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Employment Law

Legal guidance - compliance - software

21 MAY 2012

Employment Litigation's implications for the fitness and properness of Approved Persons

May 21st, 2012

For many years, the most prominent inter-dealer broking firms have engaged in serial litigation over staff poaching. Some of these cases resulted in lurid tales being told at trial of amoral conduct.  Despite its role in judging the fitness and properness of Approved Persons, the FSA appeared to take no real interest and was slow to intervene.  The word was that it regarded the conduct as insufficiently related to any regulated activities.

Recent developments suggest that the FSA is now taking a broader view and that Approved Person litigants generally may be well advised to bear in mind the potential regulatory consequences of judicial findings relating to their integrity.

The developments I refer to are of course the decision of the FSA, published on 16 May 2012, to issue a Prohibition Order against Anthony Verrier of BGC, a decision, which has now been referred to the Upper Tribunal (Tax and Chancery Chamber). 

Readers of this blog will be familiar with the fact that in Tullett Prebon plc (and two others) v BGC Brokers LP (and 13 others including Mr Verrier) [2010] EWHC 484 (QB) Anthony Verrier was found by the High Court to have participated in an unlawful means conspiracy which included the inducement of brokers to breach their contracts with Tullett Prebon by unlawfully leaving their employment. In the course of Jack J.'s judgment, the Judge made findings that Mr. Verrier had departed from the truth in the course of his oral evidence at trial, had lost or disposed of his Blackberries containing potential evidence and had deleted a relevant report.

On 28 March 2012, the FSA issued a Decision Notice against Mr. Verrier stating that it was taking action under s. 56 FSMA to make a prohibition order against him. The Order prohibits him from performing any function in relation to any regulated activity because it appears to the FSA that Mr Verrier is not a fit and proper person due to concerns over his honesty, integrity and reputation. The Decision Notice points out that the FSA's Fit and Proper Test for Approved Persons ("FIT") states at 2.1.3G that, in determining a person's honesty, integrity and reputation, the FSA will have regard to:

"(2)    whether the person has been the subject of any adverse finding ... in civil proceedings, particularly in connection with investment or other financial business, misconduct, ... or management of a body corporate;

 "(10)    whether the person, or any business with which the person has been involved, has been ... criticised by a ... court ..., whether publicly or privately;"

The Notice states that having regard to the FSA's regulatory objectives, including the severity of the risk that Mr Verrier posed to the confidence in the financial system, the FSA considered it necessary and proportionate to exercise its powers to make the prohibition order.

Mr. Verrier's lawyers  made representations on his behalf including that the FSA was extending its reach by basing a decision on conduct which was not itself a regulated activity. The Decision Notice addressed this by stating that the matters to be taken into account by the FSA in assessing whether a person is fit and proper extend beyond regulated activities as is apparent from FIT 2.1.1G: "In determining a person's honesty, integrity and reputation, the FSA will have regard to all relevant matters ..."

Approved Person litigants should beware.

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