On Friday (18 September), the court decided to impose a fine of £450,000 and to prohibit Mr Roberts from performing any role in regulated financial services.
It also decided to fine Mr Wilkins £50,000, but rejected the FCA’s allegation that he was not fit and proper and therefore overturned their plan to ban him.
The upper tribunal rejected the allegation that Mr Wilkins was not fit and proper on any basis alleged by the FCA. It remains open to Mr Roberts whether he wants to appeal the tribunal’s judgment.
In August 2013, the FCA decided to fine Mr Roberts £450,000 and impose a full prohibition on him, and to fine Mr Wilkins £100,000 and prohibit him from undertaking significant influence functions.
They both referred the FCA’s decisions to the tribunal, leading to this judgment.
Last month, the tribunal upheld the FCA’s decision to fine the chief executive and former director of Catalyst £500,000.
Mr Roberts was a director and the chief executive of Catalyst, the UK distributor of bonds issued by Arm Asset Backed Securities, of which Mr Roberts was also a director.
Mr Wilkins was a director of Catalyst until 23 March 2010, and like Mr Roberts, was involved in compliance issues, especially in relation to financial promotions.
Arm was a securitisation vehicle based in Luxembourg which issued bonds and used the proceeds to invest in traded life assurance policies (also known as senior life settlement policies). Its bond programme was registered with the Irish Stock Exchange and traded on its regulated market.
According to the FCA, Arm understood that it needed a licence to issue bonds from the Luxembourg regulator, the Commission de Surveillance du Secteur Financier, but did not have one.
Arm applied for a licence in July 2009, and in November 2009, Arm was requested by the Luxembourg regulator to cease issuing bonds until it was granted a licence.
Mr Roberts allowed Catalyst to continue promoting the bonds and collecting funds from potential investors after November 2009, in circumstances where the funds collected from potential investors were not ring fenced so that they could be paid back if Arm was refused a licence.
The FCA stated Mr Roberts and Mr Wilkins allowed Catalyst to provide misleading information about Arm’s licence position in a letter to IFAs in December 2009. Mr Roberts also approved a letter to investors containing misleading information about Arm’s licence position in March 2010.
The tribunal found that Mr Roberts’ conduct demonstrated a reckless disregard for the interests of investors, and considered the degree to which Mr Roberts acted with a lack of integrity to be serious.
It also found that Mr Roberts had acted without due care, skill and diligence in approving Arm’s financial promotions, which failed to disclose to investors significant information relating to the firm’s regulatory position.
The tribunal agreed with the FCA’s decision to impose a prohibition order on Mr Roberts on the grounds that he is not a fit and proper person, as well as the decision that Mr Wilkins had acted without due care, skill and diligence.
Its findings in this regard mostly reflect the misconduct admitted by Mr Wilkins during the enforcement process.
However, the tribunal rejected the FCA’s argument that Mr Wilkins had acted recklessly and without integrity.
It also rejected the FCA’s argument that Mr Wilkins lacked competence, noting that a number of steps taken by Mr Wilkins demonstrated his concern for investors and their funds.
The tribunal also noted that Mr Wilkins had relied on his compliance function, on legal advice and on Mr Roberts in the relevant period.
The tribunal referred the FCA’s decision to prohibit him from holding significant influence functions back to reconsider whether a prohibition should be imposed on Mr Wilkins in light of its findings. The FCA has decided that Mr Wilkins should not be prohibited.
The tribunal also found that contrary to the regulator’s decision, Mr Roberts and Mr Wilkins did take reasonable steps to keep Catalyst’s compliance officer informed of Arm’s licence position prior to 24 December 2009.
The decision follows the final notices issued to Catalyst Investment Group Limited and Alison Moran, Catalyst’s compliance officer, in September 2013.
Ms Moran was fined £20,000 for “failing to act with due skill, care and diligence” and failing to communicate issues with Arm’s licence to investors.
emma.hughes@ft.com
