further
under Procedural Matters below);
2
“SMF3” means the “Executive Director” senior management function at an
authorised firm;
“SMF16” means the “Compliance Oversight” senior management function at an
authorised firm;
“SMF17” means the “Executive Director” senior management function at an
authorised firm; and
“the Tribunal” means the Upper Tribunal (Tax and Chancery Chamber).
4.
FACTS AND MATTERS
4.1.
Firm A is an authorised financial advice firm, with a Part 4A permission to advise
on pensions, mortgages and investments. Mr Frensham is the sole director of Firm
A and is approved to perform the following senior management functions: SMF3;
SMF16; and SMF17. He also has Responsibility for Insurance Distribution and
Responsibility for MCD Intermediation. Mr Frensham is a financial adviser.
4.2.
In September 2016, Mr Frensham communicated online on a number of occasions
with someone whom he believed to be a 15-year-old girl. Mr Frensham’s messages
were sometimes sexual in nature. He offered to buy gifts for the person with whom
he was communicating and encouraged her to lie to her mother. Mr Frensham
arranged to meet her and, on 14 September 2016, travelled to meet her with the
intention of engaging in sexual activity. She was, in fact, an adult woman posing
as a child. The police were called and Mr Frensham was arrested.
4.3.
On 10 March 2017, Mr Frensham was convicted by a jury of attempting to meet a
child following sexual grooming, contrary to section 1(1) of the Criminal Attempts
Act 1981.
4.4.
On 27 March 2017, Mr Frensham was sentenced to 22 months’ imprisonment,
suspended for 18 months. As part of his suspended sentence, he was required to
take part in a rehabilitation requirement to address his sexual offending and
attitudes. The sentencing judge commented that Mr Frensham “showed no
remorse about your decision to meet a 15-year-old girl. The damage even of a
non-sexual meeting could well have been incalculable”. He was made subject to
3
an indefinite Sexual Harm Prevention Order and also a requirement to sign the sex
offenders register.
Lack of Fitness and Propriety
4.5.
The statutory and regulatory provisions relevant to this Notice are set out in detail
in Annex A.
4.6.
FIT 1.3.1G states that the Authority will have regard to a number of factors when
assessing an individual’s fitness and propriety. These include having regard to the
individual’s integrity and reputation.
4.7.
An approved person, a financial adviser and indeed any person carrying out
functions in relation to regulated activities should be a person of integrity because
consumers, the market and the Authority must be able to trust that they will
conduct themselves in accordance with the requirements and standards of the
regulatory system.
4.8.
The nature and circumstances of Mr Frensham’s offending show that he lacks
integrity. Mr Frensham sought to exploit a child for his own sexual gratification.
His conduct amounted to a criminal offence and was also in breach of pre-existing
bail conditions (relating to a different allegation with which he was ultimately not
charged), the terms of which specifically prohibited him from having
”unsupervised contact with any person under 18 years without parental consent
given in the knowledge of the investigation”. Mr Frensham therefore
demonstrated a deliberate and criminal disregard for appropriate standards of
behaviour.
4.9.
The Authority further considers that the nature of Mr Frensham’s offence and,
separately, the associated publicity following his conviction, is such that he does
not have the requisite reputation to perform functions in relation to regulated
activities. His lack of repute means that he is likely to damage the reputation of
any regulated firm at which he is required to perform such functions. Further, he
poses a risk of damage to the reputation of, and public confidence in, the financial
services sector.
4.10.
For the reasons set out above, the Authority considers that Mr Frensham is not a
fit and proper person to perform any function in relation to any regulated activity
carried on by an authorised person, exempt person or exempt professional firm.
4.11.
EG 9.1.2 states that the power to withdraw approval to perform a controlled
function will be exercised where a person is not fit and proper to perform that
function. EG 9.1.1 provides that the power to prohibit an individual will be
exercised by the Authority in order to achieve its statutory objectives, which
include both securing an appropriate degree of protection for consumers and
protecting and enhancing the integrity of the UK financial system. The Authority
will have regard to all relevant circumstances, including the criteria listed at EG
9.3.2 (as applicable).
