Upper Tribunal decision in Dr Saim Koksal T/A Arcis Management Consultancy v The Financial Conduct Authority

Posted by Catherine Ann Bryant on
The Upper Tribunal has provided clear and robust guidance to consumer credit firms who do not seek independent legal advice when applying to vary Part 4A permission to include consumer credit activities.

The FCA applicant in this case, Dr K, prided himself on his 26 years' experience in the consumer credit industry but, as identified, this is not enough to satisfy the FCA's Threshold Conditions set out in Schedule 6 to the Financial Services and Markets Act 2000 ("FSMA").

The tribunal considered how a failure by Dr K to provide correct information over a 16 month period constrained the Authority's understanding of the firm's business and provided a view of non-cooperation which, at the authorisation stage, is a cause for real concern and likely to lead to a recommendation that the application be refused.

A lack of understanding of Consumer Credit law and the FCA's CONC and PERG guidance resulted in frustration by the applicant because he did not understand or appreciate what further information the FCA sought from him and felt they were being unreasonable and unhelpful in their approach. However, the tribunal observed that Dr K became confrontational and did not appreciate the significance of the FCA's requests as he should have, and would have, had he sought independent legal advice.

Additionally, what Dr K regarded as business contracts and exempt, were in fact not exempt agreements but regulated. With respect to credit broking, Dr K failed to appreciate that even though the agreement may be exempt from regulation, the activity of introducing individuals, sole traders or small partnerships to lenders is regulated under FSMA and the Regulated Activities Order 2001 ("RAO").

The tribunal considered the FCA's requirement for small firms to be cooperative to assist in their supervisory approach by proactively identifying and reporting matters the FCA would expect notice of in order to effectively assess and mitigate risks present to consumers.

Although Dr K sought advice from a consultant after the Decision Notice had been provided by the FCA, the advice sought was limited to obtaining documentation which Dr K then completed himself. He did not seek sufficient advice to guide him through the variation process, assist his understanding and provide the information sought by the FCA.

As a result of the above, the FCA felt it could not ensure Dr K would satisfy or continue to satisfy the threshold conditions, namely; (1) Dr K failed on numerous occasions to provide adequate information following requests from the FCA (2) The FCA were not satisfied that Dr K could be effectively supervised (3) The FCA did not feel Dr K was a fit and proper person having regard to all the circumstances of the case.  

Therefore, the Tribunal stressed the importance of seeking independent legal advice to ensure Consumer Credit firms understand how to satisfy the FCA requirements.

About the Author

Catherine Ann is a Solicitor in the Banking and Finance team, based in London. Catherine Ann specialises in financial services regulation and consumer credit compliance advice.

Catherine Ann Bryant
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