Final Notice
On , the Financial Conduct Authority issued a Final Notice to Reeds Motors Ltd
FINAL NOTICE
ACTION
1.
For the reasons given in this Final Notice and pursuant to section 55J of the Act, the
Authority has decided to cancel Reeds Motors Ltd (“the Firm”)’s Part 4A permission to
carry on regulated activities.
2.
The Authority issued to the Firm the Decision Notice, which notified it that for the reasons
given in this Final Notice, the Authority had decided to take the action specified above.
3.
The Firm has not referred the matter to the Tribunal within 28 days of the date on which
the Decision Notice was issued to it.
4.
Accordingly, the Authority has today cancelled the Firm’s Part 4A permission. The
cancellation takes effect from the date of this Final Notice.
SUMMARY OF REASONS
5.
On the basis of the facts and matters set out in this Notice, it appears to the Authority
that the Firm is failing to satisfy the suitability Threshold Condition. Specifically, the
Authority considers that the Firm is not a fit and proper person to conduct regulated
activities having regard to all the circumstances, including:
a) the Firm’s connection with Mr Harris, its sole director and approved person, who was
convicted of a serious violent criminal offence for which he was sentenced to three
years’ immediate imprisonment in July 2022, and which he deliberately failed to
disclose to the Authority;
b) The Firm’s deliberate failure to disclose Mr Harris’s criminal conviction and its
deliberate provision of false and misleading information to the Authority, in relation
to an application by the Firm for Director B to be approved to perform the SMF29
function, in breach of Principle 1; and
c) the Firm’s failure to notify the Authority of the criminal proceedings in respect of Mr
Harris, and of Mr Harris’s criminal conviction, as required under SUP 15.3.1R and in
breach of Principle 11.
6.
Further, it appears to the Authority that the Firm is failing to satisfy the appropriate
resources Threshold Condition. Specifically, the Authority considers that the Firm does
not have appropriate non-financial resources, in terms of the quality of its human
resources, to carry on the regulated activities for which it holds Part 4A permission due
to the lack of honesty and integrity of Mr Harris who remains the Firm’s sole approved
person.
7.
The Authority considers that it is appropriate to take the cancellation action set out at
paragraph 1 above in order to advance its consumer protection and integrity objectives
(sections 1C and 1D of the Act).
DEFINITIONS
8.
The definitions below are used in this Notice (and in the Annex):
“the Act” means the Financial Services and Markets Act 2000;
“the Appropriate Resources Threshold Condition” means the Threshold Condition set out
in paragraph 2D of Schedule 6 of the Act;
“the Authority” means the Financial Conduct Authority;
“CF8” means the Apportionment and Oversight function formerly required by the Firm
pursuant to SUP10A.7R (no longer in force);
“COND” means the Threshold Conditions part of the Handbook;
“the Decision Notice” means the Decision Notice given to the Firm on 4 October 2024;
“Director B” means the second director of the Firm who was appointed on 22 July 2022
and resigned on 26 July 2023;
“EG” means the Enforcement Guide;
“the Firm” means Reeds Motors Ltd;
“the Firm’s Part 4A permission” means the permission granted by the Authority to the
Firm to carry on regulated activities under Part 4A of the Act;
“Mr Harris” means Mr Ari Harris;
“the Handbook” means the Authority’s Handbook of rules and guidance;
“the Offence” means the offence of wounding/inflicting grievous bodily harm without
intent, contrary to section 20 of the Offences Against the Person Act 1861, to which Mr
Harris pleaded guilty on 29 July 2020;
3
“PRIN” or “the Principles” means the Authority’s Principles for Businesses;
“the RDC” means the Regulatory Decisions Committee of the Authority (see further under
Procedural Matters below);
“SMF29” means the limited scope function of acting in the capacity of a person responsible
for the apportionment function and/or oversight function set out in SUP 10C.4.3R as
required under SYSC 4.4.5R;
“SYSC” means the Senior Management Arrangements, Systems and Controls section of
the Handbook;
“the Suitability Threshold Condition” means the Threshold Condition set out in paragraph
2E of Schedule 6 to the Act;
“SUP” means the Authority’s Supervision Manual;
“the Threshold Conditions” means the Threshold Conditions set out in Schedule 6 of the
Act; and
“the Tribunal” means the Upper Tribunal (Tax and Chancery Chamber).
RELEVANT STATUTORY AND REGULATORY PROVISIONS
9.
The statutory and regulatory provisions relevant to this Notice are set out in the Annex.
FACTS AND MATTERS
Reeds Motors Ltd and Mr Harris
10.
The Firm was authorised on 18 March 2016 as a consumer credit firm with permission to
carry on the regulated activities of credit broking, debt adjusting, and debt counselling.
