Key Facts
- •BlueCrest Capital Management (UK) LLP (BCMUK) challenged two Financial Conduct Authority (FCA) decisions: a supervisory notice imposing a redress requirement and a decision notice imposing a £40,806,700 financial penalty.
- •The FCA's case alleged BCMUK failed to manage a conflict of interest fairly between an internal and external fund, resulting in substandard service and inadequate disclosure.
- •BCMUK expedited the process, referring the matter directly to the Upper Tribunal (UT) without engaging with the Regulatory Decisions Committee (RDC).
- •The UT heard preliminary issues: FCA's application to amend its Statement of Case and BCMUK's application to strike out parts of the FCA's case on redress.
- •The FCA's proposed amendments included new allegations regarding disclosure to the External Fund's directors and investors, as well as breaches of Principle 7 and COBS 4.2.1R(1).
Legal Principles
Tribunal's jurisdiction on a reference is confined to the 'matter' referred, encompassing allegations and circumstances before the RDC, even if not reflected in the Decision Notice.
Jabre v Financial Services Authority [2002] UKFSM FSM035
The Tribunal has the power to permit amendments to a Statement of Case, considering factors such as prospects of success, timing, reasons for delay, and clarity.
Bittar v Financial Conduct Authority [2017] UKUT 0082 (TCC)
Principle 8: A firm must manage conflicts of interest fairly.
FCA's Principles for Businesses
Principle 7: A firm must pay due regard to the information needs of its clients and communicate information clearly, fairly, and not misleadingly.
FCA's Principles for Businesses
COBS 4.2.1(1)R: A firm must ensure communications and financial promotions are fair, clear, and not misleading.
Conduct of Business Rules
Section 55L FSMA allows the FCA to impose requirements, including redress, if desirable to advance operational objectives. However, this power is constrained by s.404F(7) and s.404A, requiring the establishment of loss, causation, duty, and actionability.
Financial Services and Markets Act 2000
Outcomes
The FCA's amendment application was granted in part. The amendments relating to breaches of Principle 8 were allowed; those concerning Principle 7 and COBS were refused due to jurisdictional issues.
The amendments concerning Principle 8 were considered to be within the scope of the original reference, clarifying existing allegations. The Principle 7 and COBS amendments introduced new allegations not previously before the RDC, exceeding the Tribunal's jurisdiction.
BCMUK's strike-out application was granted.
The FCA's case, even with the permitted amendments, lacked a reasonable prospect of success in establishing actionable loss necessary for imposing a single-firm redress scheme under s.55L, read with s.404F(7) and s.404A. Breaches of Principle 8 alone are not actionable.
The reference concerning the supervisory notice (FSN) was allowed.
The FCA's redress requirement could not be lawfully imposed due to the lack of actionable loss.