RegulationAug 11 2015

Catalyst duo fail to overturn £500,000 FCA fines

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Catalyst duo fail to overturn £500,000 FCA fines

The Upper Tribunal has upheld the Financial Conduct Authority’s decision to fine the chief executive and former director of failed Catalyst Investment Group £500,000.

In August 2013 the regulator published decision notices against Catalyst chief executive and Arm director Timothy Roberts and former director Andrew Wilkins, stating that it would withdraw their authorisations and fine them £450,000 and £100,000 respectively. Both referred their cases to the Upper Tribunal.

The FCA said that Catalyst knew its life settlement fund Arm had been asked to stop issuing bonds by the Luxembourg regulator in November 2009 while it decided whether to license the fund.

However, according to the FCA, Catalyst continued to accept funds from investors without disclosing Arm’s position and the fact that Arm could be liquidated if its licence application failed, adding that Mr Roberts permitted Catalyst to collect funds from potential investors for bonds that had not been issued and at a time when Arm was prohibited from issuing them.

In October 2013 the regulator censured Catalyst for “recklessly misleading” investors when promoting bonds offered by Arm Asset Backed Securities between November 2009 and May 2010.

Catalyst acted as distributor of the bonds via financial advisers, often via self-invested personal pensions. Around 2,000 UK investors placed money in the fund, approximately 800 clients of which through failed advisory firm Rockingham Retirement, which invested a total of £40m in ARM.

The court documents saw the regulator alleging that Mr Roberts failed to exercise due skill, care and diligence in Catalyst’s financial promotions, while Mr Wilkins was accused of failing to act with integrity by demonstrating a disregard for the interests of investors in collecting funds for bonds that had not been issued.

The tribunal found that Mr Roberts’ conduct demonstrated a reckless disregard for the interests of investors, calling the degree to which he acted with a lack of integrity “serious”.

Judge Terence Mowschenson ruled that the FCA should go ahead with its ban and fine of £450,000 for Mr Roberts, describing him as “reckless” with regards to the interests of investors.

Mr Wilkins had his fine halved to £50,000 because although he made “certain errors”, the judge rejected the FCA’s argument that he had acted recklessly and without integrity, referring the regulator’s decision to prohibit him from holding significant influence functions back for it to reconsider.

His suggested text in promotional material during June 2009 - as to the fact that Arm was applying for authorisation - and a March 2010 letter to IFAs was ignored by Mr Roberts, with the tribunal stating that Mr Wilkins demonstrated “a genuine concern to safeguard funds paid over by investors” and throughout acted on the advice of compliance officers and lawyers.

The court documents described Mr Roberts at the time to have been a forceful and sometimes volatile personality, “who did not easily put up with people whom he did not consider were fulfilling their role properly and on occasion wrote intemperate emails to his staff”.

peter.walker@ft.com