Greystoke & Anor v The Financial Services Authority

An appeal confined to a point of law cannot reopen factual findings or a tribunal’s penalty discretion merely because the appellant disputes the evidence or outcome. A regulated firm remains responsible for carrying out due diligence to satisfy itself that relevant regulatory requirements are met. A regulator has no general duty to advise or warn an authorised person about compliance. Guidance stating that a penalty should not be intended to cause insolvency makes insolvency a relevant consideration, not an absolute bar. A substantial penalty may remain lawful where it reflects the gravity and consequences of the breaches. An earlier appellate decision applying existing regulatory rules to different facts does not necessarily constitute a change in the law.

The Financial Services Authority issued notices imposing penalties of £200,000 on Atlantic Law LLP and Mr Greystoke. The notice against Mr Greystoke also prohibited him from performing functions in relation to regulated activities and withdrew his approval to perform control functions. The appellants referred the notices to the tribunal, which upheld the findings of breach and left the penalties in place. They renewed an application for permission to appeal on points of law. The central issues were whether the FSA had a duty to warn them about concerns regarding the Spanish companies, whether Financial Services Authority v Fox Hayes had changed the law, and whether the penalties were unlawful or disproportionate because they might cause insolvency.

The Court of Appeal refused permission to appeal. The formal order was: Application refused.

1. Scope of appeal. The statutory appeal route under section 137 of the Financial Services and Markets Act 2000, now replaced by section 13 of the Courts Tribunals and Enforcement Act 2007, permitted challenge only on a point of law. The tribunal’s factual findings could not be revisited unless there was no evidence capable of supporting them. Its discretionary decision on penalties could be challenged only if it was perverse.
2. Liability. The responsibility lay on the regulated firm to use due diligence. The FSA had no general obligation to warn or advise the firm about concerns relating to the overseas companies. Financial Services Authority v Fox Hayes [2009] EWCA Civ 76 was binding and supported that conclusion. The tribunal was entitled to find that the firm had taken no reasonable steps to ensure that the promotions were clear, fair and not misleading, and had reason to doubt whether the overseas companies would deal honestly and reliably with United Kingdom investors.
3. Effect of Fox Hayes. That decision did not create new law. It interpreted and applied the existing regulatory rules to particular facts. The factual differences between the cases did not create an arguable point of law.
4. Penalties. The tribunal had considered the appellants’ financial position and the relevant passage of the FSA’s Decision Procedure and Penalties manual. The absence of evidence about Mr Greystoke’s wife’s means and willingness to provide support made his ability to pay uncertain. Even assumed inability to pay did not prevent substantial penalties. The policy that a penalty should not be intended to render a person insolvent did not mean that insolvency could not result. The tribunal was required to impose a suitable penalty on the facts before it, rather than extrapolate mechanically from other cases.

• Court of Appeal (Civil Division): oral renewal of the application for permission to appeal refused. [2011] EWCA Civ 74.
• Upper Tribunal (Tax and Chancery Chamber): decision dated 11 May 2010 upheld the findings of breach and left the financial penalties in place.
• Financial Services Authority: notices dated 14 May 2009 imposed the penalties and, against Mr Greystoke, a prohibition order and withdrawal of approval.