4.12.
As discussed above, Mr Frensham is not fit and proper (EG 9.3.2(2)). He also
poses a risk to consumers (EG 9.3.2(8)) because there is a risk that an individual
who has demonstrated such a lack of integrity will treat consumers inappropriately
and/or otherwise conduct his business in a way which puts at risk their interests.
This is especially so in the case of a financial adviser, whose role involves direct
contact with, and advice to, consumers.
4.13.
Mr Frensham’s lack of integrity and requisite reputation is such that he poses a
risk to public confidence in the financial system (EG 9.3.2(8)). There is a risk of
an erosion of public confidence if those who seek to exploit and breach the trust
of other individuals and radically deviate from legal and ethical standards, or do
not have the requisite reputation, are permitted to continue working in the
financial services industry.
4.14.
Taking into account all relevant circumstances, the Authority therefore considers
it is appropriate to withdraw Mr Frensham’s current approval to perform senior
management functions. Further, the Authority considers it is also appropriate to
prohibit him from performing any function in relation to any regulated activity
carried on by an authorised person, exempt person or exempt professional firm.
4.15.
These actions support the Authority’s operational objectives of securing an
appropriate degree of protection for consumers and protecting and enhancing the
integrity of the UK financial system (sections 1C and 1D of the Act, respectively).
5
5.
REPRESENTATIONS
5.1
Annex B contains a brief summary of the key representations made by Mr Frensham
and how they have been dealt with. In making the decision which gave rise to the
obligation to give this Notice, the Authority has taken into account all of the
representations made by Mr Frensham, whether or not set out in Annex B.
6.
PROCEDURAL MATTERS
6.1.
This Notice is given to Mr Frensham pursuant to section 57 and section 63(3), and
in accordance with section 388, of the Act. The following paragraphs are
important.
Decision maker
6.2.
The decision which gave rise to the obligation to give this Notice was made by the
RDC. The RDC is a committee of the Authority which takes certain decisions on
behalf of the Authority. The members of the RDC are separate to the Authority staff
involved in conducting investigations and recommending action against firms and
individuals. Further information about the RDC can be found on the Authority’s
The Tribunal
6.3
Mr Frensham has the right to refer the matter to which this Notice relates to the
Tribunal. Under paragraph 2(2) of Schedule 3 of the Tribunal Procedure (Upper
Tribunal) Rules 2008, Mr Frensham has 28 days from the date on which this Notice
is given to him to refer the matter to the Tribunal. A reference to the Tribunal is
made by way of a signed reference notice (Form FTC3) filed with a copy of this
Notice. The Tribunal’s contact details are: The Upper Tribunal, Tax and Chancery
9730; email fs@hmcts.gsi.gov.uk). Further information on the Tribunal, including
guidance and the relevant forms to complete, can be found on the HM Courts and
Tribunal Service website:
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6.4
A copy of the reference notice (Form FTC3) must also be sent to the Authority at
the same time as filing a reference with the Tribunal. A copy of the reference notice
should be sent to Tania Dratcu at the Financial Conduct Authority, 12 Endeavour
Square, London, E20 1JN.
6.5
Once any referral is determined by the Tribunal and subject to that determination,
or if the matter has not been referred to the Tribunal, the Authority will issue a final
notice about the implementation of that decision.
Access to evidence
6.6
Section 394 of the Act applies to this Notice.
6.7
The person to whom this Notice is given has the right to access:
(1)
the material upon which the Authority has relied in deciding to give this
Notice; and
(2)
any secondary material which, in the opinion of the Authority, might
undermine that decision. There is no such material.
Confidentiality and publicity
6.8
This Notice may contain confidential information and should not be disclosed to
another party (except for the purpose of obtaining advice on its contents). In
accordance with section 391 of the Act, a person to whom this Notice is given may
not publish the Notice or any details concerning it unless the Authority has
published the Notice or those details.