Mr Harris has been the sole director at the Firm since 1 December 2015 apart from the
period between 22 July 2022 and 26 July 2023 when the Firm had two directors.
11.
Mr Harris was approved by the Authority to perform the CF8 apportionment and oversight
controlled function at the Firm from 18 March 2016 until 8 December 2019, and has been
approved by the Authority to perform the SMF29 limited scope senior manager function
at the Firm from 19 December 2019 to date. The Firm has no other approved persons.
12.
Since 18 May 2023, as a consequence of the matters outlined below, the Firm has been
subject to a requirement by which it has agreed not to undertake any regulated activity
in relation to the offering of credit broking services to existing or new clients without the
consent of the Authority.
13.
On 29 July 2020, Mr Harris pleaded guilty in the Crown Court at Isleworth to an offence
of wounding/inflicting grievous bodily harm without intent contrary to section 20 of the
Offences Against the Persons Act 1861, following which, on 22 July 2022, he was
sentenced to three years’ immediate imprisonment, the judge having reduced the
sentence which they would otherwise have imposed from four years’ imprisonment, in
recognition of his guilty plea.
The Firm’s provision of false and misleading information
14.
At the time of becoming authorised on 18 March 2016, the Firm was informed that an
approved person must “…[c]ontinue to comply with the FCA’s Fit and Proper test for
Approved Persons, set out in the FIT… Approved persons have a duty to report to the
authorised firm and to the FCA any matter that may impact on their on-going fitness and
propriety…”. This ongoing reporting requirement is also set out in SUP 10C.14.18R in the
Handbook. The Firm failed to notify the Authority of Mr Harris’s criminal proceedings or
subsequent conviction as required by SUP 15.3.1R and Principle 11 of the Principles.
15.
On 7 October 2022, the Firm submitted an application to the Authority for Director B to
be approved to perform the SMF29 function. Mr Harris signed the application form on
behalf of the Firm.
16.
On 19 December 2022, the Authority emailed the Firm asking, amongst other matters,
why the Firm required a second SMF29 and also whether Mr Harris would be relinquishing
his role. On 22 December 2022, the Firm sent a reply to the Authority purportedly written
by Mr Harris as follows:
“I am currently overseas looking into a new business abroad, [Director B] is
currently running the business and is also director and is the one that is to be
performing the SMF29 Function, therefore please remove me as this and place
[Director B] in my place.
17.
There was some ongoing correspondence between the Firm and the Authority over the
following few months, during which the Firm maintained the pretence that Mr Harris was
abroad or “on the road”, when he was in fact in prison serving his sentence for the
Offence.
18.
On 3 February 2023, a pre-arranged telephone call took place between the Authority’s
Authorisations department and Mr Harris, during which Mr Harris said that he was
relinquishing his role as SMF29 because he had other businesses he was dealing with and
would be running a property business in Iraq. At no point in this conversation (which
took place whilst Mr Harris was in prison) did Mr Harris inform the Authority of his
conviction or imprisonment.
19.
On 24 February 2023, the Authority called Director B, who initially maintained that:
“Both of us are directors and running the business but [Mr Harris] will be traveling
[sic] abroad and running a business that is why going forward it will be easier if I
am the director and I have also been listed as a Director and completing duties
while he is travelling back and forth and it is a matter of reaching someone.”
20.
Director B was then challenged by the Authority with a court record sheet which showed
that Mr Harris had been convicted of the Offence and imprisoned. Director B then admitted
the true position and stated that the reason that they had not disclosed the conviction
was: (i) because it would mean that they “would have to cut all of their finance work”;
and (ii) as a consequence of having taken bad advice. Whilst clearly remorseful, Director
B confirmed in subsequent correspondence with the Authority, that they had agreed
together with Mr Harris not to disclose his conviction and to provide the false account
about him working overseas.
FAILINGS
21.
Accordingly, it appears to the Authority that the Firm is failing to meet the suitability
Threshold Condition due to its connection with Mr Harris, whom the Authority considers
is not a fit and proper person due to his lack of honesty, integrity and reputation, as
evidenced by the circumstances of the Offence, his conviction, his deliberate failure to
disclose his conviction and imprisonment to the Authority, and his deliberate provision of
false and misleading to the Authority.
5
22.
Under Principle 1, the Firm is required to conduct its business with integrity. The Firm
failed to act with integrity in relation to its dealings with the Authority, as demonstrated
by its deliberate failure to disclose Mr Harris’ conviction and imprisonment to the
Authority, and by its directors acting together to deliberately provide false and misleading
information to the Authority.
23.
Under Principle 11, the Firm is required to deal with the Authority in an open and
cooperative way and to disclose to the Authority appropriately anything relating to the
Firm of which the Authority would reasonably expect notice. The Firm failed to disclose
the criminal proceedings against Mr Harris and his subsequent criminal conviction to the
Authority, as it should have done.
