In this decision report we consider the decision of the Upper Tribunal (Tax and Chancery Chamber) in which the Upper Tribunal declined to suspend the effect of a decision notice that had been issued to a firm, Money Matcher Limited. The FCA had issued this decision notice to Money Matcher following a decision to refuse its application for permission under Part 4A of the Financial Services and Markets Act 2000 (FSMA) to carry on the regulated activities of debt adjustment and debt counselling.
Background
On 9 March 2016, the FCA issued a decision notice to Money Matcher, refusing its application for a Part 4A permission to carry on the regulated activities of debt adjusting and debt-counselling. The reason for the FCA's decision was that it considered that Money Matcher lacked sufficient non-financial resources in order to meet the FCA's Threshold Conditions.
On 20 March 2016, Money Matcher referred the FCA's decision to refuse its application to the Upper Tribunal.
Cessation of interim Part 4A permission
One of the consequences of the decision notice issued to Money Matcher was that the interim permission held by Money Matcher to carry on certain regulatory activities ceased as a result of the provisions in Article 58 of the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) (No. 2) Order 2013.
When referring the decision to the Upper Tribunal, Money Matcher also applied for a direction that the effect of the decision notice (that is, that Money Matcher's interim permission ceased) be suspended pending the Upper Tribunal's decision, pursuant to Rule 5(5) of the Tribunal Procedure (Upper Tribunal) Rules 2008 (Upper Tribunal Rules). Rule 5(5) states that:
1. "In a financial services case, the Upper Tribunal may direct that the effect of the decision in respect of which the reference has been made is to be suspended pending the determination of the reference, if it is satisfied that to do so would not prejudice: (a) the interests of any persons (whether consumers, investors or otherwise) intended to be protected by that notice; (b) the smooth operation or integrity of any market intended to be protected by that notice; or (c) the stability of the financial system of the United Kingdom".
This is an issue that the Upper Tribunal had been required to consider earlier in 2016 in PDHL v FCA [2016] UKUT 0129 (TCC) (28 January 2016).
Principles to apply when deciding whether to suspend the effect of a decision notice
The Upper Tribunal had previously set out the principles it would apply when deciding an application made under Rule 5(5) of the Upper Tribunal Rules in Walker v FCA (FS/2013/0011) (3 February 2014) and PDHL:
• The Upper Tribunal is not concerned with the merits of the reference made to it.
• The sole question for the Upper Tribunal to consider is whether, in all the circumstances, the proposed suspension would not prejudice the interests of persons intended to be protected by the decision notice.
• The persons intended to be protected by a decision notice refusing to grant a Part 4A permission to a firm with interim permission will include the existing or potential customers of a firm.
• Detriment to the applicant (in this case, Money Matcher), such as it being deprived of its livelihood, is not relevant to this test.
• The burden of proof is on the applicant to satisfy the Upper Tribunal that the interests of consumers will not be prejudiced.
• So far as consumers are concerned, the type of risk the Upper Tribunal is concerned with is a significant risk beyond the normal risk of a firm that is doing business in a broadly compliant manner.
The Upper Tribunal is not obliged to grant a suspension of the effect of a decision notice if it is satisfied that to do so would not prejudice the interests of consumers. The use of the word "may" in Rule 5(5) of the Upper Tribunal Rules means that it is a matter of judicial discretion as to whether or not a suspension should be granted. As a result, the Upper Tribunal has to carry out a balancing exercise in light of all relevant factors and decide whether in all the circumstances it is in the interests of justice to grant the application. The power is a case management power, which, in accordance with Rule 2(2) of the Upper Tribunal Rules, must be exercised in accordance with the overriding objective to deal with the matter fairly and justly.
Money Matcher argued that it was necessary for the effect of the decision notice to be suspended in order to protect its clients' interests. Money Matcher noted that it was holding client monies which were awaiting distribution to creditors and that these monies could not be released until the suspension of the effect of the decision notice had been granted. Money Matcher also noted that it would not be taking on any new business and that clients seeking new advice were being directed to alternative services.
However, Money Matcher failed to submit any evidence in support of its arguments.
Decision
The Upper Tribunal dismissed Money Matcher's application to suspend the effect of the decision notice. The following factors appear to have contributed to the Upper Tribunal's decision:
• Money Matcher’s senior management appeared to fail to properly understand the risks that Money Matcher's business exposed its customers to.
• Money Matcher failed to engage with the Upper Tribunal process. This "increased rather than allayed the concerns" held by the FCA about Money Matcher.
• The Upper Tribunal could see no reason why, as Money Matcher had attempted to argue, Money Matcher would have been prevented from returning client monies to customers if the effect of the decision notice had not been lifted.
Decision
Money Matcher Ltd v FCA [2016] UKUT 0211 (TCC) (13 April 2016).
This article first appeared in Practical Law and is published with the permission of the publishers.