6.9
The Authority must publish such information about the matter to which a decision
notice or final notice relates as it considers appropriate. Mr Frensham should be
aware, therefore, that the facts and matters contained in this Notice may be made
public.
7
Authority contact
6.10
For more information concerning this matter generally, contact Tania Dratcu at the
Authority (direct line: 020 7066 6764 / email: tania.dratcu@fca.org.uk).
Tim Parkes
Chair, Regulatory Decisions Committee
ANNEX A
RELEVANT STATUTORY PROVISIONS
1.
Section 1B of the Act provides that in discharging its general functions, the
Authority must, so far as is reasonably possible, act in a way which is compatible
with its strategic objective and advances one or more of its operational objectives.
2.
The Authority’s strategic objective is to ensure that “relevant markets function well”
(section 1B(2) of the Act) and its operational objectives include securing an
appropriate degree of protection for consumers (section 1C of the Act) and
protecting and enhancing the integrity of the UK financial system (section 1D of
the Act).
3.
Section 56 of the Act provides:
(1) “The [Authority] may make a prohibition order if it appears to it that an
individual is not a fit and proper person to perform functions in relation to a
regulated activity carried on by:
(a)
an authorised person,
(b)
a person who is an exempt person in relation to that activity, or
(c)
a person to whom, as a result of Part 20, the general prohibition does not
apply in relation to that activity.”
(3) “A prohibition order may relate to –
(a)
a specified regulated activity, any regulated activity falling within a specified
description or all regulated activities”.
4.
Section 63 (1) of the Act provides:
“The [Authority] may withdraw an approval under section 59, given by the
[Authority] or the PRA in relation to the performance by a person of a function if
the [Authority] considers that the person is not a fit and proper person to perform
the function”.
RELEVANT REGULATORY PROVISIONS
5.
In exercising its powers to make a prohibition order and to withdraw an approved
person’s approval, the Authority must have regard to guidance published in the
Handbook and in regulatory guides, such as EG. The relevant main considerations
in relation to the actions specified above are set out below.
The Enforcement Guide
6.
The Authority’s policy in relation to exercising its powers to issue a prohibition order
and withdraw approval is set out in EG.
7.
EG 9.1 explains the purpose of prohibition orders in relation to the Authority’s
regulatory objectives.
It also explains that the effective use of the power to
withdraw approval will help ensure high standards of regulatory conduct.
8.
EG 9.2 sets out the Authority’s general policy on making prohibition orders and
withdrawing approval. In particular—
(a) EG 9.2.1 states that the Authority will consider all relevant circumstances,
including whether enforcement action should be taken or has been taken already
against the individual by the Authority or other enforcement agencies;
(b) EG 9.2.2 states that the Authority has 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; and
(c) EG 9.2.3 states that the scope of a prohibition order will depend on the range
of functions which the individual concerned 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.
9.
EG 9.3.2 states that, when the Authority decides to make a prohibition order
against an approved person and/or withdraw their approval, the Authority will
consider all the relevant circumstances of the case. These may include, but are not
limited to:
a) whether the individual is fit and proper to perform functions in relation to
regulated activities (noting the criteria set out in FIT 2.1, 2.2, and 2.3);
b) the relevance and materiality of any matters indicating unfitness;
c) the length of time since the occurrence of any matters indicating unfitness;
d) 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; and
e) the severity of the risk which the individual poses to consumers and to
confidence in the financial system.
10.
EG 9.3.4 states that owing to the “diverse nature of activities and functions which
the [Authority] regulates, it is not possible to produce a definitive list of matters
which the [Authority] 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”.
Fit and Proper Test for Employees and Senior Personnel
11.
The Authority has issued guidance on the fitness and propriety of individuals in FIT.
12.