24.
As Mr Harris is the Firm’s sole director and approved person, the Authority considers that
the Firm is failing to meet the appropriate resources Threshold Condition because it does
not have appropriate non-financial resources, in terms of the quality of the human
resources that the Firm has available to it.
25.
For the reasons described above, the Authority considers that the Firm is failing to satisfy
the suitability and appropriate resources Threshold Conditions and that it is appropriate
to cancel the Firm’s Part 4A permission to advance the Authority’s consumer protection
and integrity objectives.
26.
For the reasons set out in this Notice, the Authority has cancelled the Firm’s Part 4A
permission.
PROCEDURAL MATTERS
27.
This Final Notice is given to the Firm under section 390(1) of the Act. The following
paragraphs are important.
Decision maker
28.
The decision which gave rise to the obligation to give this Final 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 website:
29.
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 which this Final Notice relates as the Authority
considers appropriate.
30.
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 the Firm or prejudicial to the interest of consumers
or detrimental to the stability of the UK financial system.
31.
The Authority intends to publish such information about the matter to which this Final
Notice relates as it considers appropriate.
Authority Contacts
32.
For more information concerning this matter generally, the Firm should contact Danielle
Stuart at the Authority (direct line: 020 7066 0185 / email: Danielle.stuart@fca.org.uk).
Jeremy Parkinson
Enforcement and Market Oversight Division
7
ANNEX
RELEVANT STATUTORY PROVISIONS
1.
The Authority’s operational objectives, set out in section 1B(3) of the Act, include
protecting and enhancing the integrity of the UK financial system (section 1D of the Act).
2.
The Authority is authorised by section 55J of the Act to cancel an authorised person’s Part
4A permissions, where it appears to the Authority that an authorised person is failing, or
is likely to fail, to satisfy the Threshold Conditions.
3.
Paragraph 1A(2) of Schedule 6 of the Act states that, for the purposes of Schedule 6 of
the Act, the “non-financial resources” of a person include, amongst other things, the
human resources that the person has available.
4.
The Appropriate Resources Threshold Condition set out in Part 1B(2D) of Schedule 6 of
the Act provides, in relation to a person (“A”) carrying on, or seeking to carry on regulated
activities which do not include a PRA-regulated activity, that:
“(1) The resources of a person (“A”) must be appropriate in relation to the regulated
activities that A carries on or seeks to carry on.
[…]
(4) The matters which are relevant in determining whether A has appropriate nonfinancial
resources include–
(a)
the skills and experience of those who manage A’s affairs;
(b)
whether A’s non-financial resources are sufficient to enable A to comply with-
i. requirements imposed or likely to be imposed on A by the Authority in the
exercise of its functions; or
ii. any other requirement in relation to whose contravention the Authority
would be the appropriate regulator for the purpose of any provision of
Part 14 of the Act.
5.
The Suitability Threshold Condition set out in Part 1B(2E) of Schedule 6 of the Act
provides, in relation to a person (“A”) carrying on or seeking to carry on regulated
activities which do not consist of or include a PRA-regulated activity that:
“A must be a fit and proper person having regard to all the circumstances, including-
(a)
A’s connection with any person;
[…]
(d) whether A has complied and is complying with requirements imposed by the
[Authority] in the exercise of its functions, or requests made by the [Authority], relating
to the provision of information to the [Authority] and, where A has so complied or is so
complying, the manner of that compliance”
RELEVANT REGULATORY PROVISIONS
6.
In exercising its power to cancel a firm’s Part 4A permissions, the Authority must have
regard to the regulatory requirements and guidance published in the Handbook and in
regulatory guides, such as EG. The main considerations relevant to the action specified
in this Warning Notice are set out below.
The Threshold Conditions
7.
COND sets out guidance on the Threshold Conditions.
8.
COND 1.2.1 sets out that the Threshold Conditions represent the minimum conditions to
which the Authority is responsible, which a firm is required to satisfy, and continue to
satisfy, in order to be given and to retain a Part 4A permission.
9.
COND 1.2.3G reproduces the relevant statutory provision that the Authority may exercise
its own-initiative powers to cancel an authorised person’s Part 4A permission, if a firm is
failing to satisfy any of the Threshold Conditions, or is likely to fail to do so.
COND 2.4: Guidance on the Appropriate Resources Threshold Condition
10.
COND 2.4.1AUK reproduces the relevant statutory provisions that the resources of a
person concerned must be appropriate in relation to the regulated activities that person
carries on or seeks to carry on, and that the matters which are relevant in determining
whether such a person has appropriate non-financial resources includes whether that
person’s nonfinancial resources are sufficient to enable it to comply with the requirements
imposed or likely to be imposed on it by the Authority in the course of the exercise of its
functions.
