Judge Timothy Herrington found the FCA's decision to ban Jon Frensham from operating as an adviser was justified based on his conviction and subsequent behaviour.
However, the tribunal highlighted the regulator's lack of diligence in following up with Frensham after it became aware of his conviction, its putting forward of witnesses who were "not properly prepared", and its reluctance to take a stance on the case for years.
The FCA banned Jon Frensham from operating as an adviser in October 2020, more than three years after he was convicted for attempting to meet a child.
The sole director of Frensham Wealth - who was formerly known as Jonathan James Hunt - received a 22-month jail sentence in March 2017, of which 18 months were suspended. He was first arrested a year before his conviction, in March 2016.
Whilst operating as an approved adviser, Frensham had messaged a girl called ‘Holly’, who early on told him she was, in fact, only 15 years old.
The judge said “many” of Frensham’s messages were “sexual in tone”, and that he wanted a photo of her in her school uniform.
When Frensham met Holly, she turned out to be an adult who had tricked him, leading to his arrest.
He was already on bail at this time, having been arrested for another suspected offence - though no charges were brought.
As part of his conviction, Frensham was added to the sex offenders register until 2027.
FCA failings
Following his conviction, the Chartered Insurance Institute refused to renew Frensham’s Statement of Professional Standing, meaning he was unable to continue trading.
But according to the tribunal, which sat in mid-June, Frensham “failed to inform” the FCA of this, which meant he continued trading without a SPS for more than three years.
The FCA later discovered his conviction “from other sources”.
Whilst the tribunal heard that “Frensham decided to put his own interests and those of the firm before the need to comply with the clear obligations to be open and transparent with the FCA,” it also said the financial watchdog “was not as diligent as it should have been in following up with Frensham after it became aware of those matters”.
The tribunal accused the FCA of being “reluctant” for its position to be known on the Frensham case, with regards to taking regulatory action based on non-financial misconduct, which would have led to the delayed ban.
According to one FCA employee it was that it considered convictions for non-financial misconduct indicative of an individual’s lack of integrity.
“That did not appear to be the settled position at the time the FCA became aware of Frensham’s conviction. That only became apparent after a long period of reflection, and it appears that the FCA was reluctant for it to be known that that was the position,” the hearing stated.
What's more, the judge criticised the FCA's preparation for, and openness at, the hearing. As part of the tribunal hearing a number of FCA employees filed witness statements on which they were cross-examined.
The tribunal found one witness statement "did not give the full picture" after a "lengthy re-examination" during which new evidence was teased out.
For instance, in her statement the witness failed to mention the internal discussions which were taking place at the regulator during the more than three years between Frensham's conviction and the FCA's decision to ban him from operating.
"We regret to say that in this respect the FCA has not shown the degree of candour which the tribunal should reasonably expect and which the FCA would expect from the firms and individuals which it regulates, which, ironically, the FCA maintains was not provided by Frensham in this case," the hearing concluded.
It added: "We regard it as unsatisfactory that the FCA did not put forward appropriate witnesses and that those witnesses who did attend were not properly prepared.”
Delayed ban
A large part of the FCA's delay in bringing regulatory proceedings against Frensham was put down to the fact "discussions were taking place internally, at a senior level, as to how to proceed with cases of this kind,” according to the tribunal.
For the FCA, this case marked a first, meaning “it had not decided how to deal with such cases” when it came to light.
"This was certainly not a routine case as far as the authority was concerned," the tribunal surmised.
"This case was one of a number brought by the FCA against individuals guilty of non-financial misconduct following a lengthy period during which the FCA was deciding on how to deal with cases of that kind."
The tribunal hearing in June centred on the question of whether the FCA’s prohibition order sent to Frensham was based on the fact he was no longer fit and proper to carry out his role as an adviser due to lacking “the necessary integrity and reputation”.
In other words, whether the FCA was right to ban him based on non-financial misconduct.
Frensham had contended that the FCA allowed “irrelevant considerations” to affect its judgment and “did not have sufficient or any regard to relevant factors”.
He claimed his conviction did not relate to his regulated activity, that the conviction was not for an offence of dishonesty, and there were no indirect connections between the criminal offence and his regulated activity.
But the tribunal unanimously sided with the FCA. It concluded: “Although we have found some flaws in the FCA’s approach to the relevance of the conviction, in our view those flaws do not justify us asking the FCA to reconsider its decision.
“On the basis of the facts that we have found, and the assessment that we have made of all of the circumstances surrounding Frensham’s conviction and his subsequent conduct, in our view it would be inevitable that if the matter was remitted to the FCA, then the same decision to withdraw Frensham’s approvals and make a prohibition order would be made.
“In our view, the FCA would be fully entitled to take that course.”
FTAdviser has approached the FCA for comment.
ruby.hinchliffe@ft.com