FIT 1.3.1BG states that the most important considerations when assessing the
fitness and propriety of a person will be the person’s: (1) honesty, integrity and
reputation; (2) competence and capability; and (3) financial soundness. A person
only has to be deemed lacking in one of the three areas in order to be deemed not
fit and proper.
13.
FIT 2.1.1G states that in determining a person’s honesty, integrity and reputation,
the Authority will have regard to all relevant matters including, but not limited to,
those set out in FIT 2.1.3G. The FCA will consider the circumstances only where
relevant to the requirements and standards of the regulatory system. It states
(referring specifically to an application for approval, though still applicable in the
present context) that:
“… conviction for a criminal offence will not automatically mean an application will
be rejected. The [Authority] treats each candidate’s application on a case-by-case
basis, taking into account the seriousness of, and circumstances surrounding, the
offence, the explanation offered by the convicted person, the relevance of the
offence to the proposed role, the passage of time since the offence was committed
and evidence of the individual’s rehabilitation.”
14.
FIT 2.1.2G states “…the Authority will look at whether the person's reputation might
have an adverse impact upon the firm for which the controlled function is or is to
be performed and at the person's responsibilities.”
15.
FIT 2.1.3G(1) states “whether the person has been convicted of any criminal
offence (our emphasis)….particular consideration will be given to offences of
dishonesty, fraud, financial crime or an offence under legislation relating to
companies, building societies, industrial and provident societies, credit unions,
friendly societies, banking, other financial services, insolvency, consumer credit
companies,
insurance,
consumer
protection,
money
laundering,
market
manipulation and insider dealing, whether or not in the United Kingdom.”
16.
FIT 2.1.3G(4) states “…whether the person is or has been the subject of any
proceedings of a disciplinary or criminal nature, or has been notified of any potential
proceedings or of any investigation which might lead to those proceedings.”
17.
FIT 2.1.3G(13) states “…whether, in the past, the person has been candid and
truthful in all their dealings with any regulatory body and whether the person
demonstrates a readiness and willingness to comply with the requirements and
standards of the regulatory system and with other legal, regulatory and
professional requirements and standards.”
ANNEX B
REPRESENTATIONS
1.
Mr Frensham’s representations (in italics), and the Authority’s conclusions in
respect of them, are set out below.
The FIT test - integrity
2.
The Authority has wrongly applied the FIT test to the facts of Mr Frensham’s case.
If the Authority properly applied the guidance in FIT 2.1.1G and 2.1.3G and had
regard to all relevant matters when considering Mr Frensham’s integrity and
reputation, it should conclude that he should not be made subject to a prohibition
order.
3.
Mr Frensham accepts that the offence for which he was convicted was serious. He
regrets and is ashamed of his actions. He has shown real remorse and the Authority
can be assured that his conduct will not be repeated.
4.
However, the fact that Mr Frensham carried out acts which lacked integrity over a
short period of time in 2016 does not mean that in 2020 he is a person who lacks
integrity. The circumstances of the offence should be taken into account. Mr
Frensham was under serious strain in his personal life and he was under arrest for
a separate crime which he knew he had not committed and for which he was never
charged. Further, each person must be considered in the round, having regard to
the totality of the evidence. A conviction is a snapshot of a person’s integrity and
should not be relied on as the sole determining factor in understanding their whole
character. Mr Frensham has provided evidence going to his overall integrity, by
way of character references and testimonials from clients and a family member
who had full knowledge of his conviction.
5.
Mr Frensham’s conviction has no bearing upon, and is irrelevant to, his competence
as a financial adviser. Mr Frensham has hitherto enjoyed a successful career as a
financial adviser spanning 30 years, during which time he has not been subject to
any complaints regarding the quality of his advice or personal conduct. Mr
Frensham has always acted with integrity in his professional life and there is no
real risk of his integrity being called into question in any way which is relevant to
his professional work. His criminal offence did not involve financial dishonesty and
is not amongst those listed at FIT 2.1.3G(1) as offences to which the Authority will
give particular consideration in considering a person’s fitness and propriety.