11.
COND 2.4.2G(2) provides that the Authority will interpret the term ‘appropriate’ as
meaning sufficient in terms of quantity, quality and availability, and ‘resources’ as
including, nonfinancial resources and means of managing its resources, an example of
which includes human resources.
COND 2.5: Guidance on the Suitability Threshold Condition
12.
COND 2.5.1AUK(1) reproduces the relevant statutory provision that a person concerned
must be a fit and proper person having regard to all the circumstances, including,
amongst other things:
•
that person’s connection with any person (COND 2.5.1AUK(1)(a)); and
•
the need to comply with requirements imposed by the Authority in the exercise of
its functions, or requests made by the Authority, relating to the provision of
information to the Authority, and where a person has so complied or is so complying,
the manner of that compliance (COND 2.5.1AUK(1)(d)).
13.
COND 2.5.3G states that the emphasis of the Suitability Threshold Condition is on the
suitability of the firm itself. However, in certain circumstances, the Authority may consider
that the firm is not suitable because of doubts over the individual or collective suitability
of persons connected with the firm.
14.
COND 2.5.6G gives examples of the kind of particular considerations to which the
Authority may have regard when assessing whether a firm will satisfy, and continue to
satisfy, the Suitability Threshold Condition including, but not limited to:
•
whether the firm has been open and co-operative in all its dealings with the Authority
(Principle 11 (Relations with regulators)) and is ready, willing and organised to
comply with the requirements and standards under the regulatory system in addition
to other legal, regulatory and professional obligations; the relevant requirements
and standards will depend on the circumstances of each case, including the regulated
activities which the firm has permission, or is seeking permission, to carry on (COND
2.5.6G(1));
•
whether the firm has been convicted or is connected with a person who has been
convicted, of any criminal offence; this must include, where provided for by the
Rehabilitation Exceptions Orders to the Rehabilitation of Offenders Act 1974 or the
Rehabilitation of Offenders (Northern Ireland) Order 1978 (as applicable), any spent
convictions; 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 (COND 2.5.6G(2)); and
•
whether the firm has contravened, or is connected with a person who has
contravened, any provisions of the Act or the regulatory system (which includes the
Threshold Conditions, the Principles and other rules, the Statements of Principle,
codes and guidance) (COND 2.5.6G(4)).
The Principles
15.
The relevant principles for businesses are set out in PRIN 2.1.1R.
16.
Principle 1 of PRIN (Integrity) requires a firm to conduct its business with integrity.
17.
Principle 11 of PRIN (Relations with regulators) requires a firm to deal with its regulators
in an open and co-operative way, and to disclose to the Authority appropriately anything
relating to the firm of which the Authority would reasonably expect notice.
The Enforcement Guide
18.
The Authority’s policy in relation to exercising its enforcement powers is set out in EG,
certain provisions of which are summarised below.
19.
EG 8.1.1 provides that the Authority may use its own-initiative power to vary or cancel
the Part 4A permissions of an authorised person under section 55J of the Act where:
•
the person is failing or is likely to fail to satisfy the Threshold Conditions for which
the Authority is responsible (EG 8.1.1(1)); or
•
it is desirable to exercise the power in order to advance one or more of its operational
objectives (EG 8.1.1(3)).
20.
EG 8.5.1(1) states that the Authority will consider cancelling a firm’s Part 4A permissions
using its own-initiative powers under section 55J of the Act in circumstances where the
Authority has very serious concerns about the firm, or the way its business is or has been
conducted.
21.
EG 8.5.2 provides examples of the types of circumstances in which the Authority may
cancel a firm’s Part 4A permission on its own initiative including material non-disclosure
in an application for authorisation or approval or material non-notification after
authorisation or approval has been granted. The information which is the subject of the
non-disclosure or non-notification may also be grounds for cancellation (EG 8.5.2(2)).
The Supervision chapter of the Handbook (“SUP”)
22.
SUP 10C.14.18R provides:
“(1) If a firm becomes aware of information which would reasonably be material to the
assessment of the fitness and propriety of an FCA-approved SMF manager, or of
candidate to be one (see FIT), it must inform the FCA either:
a.
on Form D; or
b.
if it is more practicable to do so and with the prior agreement of the
Authority, by email or fax:
as soon as practicable and, in any case, within seven business days.”
23.
SUP10C.14.21G provides that the duty to notify in SUP 10C.14.18R extends to any
circumstances that would normally be declared when giving the information required for
section 5 of Form A or matters considered in FIT 2.
24.
SUP 15.3.1R requires that: “A firm must notify the [Authority] immediately it becomes
aware, or has information which reasonably suggests, that any of the following has
occurred, may have occurred or may occur in the foreseeable future:
(1) The firm is failing to satisfy one or more of the threshold conditions; or
(2) Any matter which could have a significant adverse impact on the firm’s reputation;
ACTION
1.
