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The Financial Conduct Authority (formerly the Financial Services Authority) v David John Hobbs [2013] EWCA Civ 918

The Court of Appeal upheld the appeal of the Financial Conduct Authority ("the FCA") that the FCA was not bound to discontinue proceedings where it had published, and subsequently withdrawn, a

The Court of Appeal upheld the appeal of the Financial Conduct Authority ("the FCA") that the FCA was not bound to discontinue proceedings where it had published, and subsequently withdrawn, a statement on its website which stated that the FCA was discontinuing proceedings.


In 2007, the FCA had carried out an investigation into H in relation to alleged market abuse. The FCA decided to impose a large financial penalty and a prohibition order upon H. who subsequently referred the matter to the Upper Tribunal (Tax and Chancery Chamber) ("the Tribunal").


The FCA's case as to whether H was a fit and proper person was a combination of his alleged conduct, and then lying about that conduct. The Tribunal, on the facts of the case, decided that H's explanations for his conduct were false but that he was not engaged in market abuse and that therefore, the FCA had not made out its case that he was not a fit and proper person.


The Tribunal issued its decision on 22 November 2012. On the same day, the FCA published the decision on its website, adding "the FSA confirms that following the Tribunal's decision and in accordance with its direction, it is discontinuing its action against Mr Hobbs in relation to this matter".


The added sentence was removed from the FCA's website on 27 November 2012. On 6 December 2012, the FCA applied to the Tribunal to appeal on the basis that the Tribunal had "wrongfully failed to consider whether [H's lying during the investigation] showed that he was not a fit and proper person".


 The Tribunal refused permission to appeal, finding that the FCA had discontinued its proceedings against H.


The FCA took the case to the Court of Appeal, arguing, inter alia, that where the FCA published, and subsequently withdrew, a statement on its website which stated that the FCA was discontinuing proceedings, the FCA was not bound, by virtue of that statement, to discontinue proceedings.

Sir Stanley Burton gave the leading judgment in the Court of Appeal. He did not agree with the Tribunal's assessment that the requirement of giving notice of discontinuance under s.389 of the Financial Services and Markets Act 2009 (which had not been given in this case) was simply a procedural step that follows the decision to discontinue having been taken by the FCA.  Otherwise, by implication the finding of the Tribunal meant that 'if, at 10.30am someone with sufficient authority [within the FCA] decided to discontinue, but at 11.00am he was persuaded otherwise, and for good reason, the FCA could not proceed with the action…'.

The Court of Appeal did not consider that Parliament intended to create a rule 'that renders an internal decision irrevocably effective'.

As a separate point, the Court of Appeal held that on the evidence a decision to discontinue had not been taken by someone on behalf of the FCA with the requisite authority. The Court of Appeal also considered that it was incumbent upon the Tribunal to consider whether H's lies rendered him a person who was not fit and proper.


The FCA's appeal was therefore allowed and the matter was remitted to the Tribunal for consideration as to what order to make.


Read the case here.


 

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