Financial Conduct Authority v BlueCrest Capital Management (UK) LLP

This Court of Appeal allowed the FCA's appeal on two principal issues: (1) the FCA has power under section 55L of the Financial Services and Markets Act 2000 to impose a single-firm requirement for remedial action or payment of redress as a condition of continued permission without those powers being circumscribed by the four-fold threshold contained in section 404 (loss, causation, duty and actionability); and (2) the Upper Tribunal’s jurisdiction on a reference is a wide one: the “matter” referred is the subject-matter of the regulatory process and includes issues and legal characterisations having a real and significant connection to that subject-matter, such that the Tribunal may permit amendments to the FCA’s pleading where they fairly relate to the matter and do not cause unfairness.

The court held that s.55L and s.55N(5) plainly empower the FCA to impose requirements dealing with past conduct and remedial action; that s.404F(7) does not create or limit that power but instead clarifies what may be included in a permission when the FCA chooses to include provisions corresponding to s.404 rules; and that public law safeguards and the Upper Tribunal’s supervisory (‘JR plus’) jurisdiction provide adequate protection against arbitrary use of s.55L.

This appeal concerned two related legal questions arising from FCA notices to BlueCrest Capital Management (UK) LLP: a supervisory notice of 30 September 2021 imposing a single-firm redress requirement under s.55L FSMA and a decision notice of 4 November 2021 imposing a financial penalty under s.206 FSMA. The notices relied on the FCA’s allegation that BCMUK had failed properly to manage conflicts of interest between BlueCrest’s Internal and External Funds, and had favoured the Internal Fund.

Procedural posture: BCMUK referred both notices to the Upper Tribunal (Tax & Chancery Chamber). The UT struck out parts of the FCA’s pleaded case on the redress requirement, holding that s.55L was constrained by s.404F(7) and the s.404 scheme such that four conditions (loss, causation, duty and actionability) must be met before a single‑firm redress requirement may be imposed. The UT also refused to allow two contested amendments to the FCA’s statement of case (Amendments 3 & 4) on jurisdictional grounds, while allowing another contested amendment (Amendment 2).

Issues for this court: (i) whether s.55L is subject to the s.404F(7)/s.404 four conditions (or, alternatively, whether an actionability condition applies); and (ii) the scope of the Upper Tribunal’s jurisdiction on a reference — whether the Tribunal may permit amendment of the FCA’s pleading to add allegations or legal causes of action that were not set out in the FCA’s warning/decision or first supervisory notice.

Court’s reasoning:

• The Court considered the statutory text and legislative context. It concluded that s.55L is an own‑initiative power to vary permissions and may include remedial steps relating to past conduct (expressly permitted by s.55N(5)). The wording of s.404F(7) does not create the single‑firm power or impose the s.404 threshold conditions; rather it presupposes that a power exists elsewhere and explains what provisions may be included in a permission when the FCA elects to include requirements corresponding to s.404 rules.
• The Court rejected the Upper Tribunal’s construction that imported the s.404(1) conditions into s.55L, finding that such an implication is not supported by the statutory language, the drafting or the legislative history. The public law safeguards (rationality, proper purpose) and the Upper Tribunal’s wide supervisory jurisdiction provide the necessary protections against arbitrary deprivation or disproportionate use of the power.
• On Tribunal jurisdiction, the court held that the “matter” referred is to be given a broad meaning: the subject matter of the regulatory process culminating in the notice. The correct test is whether the new matter or amendment has a real and significant connection with the subject‑matter of the decision or power being referred. If so, the Tribunal has jurisdiction to entertain it, subject to case‑management discretion to refuse relief where allowing the new matter would be unfair or unjust.
• Applying those principles, the Court allowed the FCA to pursue the rejoinder and disallowed the UT’s strike‑out of the redress case; and it remade the UT’s decision on the amendment application by permitting Amendments 3 and 4 to be pleaded. The cross‑appeal by BCMUK against allowing Amendment 2 was dismissed.

Implications: the decision confirms the FCA’s ability to impose single‑firm remedial requirements under s.55L (including by reference to past conduct) without importing the market‑wide s.404 thresholds, while preserving tribunal review and public law protections; it also confirms a broad but manageable definition of the Tribunal’s jurisdiction on references.

Appeal allowed. (1) The Court held that the FCA’s power under s.55L FSMA to impose requirements as conditions of permission — including requirements referring to past conduct under s.55N(5) — is not circumscribed by s.404F(7) or by the four conditions found in s.404 (loss, causation, duty and actionability). The FCA may impose a single‑firm remedial or redress requirement under s.55L where it is rationally satisfied that doing so advances an operational objective, subject to ordinary public‑law limits and Upper Tribunal scrutiny. (2) The Court held that the Upper Tribunal’s jurisdiction on a reference is broad: the “matter” referred includes issues that bear a real and significant connection to the subject‑matter of the regulatory process culminating in the notice. The Tribunal therefore had jurisdiction to permit the FCA’s Amendments 3 & 4; the Court remade the UT decision and allowed those amendments. The strike‑out of the FCA’s redress case was dismissed and the rejoinder application allowed. The UT’s allowance of Amendment 2 was upheld.

This is an appeal from the Upper Tribunal (Tax & Chancery Chamber), Judges Timothy Herrington and Rupert Jones, decision of 21 June 2023: [2023] UKUT 00140 (TCC). The appeal was heard in the Court of Appeal (Civil Division) and decided by Popplewell LJ, Nugee LJ and Falk LJ, with judgment handed down 2 October 2024 ([2024] EWCA Civ 1125).