Craig Francis Donaldson & Anor v The Financial Conduct Authority

An issuer which publishes financial information must take reasonable care to ensure that the information is accurate and reliable. It cannot publish a figure known to be materially wrong merely because the correct figure is under investigation, the regulator has accepted the figure for confidential reporting, or correction would be commercially inconvenient. A qualification, estimate or omission may be required.

To be knowingly concerned in a contravention, a person must be actually involved and know the facts on which the contravention depends. Knowledge of the law is unnecessary. Reliance on legal advice may assist only where the advice concerns the relevant activity and is based on a correct and complete factual matrix.

Metro Bank’s third-quarter 2018 trading update stated that its risk-weighted assets were £7,398m and that total capital represented 19.1% of risk-weighted assets. The figures applied a 50% risk weighting to commercial loans secured on commercial property, although a 100% weighting was required. The Bank knew that a material error existed but published the figures without qualification.

The FCA decided that the Bank had breached Listing Rule 1.3.3R and that its CEO, Craig Donaldson, and CFO, David Arden, were knowingly concerned in the breach. The Bank accepted its own penalty. The Applicants referred their penalties to the Tribunal. The issues were whether there was a breach, whether the Applicants were knowingly concerned, and what penalties were appropriate.

1. Jurisdiction and approach. A disciplinary reference under Financial Services and Markets Act 2000, section 133, is a complete rehearing rather than an appeal from the FCA’s decision. The burden was on the FCA, on the balance of probabilities.
2. Listing Rule breach. The Bank knew that CLIP loans had been wrongly risk-weighted at 50% instead of 100%, and that correction would increase reported RWAs by approximately £574m. Regulatory uncertainty concerning PBTL loans, possible data adjustments, or potential future mitigants did not alter that conclusion. The mitigants could affect capital requirements, but not the accuracy of the RWA figure itself.
3. The PRA’s acceptance that the confidential COREP return could remain unchanged did not authorise publication of a known inaccurate market figure. Nor did confidentiality, the MAR disclosure regime, or Linklaters’ advice assist. The advice concerned whether a proactive disclosure was required under the MAR, not whether the Bank could publish materially incorrect RWA figures in the Q3 Update. The Bank therefore breached LR 1.3.3R.
4. Knowingly concerned. Applying Ferreira [2022] EWCA Civ 397 and Scandex [1998] 1 WLR 712, the Applicants were actually involved and knew the facts constituting the breach. No additional fraud, recklessness, lack of integrity or other personal wrongdoing was required. Their reliance on legal advice failed because the advice was based on incomplete and inaccurate facts and did not address the Q3 Update.
5. Penalties. A public censure was insufficient given the seriousness of publishing materially inaccurate capital information and the risk to investors. Applying the DEPP framework with due regard, level 3 penalties were appropriate. However, the Applicants’ cooperation with the FCA and PRA, remediation and compliance with the PRA’s requirements justified a 25% reduction.
6. The penalties were reduced from £223,100 to £167,325 for Mr Donaldson and from £134,600 to £100,950 for Mr Arden. The Decision Notices were remitted to the FCA to give effect to the determination. The decision was unanimous.

Financial Conduct Authority: Decision Notices dated 10 November 2022 imposed penalties of £223,100 on Mr Donaldson and £134,600 on Mr Arden for being knowingly concerned in the Bank’s breach of LR 1.3.3R.

Upper Tribunal (Tax and Chancery Chamber): The References were determined by a complete rehearing. The findings of breach and knowing concern were upheld, but the penalties were reduced and the Decision Notices remitted: [2025] UKUT 185 (TCC).