6.
The Authority does not accept that it has wrongly applied the guidance in FIT. It
has given careful thought to the relevant factors in FIT, as well as those in EG, and
their application to Mr Frensham’s particular circumstances, in reaching the
conclusion that Mr Frensham lacks fitness and propriety due to a lack of integrity
and reputation, poses a risk to consumers and to confidence in the financial system,
and so should be prohibited.
7.
The relevant factors considered by the Authority include those mentioned in FIT
2.1.1G: the seriousness of, and circumstances surrounding, the offence; the
explanation offered by the convicted person; the relevance of the offence to the
proposed role; the passage of time since the offence was committed; and evidence
of the individual’s rehabilitation. These factors need to be considered on a case-
by-case basis and do not need to be given equal weight. The Authority considers
that it is appropriate to give most weight to the seriousness of Mr Frensham’s
offence, which involved exploitation, an abuse of a position of trust and a deliberate
and criminal disregard for appropriate standards of behaviour.
8.
The Authority notes Mr Frensham’s stated remorse and regret for his actions, but
also considers it to be relevant that the sentencing judge commented that he
showed no remorse about his decision to meet a 15-year-old girl. In addition, the
Authority considers that Mr Frensham’s explanation regarding the circumstances of
the offence does not mitigate the seriousness of his conduct or give the Authority
confidence that he poses little or no risk to consumers.
9.
In fact, the Authority considers that Mr Frensham’s offence is aggravated by the
surrounding circumstances. At the time of his offending, Mr Frensham was the
sole approved person of an authorised firm; he provided financial advice to
potentially vulnerable customers and would have been aware that the requirements
of honesty, integrity and reputation were fundamental to his fitness and propriety.
He also committed his offence knowing this was in breach of bail conditions that he
was made subject to as part of an investigation into a separate matter.
10.
The Authority agrees that each person’s integrity should be assessed in the round
and, as is explained in paragraphs 25 and 27 below, has had regard to the
testimonials provided by Mr Frensham. However, the Authority considers that the
serious nature of the offence and its surrounding circumstances must be given
much greater weight and that in all the circumstances the only reasonable
conclusion it can reach is that Mr Frensham lacks integrity.
11.
The Authority does not agree that Mr Frensham’s conviction is irrelevant to his role
as a financial adviser. As a financial adviser, Mr Frensham is in a position of trust
as regards his customers, who rely on his advice when making significant financial
decisions and need to be able to trust that he will act appropriately. In addition, in
order to maintain public confidence in the financial services industry, the Authority
and the public are entitled to expect that approved persons and financial advisers
are individuals with integrity and of good reputation. Even though Mr Frensham’s
offence was not committed at work and did not involve financial dishonesty, it
involved him deviating from legal and ethical standards and seeking to exploit those
more vulnerable than himself, which in the Authority’s view is fundamentally
incompatible with his role as a financial adviser.
The FIT Test - reputation
12.
Much of the Authority’s concerns about risk to consumers, damage to the
reputation of Firm A, and damage to the public’s trust in financial services, is
speculative. Mr Frensham changed his and his firm’s name partly due to his
conviction but also because it was the right time in his personal life to do so. Mr
Frensham has been working post-conviction at Firm A for three and a half years
and there is no evidence of reputational damage to it or the financial sector.
However, a prohibition would harm Firm A and also the financial services industry’s
reputation due to the negative impact on his clients.
13.
Approximately 30 clients ceased to instruct Mr Frensham after his conviction but
he remains the trusted adviser to about 63 clients. He accepts that he did not
proactively inform his clients of his conviction, as he did not view it as part of his
professional discussions with his clients, although he was frank about his offending
when asked and offered to introduce those who asked to an alternative adviser.
When this occurred, around five clients decided to seek advice elsewhere and
around seven decided to keep instructing him.
14.
