Key Facts
- •Arian Financial LLP (Applicant) breached Principles 2 and 3 of the FCA's Principles for Business by having inadequate systems and controls to mitigate the risk of fraudulent trading and money laundering.
- •The breaches related to the Applicant's involvement with the Solo Group, involving approximately £52 billion worth of trades.
- •The FCA imposed a £744,745 financial penalty, which the Applicant challenged as disproportionate.
- •The Applicant did not dispute the breaches but contested the penalty amount.
- •The Tribunal considered the FCA's five-step penalty framework (DEPP 6.5A) in its assessment.
Legal Principles
Principle 2: Conduct business with due skill, care, and diligence.
FCA's Principles for Businesses
Principle 3: Take reasonable care to organise and control affairs responsibly and effectively, with adequate risk management systems.
FCA's Principles for Businesses
SYSC 6.3.1 R: Firms must have systems and controls to identify, assess, monitor, and manage money laundering risk.
FCA's Handbook
Section 206 FSMA: FCA can impose financial penalties for contravening relevant requirements.
Financial Services and Markets Act 2000
DEPP 6.5A: FCA's five-step framework for determining financial penalties (disgorgement, seriousness of breach, mitigating/aggravating factors, deterrence, settlement discount).
FCA's Handbook
Tribunal's role: Complete rehearing of issues, not bound by FCA policy but pays due regard, overriding objective of doing justice.
Section 133 FSMA, Tariq Carrimjee v FCA, Westwood Independent Financial Planners v FCA, FCA v Da Vinci Invest Limited
Disgorgement: Firm should not benefit from breach; flexible interpretation, considering expenses and pre-existing contractual obligations.
DEPP 6.5.2, Da Vinci, Ford v FCA
Outcomes
The Tribunal reduced the financial penalty from £744,745 to £288,962.53.
The Tribunal found that the FCA had incorrectly calculated the disgorgement amount by not deducting commissions paid to Hopa (which was essentially an expense). The Tribunal also adjusted the penalty based on its own assessment of the seriousness of the breach, mitigating and aggravating factors, and a revised approach to deterrence.