Key Facts
- •Mr. Markos Markou (Applicant) was the sole director and shareholder of Financial Solutions (Euro) Limited (FSE), a regulated mortgage business.
- •The Financial Conduct Authority (FCA) issued a Decision Notice imposing a £25,000 financial penalty, withdrawing Markou's approval to perform controlled functions at FSE, and prohibiting him from performing any function in relation to regulated activity.
- •The FCA's case was that Markou failed to maintain a compliant mortgage business at FSE, acting recklessly and demonstrating a lack of integrity.
- •Markou denied the allegations and referred the matter to the Upper Tribunal.
- •The FCA's main allegations centered on Markou's failure to implement policies to combat mortgage fraud, properly supervise mortgage advisors, and prevent FSE from transacting business without professional indemnity insurance (PII).
- •A prior Upper Tribunal decision (FSE v FCA) found that FSE voluntarily ceased regulated activities when its PII lapsed, a point disputed in this case.
- •The Tribunal heard evidence from six witnesses, including FCA employees and former FSE employees.
- •The Tribunal considered the concept of recklessness and its relation to a lack of integrity, referencing relevant case law (Tinney v FCA, Forsyth v FCA and PRA, Ford and Owen v FCA, Page and others v FCA).
Legal Principles
Prohibition order under section 56 of the Financial Services and Markets Act 2000 (FSMA)
FSMA 2000, section 56
Withdrawal of approval under section 63 of FSMA
FSMA 2000, section 63
Imposition of financial penalty under section 66 of FSMA
FSMA 2000, section 66
Statements of Principle (APER) and the definition of 'acting with integrity'
FCA Handbook, APER
Recklessness
Tinney v FCA [2018] UKUT 0435 (TCC), R v G [2003] UKHL 50
Tribunal's jurisdiction and powers on references
FSMA 2000, sections 57(5), 63(5), 67, 133
Estoppel, res judicata, and abuse of process
Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46, Arnold v National Westminster Bank plc [1991] 2 AC 93, Henderson v Henderson [1843-1860] All ER Rep 378, Barrow v Bankside Members Agency Limited [1996] 1 All ER 981, Mansing Moorjani v Durban Estates Limited [2019] EWHC 1229 (TCC)
Subject matter of a reference
Jabre (Decision on Jurisdiction) v Financial Services Authority [2002] UKFSM FSM035, James Parker v FSA (FSMT, 13 October 2004), Allen v Financial Conduct Authority [2013] 5 WLUK 766, Financial Conduct Authority v Hobbs [2013] EWCA Civ 918, Khan v Financial Conduct Authority [2014] UKUT 186 (TCC)
Outcomes
Appeal regarding financial penalty allowed.
The Tribunal found that the FCA did not establish that Markou acted recklessly or without integrity, thus failing to prove a breach of Statement of Principle 1, the basis for the penalty.
Appeal regarding withdrawal of approval and prohibition order allowed.
The Tribunal found the FCA's decisions to withdraw Markou's approval and issue a prohibition order to be unreasonable, given the lack of evidence supporting the FCA's allegations.