The Financial Conduct Authority v BlueCrest Capital Management

The FCA may impose a single-firm redress requirement as a condition of continued permission under sections 55L and 55N(5) of the Financial Services and Markets Act 2000. The power is not limited by section 404F(7) or by conditions requiring loss, causation, a duty and an actionable wrong. It remains subject to its statutory objectives, public law constraints and Upper Tribunal supervision.

On a reference, the “matter” includes anything having a real and significant connection with the procedural or substantive subject matter of the regulatory process culminating in the notice. This is a broad jurisdictional gateway. Whether the FCA may rely on new material within it is separately controlled by the Tribunal’s duty to deal with the case fairly and justly.

The FCA issued a supervisory notice requiring BlueCrest Capital Management (UK) LLP to pay substantial redress to investors and a decision notice imposing a financial penalty. Both notices alleged that the firm had failed properly to manage conflicts between an internal fund and an external fund, contrary to Principle 8 of the FCA’s Principles for Businesses.

The Upper Tribunal, in [2023] UKUT 00140 (TCC), held that sections 55L and 404F(7) of the Financial Services and Markets Act 2000 permitted single-firm redress only where conditions of loss, causation, duty and actionability were met. It struck out the redress case because breach of Principle 8 was not actionable. It also refused amendments alleging breaches of Principle 7 and COBS 4.2.1 as outside the matter referred, while allowing another amendment concerning Principle 8.

The FCA appealed. The firm cross-appealed and relied on human-rights and common-law grounds. The central questions were the scope of the FCA’s single-firm redress power and the jurisdiction of the Upper Tribunal over new allegations on a reference.

1. The FCA’s appeal was allowed on both grounds, and the firm’s cross-appeal was dismissed. Sections 55L and 55N(5) of the Financial Services and Markets Act 2000 confer a broad power to impose requirements, including remedial action concerning past conduct, as conditions of continued permission. A single-firm redress requirement falls within that language.

2. Section 404F(7) neither creates nor restricts that power. Its conditional and inclusionary wording presupposes a power found elsewhere and identifies provisions which may be included when it is exercised. It does not import the four threshold conditions applicable to a market-wide scheme under section 404. Section 415A further prevents powers under sections 55L and 55N(5) from being limited by another statutory power.

3. The power is not unfettered. The FCA must consider its exercise desirable for advancing a statutory operational objective. It must act rationally, for a proper purpose and consistently with public law. The Upper Tribunal’s “JR plus” jurisdiction supplies a substantial safeguard because it may determine facts and law independently, identify relevant considerations and prescribe procedural or other steps.

4. The construction adopted was compatible with A1P1. Redress may legitimately protect consumers even without recoverable financial loss, including through disgorgement, compensation for other adverse effects or measures relevant to continued fitness. The statutory objectives, public-law controls and Tribunal supervision provide sufficient legality and protection against arbitrariness.

5. On the pleaded assumptions, receipt of a substandard service was capable of constituting loss. Such loss may be valued by comparing the service promised with that delivered, irrespective of further financial loss. The challenge could not succeed on a strike-out application.

6. The “matter” referred to the Upper Tribunal encompasses new material having a real and significant connection with the procedural or substantive subject matter of the regulatory process culminating in the relevant notice. The connection must not be fanciful or tenuous. This is deliberately a broad gateway, although the Tribunal retains a separate discretion to exclude material where reliance on it would not be fair and just.

7. The proposed allegations under Principle 7 and COBS 4.2.1 largely relabelled existing alleged conduct and fell within the matter referred. They caused no unfair prejudice and were allowed. The amendment concerning Principle 8 was also properly allowed. The strike-out application was dismissed and the FCA’s rejoinder was permitted.

1. Court of Appeal (Civil Division): In [2024] EWCA Civ 1125, allowed the FCA’s appeal on both grounds, dismissed the firm’s cross-appeal, dismissed the strike-out application and allowed the disputed amendments and rejoinder.
2. Upper Tribunal (Tax and Chancery Chamber): In [2023] UKUT 00140 (TCC), held that single-firm redress required loss, causation, duty and actionability; struck out the redress case; refused the amendments relying on Principle 7 and COBS 4.2.1 for want of jurisdiction; and allowed the amendment concerning Principle 8.