Mr Frensham’s alleged lack of reputation does not mean that he is incapable of
performing regulated functions. His circumstances cannot be compared to the
example of Paul Flowers, the ex-Chairman of the Co-operative Bank, the only
precedent case cited by the Authority’s Enforcement case team. Mr Frensham has
no public profile, no positions of responsibility beyond his own firm and his
reputation is so marginal that it cannot possibly be said to have any impact on the
reputation of the financial services industry as a whole. In addition, Mr Frensham’s
misconduct was very different as it was a one-off instance of poor judgment, rather
than a pattern of serious misconduct committed over three years. His position is
therefore not remotely equivalent to that of Mr Flowers, yet his case is the only
comparison cited.
15.
It is plain that Mr Frensham’s conviction has caused him to lack reputation and this
is demonstrated by the negative publicity after he was convicted. The fact that Mr
Frensham changed not only his own name but that of his firm following his
conviction shows he is aware of this and also that he poses a reputational risk to
Firm A. Part of the reason he took these steps must have been to distance himself
from the negative public reaction to his own behaviour and conviction which would
doubtless have had a detrimental impact upon his livelihood. The Authority does
not agree that more harm would be caused to the reputation of the financial
services industry by prohibiting him; instead, it considers there is a risk of erosion
of public confidence if individuals who have committed such misconduct and do not
have the requisite reputation are permitted to continue working in the financial
services industry.
16.
The fact that about one third of Mr Frensham’s clients chose to leave his firm
following his conviction strongly suggests that, due to his reputation, many
consumers had and would have concerns with him acting as their financial adviser.
The fact that Mr Frensham did not proactively inform clients of his offending also
undermines his submissions regarding the reputational impact of his conviction.
Although Mr Frensham stated that he would confirm the fact of his conviction when
prompted by clients, this was reliant on clients conducting their own research, and
raising this with him. Mr Frensham’s conviction might not come to any new client’s
knowledge without being mentioned by him, especially as Mr Frensham changed
both his and his firm’s name after his conviction, so there is a risk that new clients
will not be in a position to make an informed decision about whether to instruct
him.
17.
The Authority accepts that Mr Frensham’s public profile is very different to that of
Mr Flowers. The Authority cited the case of Mr Flowers as a precedent to point out
that it has previously taken action against an individual in relation to non-financial
misconduct which affected the individual’s integrity and reputation. The fact that
the Authority has not previously taken action for similar misconduct to that
committed by Mr Frensham does not mean that it is inappropriate for it to do so
now.
Any risk is managed by the criminal justice system’s measures
18.
Mr Frensham has already been punished by the criminal justice system. As part of
his sentence, Mr Frensham is to remain on the sexual offences register until March
2027 and subject to a Sexual Harm Prevention Order (SHPO) indefinitely. The
stringent terms of his SHPO restrict Mr Frensham’s use of electrical devices unless
he notifies the police and allows them access for inspection. A breach of the SHPO
carries a maximum term of imprisonment of five years. The deterrent effect of the
criminal justice system’s safeguarding mechanisms should sufficiently address any
of the Authority’s concerns about risk to consumers.
19.
The sentencing judge took into account Mr Frensham’s remorse, and the steps he
had taken to address his failings prior to and after his conviction, and concluded
that Mr Frensham could be rehabilitated. Mr Frensham has since completed his
court-ordered rehabilitation programmes. The sentencing judge had the benefit of
hearing all the evidence in Mr Frensham’s case and did not impose an immediate
custodial sentence upon him. Mr Frensham’s suspended sentence indicates that he
has a real chance of rehabilitation and there has been no further wrongdoing since.
The Authority would be curtailing that path to rehabilitation, were it to make a
prohibition order.
20.
The statutory objectives of the Authority require it to manage the risk posed by
those who lack the requisite honesty, integrity and reputation to hold controlled
functions or work in the regulated sector. That Mr Frensham remains subject to a
SHPO indefinitely and will remain on the sexual offenders register until 2027
indicates that the criminal justice system deems that he will remain a risk to others
for some considerable time in the future. Those restrictions exist because there is
an ongoing risk to be managed and in the Authority’s view are a significant barrier
to concluding that he has the requisite integrity and reputation for the purposes of
FIT.
