Singh (t/a Ocean Mortgages) v Financial Services Authority

Mortgage-related activities — Authorisation – Fit and proper person – FSA refusing to grant applicant permission to carry on regulated services as mortgage intermediary – FSA cancelling earlier authorisation on grounds of failure to submit retail mediation activities returns – Tribunal refusing to reauthorise on evidence of earlier failures – Application dismissed The applicant was a sole trader who traded under the name of “Ocean Mortgages”. From mid-2005, he advised on and arranged regulated mortgage contracts. He was authorised by the respondent Financial Services Authority under Part IV of Financial Services and Markets 2000.In July 2008, the applicant reapplied for authorisation to carry on regulated activities as a mortgage and general insurance intermediary. Section 41(2) of the 2000 Act provided that, in giving permission, the respondent had to ensure that the applicant would satisfy and continue to satisfy the threshold conditions in respect of all of the regulated activities for which he would have permission. Threshold condition 5 on suitability required that the person concerned had to satisfy the respondent that he was a fit and proper person having regard to all the circumstances, including the need to ensure that his affairs were conducted soundly and prudently.The respondent refused the application and the applicant referred that decision to the Upper Tribunal. It had to decide whether the applicant would satisfy and continue to satisfy threshold condition 5 in respect of all of the regulated activities for which he sought permission. The respondent contended that the applicant could not satisfy that condition on account of repeated failures to file retail mediation activities returns (RMARs), which had led to the cancellation of his previous permissions and the late payment of administrative and regulatory fees. The purpose of the RMAR was to bring together in a cost-effective and practical way important information concerning regulated firms on which the respondent relied to fulfil its regulatory objectives and to conduct an effective risk-based regulation of the industry. The applicant had been late in submitting RMARs covering six periods, each of six months, and had not responded to reminders and a warning notice setting out his right to make representations to the respondent. Accordingly, the respondent decided to cancel the applicant’s permission.Held: The application was dismissed.The tribunal was satisfied that the threshold for compliance had to be high. It therefore held that the respondent had been right to refuse the application for Part IV permission since the applicant had not reached to the standards of fitness and propriety demanded by threshold condition 5.The information contained within the RMAR enabled the respondent to carry out a desk-based review of a firm’s systems and controls, scope of permission, approved persons and product sales data and to conduct trend analyses and assess the financial stability of the markets under its control. The information extracted from the RMAR significantly reduced the need for the respondent to conduct routine visits to firms and made it a cost-effective supervision tool. It was essential to the regulation of small firms without designated supervisors. It also provided the respondent with almost all the data that it received on firms and was the primary source of information to be supplied to the respondent on a regular basis. The failure by a firm to submit the RMAR promptly and, more significantly, its collective failures to do so, endangered the respondent’s ability to discharge its risk-based supervisory functions and its statutory consumer protection objective. The respondent could not afford to drop its guard. Each return had to contain essential up-to-date information without which the respondent could not carry out its regulatory function. The respondent could not therefore allow late returns and had to insist on the highest standard of compliance. The applicant had assured the tribunal that he had had a good relationship with his own clients. Nevertheless, he had shown that he could not be relied on to comply with the requirement to lodge RMARs. The tribunal had had some concerns, from the manner in which he gave oral evidence, about whether he understood the respondent’s written requirements. It recognised that he had the best intentions as to his future compliance and his proficiency when it came to handling the requirements of clients and customers had not been critised. Moreover, the applicant might, through working with more organised associates in a larger firm, bring his compliance standards up to the required level to enable him to make a more promising application. However he had not satisfied the tribunal that he could be relied on to comply with the RMAR requirements. The applicant appeared in person; Sarah Clark (instructed by the Financial Services Authority) appeared for the respondent.Eileen O’Grady, barrister