For the reasons given in this Final Notice and pursuant to section 55J of the Act, the
Authority has decided to cancel Reeds Motors Ltd (“the Firm”)’s Part 4A permission to
carry on regulated activities.
2.
The Authority issued to the Firm the Decision Notice, which notified it that for the reasons
given in this Final Notice, the Authority had decided to take the action specified above.
3.
The Firm has not referred the matter to the Tribunal within 28 days of the date on which
the Decision Notice was issued to it.
4.
Accordingly, the Authority has today cancelled the Firm’s Part 4A permission. The
cancellation takes effect from the date of this Final Notice.
SUMMARY OF REASONS
5.
On the basis of the facts and matters set out in this Notice, it appears to the Authority
that the Firm is failing to satisfy the suitability Threshold Condition. Specifically, the
Authority considers that the Firm is not a fit and proper person to conduct regulated
activities having regard to all the circumstances, including:
a) the Firm’s connection with Mr Harris, its sole director and approved person, who was
convicted of a serious violent criminal offence for which he was sentenced to three
years’ immediate imprisonment in July 2022, and which he deliberately failed to
disclose to the Authority;
b) The Firm’s deliberate failure to disclose Mr Harris’s criminal conviction and its
deliberate provision of false and misleading information to the Authority, in relation
to an application by the Firm for Director B to be approved to perform the SMF29
function, in breach of Principle 1; and
c) the Firm’s failure to notify the Authority of the criminal proceedings in respect of Mr
Harris, and of Mr Harris’s criminal conviction, as required under SUP 15.3.1R and in
breach of Principle 11.
6.
Further, it appears to the Authority that the Firm is failing to satisfy the appropriate
resources Threshold Condition. Specifically, the Authority considers that the Firm does
not have appropriate non-financial resources, in terms of the quality of its human
resources, to carry on the regulated activities for which it holds Part 4A permission due
to the lack of honesty and integrity of Mr Harris who remains the Firm’s sole approved
person.
7.
The Authority considers that it is appropriate to take the cancellation action set out at
paragraph 1 above in order to advance its consumer protection and integrity objectives
(sections 1C and 1D of the Act).
DEFINITIONS
8.
The definitions below are used in this Notice (and in the Annex):
“the Act” means the Financial Services and Markets Act 2000;
“the Appropriate Resources Threshold Condition” means the Threshold Condition set out
in paragraph 2D of Schedule 6 of the Act;
“the Authority” means the Financial Conduct Authority;
“CF8” means the Apportionment and Oversight function formerly required by the Firm
pursuant to SUP10A.7R (no longer in force);
“COND” means the Threshold Conditions part of the Handbook;
“the Decision Notice” means the Decision Notice given to the Firm on 4 October 2024;
“Director B” means the second director of the Firm who was appointed on 22 July 2022
and resigned on 26 July 2023;
“EG” means the Enforcement Guide;
“the Firm” means Reeds Motors Ltd;
“the Firm’s Part 4A permission” means the permission granted by the Authority to the
Firm to carry on regulated activities under Part 4A of the Act;
“Mr Harris” means Mr Ari Harris;
“the Handbook” means the Authority’s Handbook of rules and guidance;
“the Offence” means the offence of wounding/inflicting grievous bodily harm without
intent, contrary to section 20 of the Offences Against the Person Act 1861, to which Mr
Harris pleaded guilty on 29 July 2020;
3
“PRIN” or “the Principles” means the Authority’s Principles for Businesses;
“the RDC” means the Regulatory Decisions Committee of the Authority (see further under
Procedural Matters below);
“SMF29” means the limited scope function of acting in the capacity of a person responsible
for the apportionment function and/or oversight function set out in SUP 10C.4.3R as
required under SYSC 4.4.5R;
“SYSC” means the Senior Management Arrangements, Systems and Controls section of
the Handbook;
“the Suitability Threshold Condition” means the Threshold Condition set out in paragraph
2E of Schedule 6 to the Act;
“SUP” means the Authority’s Supervision Manual;
“the Threshold Conditions” means the Threshold Conditions set out in Schedule 6 of the
Act; and
“the Tribunal” means the Upper Tribunal (Tax and Chancery Chamber).
RELEVANT STATUTORY AND REGULATORY PROVISIONS
9.
The statutory and regulatory provisions relevant to this Notice are set out in the Annex.
FACTS AND MATTERS
Reeds Motors Ltd and Mr Harris
10.
The Firm was authorised on 18 March 2016 as a consumer credit firm with permission to
carry on the regulated activities of credit broking, debt adjusting, and debt counselling.
Mr Harris has been the sole director at the Firm since 1 December 2015 apart from the
period between 22 July 2022 and 26 July 2023 when the Firm had two directors.