21.
The Authority notes that the sentencing judge deemed Mr Frensham to have
crossed the custody threshold in sentencing him to a suspended term of
imprisonment. Mr Frensham’s conviction does not become spent whilst the SHPO
remains in force. The Authority considers that the judge’s sentencing remarks do
not provide evidence of the likelihood of subsequent rehabilitation that is sufficient
to allow the Authority to conclude that Mr Frensham has the necessary integrity
and reputation to hold controlled functions or work in the regulated sector. The
existence of the notification requirements and the SHPO and the fact that his
conviction does not become spent whilst the SHPO remains in force, clearly indicate
that the criminal justice system considers that the end of his suspended sentence
period does not mean that rehabilitation has been achieved and that Mr Frensham
no longer presents a risk to society.
Impact on clients, family members, Mr Frensham and the public purse
22.
The positive testimonials from his clients show that Mr Frensham is relied on by
many people in relation to their financial affairs and that clients are willing to retain
him as their financial adviser notwithstanding his conviction. A prohibition order
would be detrimental to his clients, who would be denied Mr Frensham’s services
and would have to switch to another financial adviser. These testimonials are
demonstrative of the real public interest – they show what real consumers think
about the conviction as regards his integrity and reputation. The public are in favour
of maintaining Mr Frensham’s employment in the financial services industry; any
suggestion otherwise would be speculative.
23.
Mr Frensham’s personal circumstances were difficult in the run-up to, and as a
result of, his offending. Despite this, a family member has also spoken positively
about Mr Frensham’s integrity in a character reference. That person would be
deprived of financial support from Mr Frensham were any prohibition order to be
made against him. Prohibition would also have a devastating impact on Mr
Frensham’s financial position.
24.
The public purse would also be deprived of the tax generated from Mr Frensham’s
income. The public purse would also have to bear the responsibility of supporting
Mr Frensham, if Mr Frensham were prohibited and unable to find employment.
25.
The Authority has had regard to the witness statements provided by three of Mr
Frensham’s clients but considers it is not appropriate to place too much weight on
this limited evidence in reaching conclusions regarding the wider public interest
which is not confined to Mr Frensham’s clients. The Authority also considers that
Mr Frensham’s reliance on these testimonials is undermined by the fact that about
one third of his clients sought another adviser after learning of his conviction.
Notwithstanding that there has already been negative publicity following Mr
Frensham’s conviction which referred to the fact that he was a financial adviser,
the Authority considers there is a risk that public confidence would be undermined,
if a prohibition order were not made against a financial adviser and approved
person in the circumstances of this case.
26.
The Authority recognises that Mr Frensham’s clients may have to seek an
alternative financial adviser, were a prohibition order to be made. The Authority
considers this to be a natural consequence of such an order, and would expect Mr
Frensham to have contingency plans in place for his clients, in the event that he
ceases to be an approved person and/or is prohibited from involvement in financial
services. The Authority considers that any inconvenience to clients is outweighed
by the risk to consumers and to public confidence in the financial system of the
Authority not taking action against Mr Frensham.
27.
The Authority has taken into account the family member’s witness statement, but
considers it carries limited weight, given the family member’s personal and financial
connection to him. The Authority recognises that a prohibition order will also have
a financial impact on Mr Frensham and the family member, and has not taken the
decision to prohibit him lightly, but considers it is appropriate to take this action
given its conclusion that he lacks fitness and propriety and poses a risk to
consumers and to public confidence in the financial system.
28.
The Authority considers Mr Frensham’s submissions regarding the effect on the
public purse to be speculative and in any case to carry no weight in the assessment
that it has to make as to whether it is appropriate to make a prohibition order
against him.