11.
Mr Harris was approved by the Authority to perform the CF8 apportionment and oversight
controlled function at the Firm from 18 March 2016 until 8 December 2019, and has been
approved by the Authority to perform the SMF29 limited scope senior manager function
at the Firm from 19 December 2019 to date. The Firm has no other approved persons.
12.
Since 18 May 2023, as a consequence of the matters outlined below, the Firm has been
subject to a requirement by which it has agreed not to undertake any regulated activity
in relation to the offering of credit broking services to existing or new clients without the
consent of the Authority.
13.
On 29 July 2020, Mr Harris pleaded guilty in the Crown Court at Isleworth to an offence
of wounding/inflicting grievous bodily harm without intent contrary to section 20 of the
Offences Against the Persons Act 1861, following which, on 22 July 2022, he was
sentenced to three years’ immediate imprisonment, the judge having reduced the
sentence which they would otherwise have imposed from four years’ imprisonment, in
recognition of his guilty plea.
The Firm’s provision of false and misleading information
14.
At the time of becoming authorised on 18 March 2016, the Firm was informed that an
approved person must “…[c]ontinue to comply with the FCA’s Fit and Proper test for
Approved Persons, set out in the FIT… Approved persons have a duty to report to the
authorised firm and to the FCA any matter that may impact on their on-going fitness and
propriety…”. This ongoing reporting requirement is also set out in SUP 10C.14.18R in the
Handbook. The Firm failed to notify the Authority of Mr Harris’s criminal proceedings or
subsequent conviction as required by SUP 15.3.1R and Principle 11 of the Principles.
15.
On 7 October 2022, the Firm submitted an application to the Authority for Director B to
be approved to perform the SMF29 function. Mr Harris signed the application form on
behalf of the Firm.
16.
On 19 December 2022, the Authority emailed the Firm asking, amongst other matters,
why the Firm required a second SMF29 and also whether Mr Harris would be relinquishing
his role. On 22 December 2022, the Firm sent a reply to the Authority purportedly written
by Mr Harris as follows:
“I am currently overseas looking into a new business abroad, [Director B] is
currently running the business and is also director and is the one that is to be
performing the SMF29 Function, therefore please remove me as this and place
[Director B] in my place.
17.
There was some ongoing correspondence between the Firm and the Authority over the
following few months, during which the Firm maintained the pretence that Mr Harris was
abroad or “on the road”, when he was in fact in prison serving his sentence for the
Offence.
18.
On 3 February 2023, a pre-arranged telephone call took place between the Authority’s
Authorisations department and Mr Harris, during which Mr Harris said that he was
relinquishing his role as SMF29 because he had other businesses he was dealing with and
would be running a property business in Iraq. At no point in this conversation (which
took place whilst Mr Harris was in prison) did Mr Harris inform the Authority of his
conviction or imprisonment.
19.
On 24 February 2023, the Authority called Director B, who initially maintained that:
“Both of us are directors and running the business but [Mr Harris] will be traveling
[sic] abroad and running a business that is why going forward it will be easier if I
am the director and I have also been listed as a Director and completing duties
while he is travelling back and forth and it is a matter of reaching someone.”
20.
Director B was then challenged by the Authority with a court record sheet which showed
that Mr Harris had been convicted of the Offence and imprisoned. Director B then admitted
the true position and stated that the reason that they had not disclosed the conviction
was: (i) because it would mean that they “would have to cut all of their finance work”;
and (ii) as a consequence of having taken bad advice. Whilst clearly remorseful, Director
B confirmed in subsequent correspondence with the Authority, that they had agreed
together with Mr Harris not to disclose his conviction and to provide the false account
about him working overseas.
FAILINGS
21.
Accordingly, it appears to the Authority that the Firm is failing to meet the suitability
Threshold Condition due to its connection with Mr Harris, whom the Authority considers
is not a fit and proper person due to his lack of honesty, integrity and reputation, as
evidenced by the circumstances of the Offence, his conviction, his deliberate failure to
disclose his conviction and imprisonment to the Authority, and his deliberate provision of
false and misleading to the Authority.
5
22.
Under Principle 1, the Firm is required to conduct its business with integrity. The Firm
failed to act with integrity in relation to its dealings with the Authority, as demonstrated
by its deliberate failure to disclose Mr Harris’ conviction and imprisonment to the
Authority, and by its directors acting together to deliberately provide false and misleading
information to the Authority.
23.
Under Principle 11, the Firm is required to deal with the Authority in an open and
cooperative way and to disclose to the Authority appropriately anything relating to the
Firm of which the Authority would reasonably expect notice. The Firm failed to disclose
the criminal proceedings against Mr Harris and his subsequent criminal conviction to the
Authority, as it should have done.
24.
As Mr Harris is the Firm’s sole director and approved person, the Authority considers that
the Firm is failing to meet the appropriate resources Threshold Condition because it does
not have appropriate non-financial resources, in terms of the quality of the human
resources that the Firm has available to it.
25.
For the reasons described above, the Authority considers that the Firm is failing to satisfy
the suitability and appropriate resources Threshold Conditions and that it is appropriate
to cancel the Firm’s Part 4A permission to advance the Authority’s consumer protection
and integrity objectives.
26.
For the reasons set out in this Notice, the Authority has cancelled the Firm’s Part 4A
permission.
PROCEDURAL MATTERS
27.
This Final Notice is given to the Firm under section 390(1) of the Act. The following
paragraphs are important.
Decision maker
28.
The decision which gave rise to the obligation to give this Final 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 website:
29.
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 which this Final Notice relates as the Authority
considers appropriate.
30.
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 the Firm or prejudicial to the interest of consumers
or detrimental to the stability of the UK financial system.
31.
The Authority intends to publish such information about the matter to which this Final
Notice relates as it considers appropriate.
Authority Contacts
32.
For more information concerning this matter generally, the Firm should contact Danielle
Stuart at the Authority (direct line: 020 7066 0185 / email: Danielle.stuart@fca.org.uk).
Jeremy Parkinson
Enforcement and Market Oversight Division
7
ANNEX
RELEVANT STATUTORY PROVISIONS
1.
The Authority’s operational objectives, set out in section 1B(3) of the Act, include
protecting and enhancing the integrity of the UK financial system (section 1D of the Act).
2.
The Authority is authorised by section 55J of the Act to cancel an authorised person’s Part
4A permissions, where it appears to the Authority that an authorised person is failing, or
is likely to fail, to satisfy the Threshold Conditions.
3.
Paragraph 1A(2) of Schedule 6 of the Act states that, for the purposes of Schedule 6 of
the Act, the “non-financial resources” of a person include, amongst other things, the
human resources that the person has available.
4.
The Appropriate Resources Threshold Condition set out in Part 1B(2D) of Schedule 6 of
the Act provides, in relation to a person (“A”) carrying on, or seeking to carry on regulated
activities which do not include a PRA-regulated activity, that:
“(1) The resources of a person (“A”) must be appropriate in relation to the regulated
activities that A carries on or seeks to carry on.
[…]
(4) The matters which are relevant in determining whether A has appropriate nonfinancial
resources include–
(a)
the skills and experience of those who manage A’s affairs;
(b)
whether A’s non-financial resources are sufficient to enable A to comply with-
i. requirements imposed or likely to be imposed on A by the Authority in the
exercise of its functions; or
ii. any other requirement in relation to whose contravention the Authority
would be the appropriate regulator for the purpose of any provision of
Part 14 of the Act.
5.
The Suitability Threshold Condition set out in Part 1B(2E) of Schedule 6 of the Act
provides, in relation to a person (“A”) carrying on or seeking to carry on regulated
activities which do not consist of or include a PRA-regulated activity that:
“A must be a fit and proper person having regard to all the circumstances, including-
(a)
A’s connection with any person;
[…]
(d) whether A has complied and is complying with requirements imposed by the
[Authority] in the exercise of its functions, or requests made by the [Authority], relating
to the provision of information to the [Authority] and, where A has so complied or is so
complying, the manner of that compliance”
RELEVANT REGULATORY PROVISIONS
6.
In exercising its power to cancel a firm’s Part 4A permissions, the Authority must have
regard to the regulatory requirements and guidance published in the Handbook and in
regulatory guides, such as EG. The main considerations relevant to the action specified
in this Warning Notice are set out below.
The Threshold Conditions
7.
COND sets out guidance on the Threshold Conditions.
8.
COND 1.2.1 sets out that the Threshold Conditions represent the minimum conditions to
which the Authority is responsible, which a firm is required to satisfy, and continue to
satisfy, in order to be given and to retain a Part 4A permission.
9.
COND 1.2.3G reproduces the relevant statutory provision that the Authority may exercise
its own-initiative powers to cancel an authorised person’s Part 4A permission, if a firm is
failing to satisfy any of the Threshold Conditions, or is likely to fail to do so.
COND 2.4: Guidance on the Appropriate Resources Threshold Condition
10.
COND 2.4.1AUK reproduces the relevant statutory provisions that the resources of a
person concerned must be appropriate in relation to the regulated activities that person
carries on or seeks to carry on, and that the matters which are relevant in determining
whether such a person has appropriate non-financial resources includes whether that
person’s nonfinancial resources are sufficient to enable it to comply with the requirements
imposed or likely to be imposed on it by the Authority in the course of the exercise of its
functions.
11.