Lapse of time since Mr Frensham’s conviction
29.
Mr Frensham kept the Authority informed about the criminal proceedings prior to
his conviction, and fully updated the Authority in April 2017 about his conviction,
but the Authority did not take any steps against Mr Frensham or even contact him
again with regard to this matter until January 2019. The lack of urgency on the
part of the Authority in taking action undermines the need for a prohibition order.
30.
Over three and a half years have elapsed since the events underlying the
conviction, during which time no criticism has been made of Mr Frensham. The
Authority should not ignore this evidence of good conduct on the part of Mr
Frensham. In addition, other than this matter, as far as he is aware he has never
been the subject of a complaint, investigation or disciplinary procedure by the
Authority, Chartered Insurance Institute (CII) or Financial Services Ombudsman,
or any other professional body.
31.
Had Mr Frensham been informed earlier that the Authority intended to limit or
prohibit his practice, he would not have dedicated considerable effort and expense
in updating his processes to comply with MiFID II.
32.
The Authority acknowledges that it could have taken action to prohibit Mr Frensham
sooner, but considers that this is not relevant to the question of whether he is fit
and proper and poses a risk to consumers and to confidence in the financial system.
33.
Although Mr Frensham has stated that he kept the Authority updated about the
conviction, the Authority considers that Mr Frensham has not been open and
transparent with it on a number of occasions, as he is required to be by the
Authority’s regulatory requirements. Mr Frensham did not inform the Authority of
either his earlier arrest in respect of a separate matter which led to the bail
conditions being imposed or of his arrest in respect of the offence which led to his
conviction. He also did not tell the Authority that, whilst on remand pending trial
for five weeks, he was not in a position to discharge his controlled functions or
ensure compliance by his firm with its regulatory obligations and so had arranged
for locum cover. Further, the Authority is aware that the CII refused to renew his
Statement of Professional Standing and then recently decided to expel him from its
membership. Mr Frensham did not inform the Authority of either of these matters,
and his submissions give the impression that no disciplinary action had been taken
by the CII against him. These matters undermine Mr Frensham’s submission that
he is a person of integrity.
34.
The Authority acknowledges that no criticism has been made of Mr Frensham’s
behaviour since his conviction, but does not consider that this demonstrates that
Mr Frensham has been fully rehabilitated, such that he no longer presents a risk to
consumers or to confidence in the financial system, especially given the seriousness
of his offending. The Authority also considers that the passage of time since the
conviction is not sufficient to assuage its concerns relating to Mr Frensham’s
offending and surrounding circumstances.
35.
The Authority acknowledges the efforts Mr Frensham has made to comply with
MiFID II, on his assumption that the Authority was not going to take any action,
but considers that in the absence of any such confirmation from the Authority, this
was an erroneous interpretation of the Authority’s correspondence.
A prohibition order should not be made
36.
Other regulators do not automatically strike off individuals who fall under their
regulatory remit for serious convictions. A prohibition order should not be made
against Mr Frensham at all, or should only be made for a limited time, and his
approval to perform controlled functions should not be withdrawn.
37.
The Authority considers the approach of other regulators to be of limited relevance,
as each regulator is required to take action in accordance with its own statutory
objectives, policies and procedures, but nevertheless notes that its action is
consistent with that taken by other regulators for similar offences. The Authority
has decided that in all the circumstances it is appropriate to make a full prohibition
order and withdraw Mr Frensham’s current approvals. To do otherwise would
undermine the integrity of the financial services industry and public confidence in
the financial system. The Authority does not have the power to issue a time-limited
prohibition order. It does not consider it appropriate in the circumstances to issue
a prohibition order with an indication that it be revoked after a period of time. To
give such an indication would not adequately address the risks posed by Mr
Frensham’s lack of integrity and reputation. It is open to Mr Frensham to apply to
the Authority to revoke the prohibition order in the future, if he considers that he
is able to satisfy the Authority of his fitness and propriety at that stage.