COND 2.4.2G(2) provides that the Authority will interpret the term ‘appropriate’ as
meaning sufficient in terms of quantity, quality and availability, and ‘resources’ as
including, nonfinancial resources and means of managing its resources, an example of
which includes human resources.
COND 2.5: Guidance on the Suitability Threshold Condition
12.
COND 2.5.1AUK(1) reproduces the relevant statutory provision that a person concerned
must be a fit and proper person having regard to all the circumstances, including,
amongst other things:
•
that person’s connection with any person (COND 2.5.1AUK(1)(a)); and
•
the need to comply with requirements imposed by the Authority in the exercise of
its functions, or requests made by the Authority, relating to the provision of
information to the Authority, and where a person has so complied or is so complying,
the manner of that compliance (COND 2.5.1AUK(1)(d)).
13.
COND 2.5.3G states that the emphasis of the Suitability Threshold Condition is on the
suitability of the firm itself. However, in certain circumstances, the Authority may consider
that the firm is not suitable because of doubts over the individual or collective suitability
of persons connected with the firm.
14.
COND 2.5.6G gives examples of the kind of particular considerations to which the
Authority may have regard when assessing whether a firm will satisfy, and continue to
satisfy, the Suitability Threshold Condition including, but not limited to:
•
whether the firm has been open and co-operative in all its dealings with the Authority
(Principle 11 (Relations with regulators)) and is ready, willing and organised to
comply with the requirements and standards under the regulatory system in addition
to other legal, regulatory and professional obligations; the relevant requirements
and standards will depend on the circumstances of each case, including the regulated
activities which the firm has permission, or is seeking permission, to carry on (COND
2.5.6G(1));
•
whether the firm has been convicted or is connected with a person who has been
convicted, of any criminal offence; this must include, where provided for by the
Rehabilitation Exceptions Orders to the Rehabilitation of Offenders Act 1974 or the
Rehabilitation of Offenders (Northern Ireland) Order 1978 (as applicable), any spent
convictions; 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 (COND 2.5.6G(2)); and
•
whether the firm has contravened, or is connected with a person who has
contravened, any provisions of the Act or the regulatory system (which includes the
Threshold Conditions, the Principles and other rules, the Statements of Principle,
codes and guidance) (COND 2.5.6G(4)).
The Principles
15.
The relevant principles for businesses are set out in PRIN 2.1.1R.
16.
Principle 1 of PRIN (Integrity) requires a firm to conduct its business with integrity.
17.
Principle 11 of PRIN (Relations with regulators) requires a firm to deal with its regulators
in an open and co-operative way, and to disclose to the Authority appropriately anything
relating to the firm of which the Authority would reasonably expect notice.
The Enforcement Guide
18.
The Authority’s policy in relation to exercising its enforcement powers is set out in EG,
certain provisions of which are summarised below.
19.
EG 8.1.1 provides that the Authority may use its own-initiative power to vary or cancel
the Part 4A permissions of an authorised person under section 55J of the Act where:
•
the person is failing or is likely to fail to satisfy the Threshold Conditions for which
the Authority is responsible (EG 8.1.1(1)); or
•
it is desirable to exercise the power in order to advance one or more of its operational
objectives (EG 8.1.1(3)).
20.
EG 8.5.1(1) states that the Authority will consider cancelling a firm’s Part 4A permissions
using its own-initiative powers under section 55J of the Act in circumstances where the
Authority has very serious concerns about the firm, or the way its business is or has been
conducted.
21.
EG 8.5.2 provides examples of the types of circumstances in which the Authority may
cancel a firm’s Part 4A permission on its own initiative including material non-disclosure
in an application for authorisation or approval or material non-notification after
authorisation or approval has been granted. The information which is the subject of the
non-disclosure or non-notification may also be grounds for cancellation (EG 8.5.2(2)).
The Supervision chapter of the Handbook (“SUP”)
22.
SUP 10C.14.18R provides:
“(1) If a firm becomes aware of information which would reasonably be material to the
assessment of the fitness and propriety of an FCA-approved SMF manager, or of
candidate to be one (see FIT), it must inform the FCA either:
a.
on Form D; or
b.
if it is more practicable to do so and with the prior agreement of the
Authority, by email or fax:
as soon as practicable and, in any case, within seven business days.”
23.
SUP10C.14.21G provides that the duty to notify in SUP 10C.14.18R extends to any
circumstances that would normally be declared when giving the information required for
section 5 of Form A or matters considered in FIT 2.
24.
SUP 15.3.1R requires that: “A firm must notify the [Authority] immediately it becomes
aware, or has information which reasonably suggests, that any of the following has
occurred, may have occurred or may occur in the foreseeable future:
(1) The firm is failing to satisfy one or more of the threshold conditions; or
(2) Any matter which could have a significant adverse impact on the firm’s reputation;