Thomas Seiler, Louise Whitestone and Gustavo Raitzin v. Financial Conduct Authority [2023] UKUT 00133 (TCC)
On 12 June 2023, the Upper Tribunal handed down Judgment in the joined references of three applicants, Mr Thomas Seiler, Mrs Louise Whitestone and Mr Gustavo Raitzin, upholding their challenge to the Financial Conduct Authority’s (“FCA”) decision to impose a prohibition order against each of them on the ground of an alleged lack of integrity.
Ben Strong KC and Jade Fowler appeared for Mr Seiler, instructed by Mishcon de Reya LLP.
The case concerned arrangements between the private bank Julius Baer and Mr Dmitri Merinson, an individual connected with the Yukos Group of companies, pursuant to which Mr Merinson received commissions for introducing certain Yukos companies to Julius Baer. The arrangements were proposed and approved by Mr Daniel Feldman, the sole director of one the relevant Yukos companies. Mr Merinson subsequently paid half of his commissions from his Julius Baer account to Mr Feldman.
The FCA found that three individuals lacked integrity: the bank’s relationship manager on the relevant accounts, Mrs Whitestone; Julius Baer’s Market Head for Russia and Central and Eastern Europe, Mr Seiler; and his superior, the Region Head for the relevant region, Mr Raitzin. The FCA concluded that they each recklessly disregarded the risk, of which they were or should have been aware, that Mr Merinson and Mr Feldman were misappropriating Yukos monies, and that they should be prohibited from performing any function in relation to any regulated activities as a result.
The Tribunal held that the FCA had not made out its case on any of its allegations and that none of the individuals had acted recklessly and with a lack of integrity, and it accordingly allowed the references. Significantly, the Upper Tribunal’s decision:
- rejected the FCA’s argument that recklessness, and in turn a lack of integrity, could be established if a reasonable person in the same position as the individual would have been aware of the risk in question, regardless of the individual’s actual knowledge of the risk concerned;
- considered instead that a person can only be said recklessly to ignore a risk of which they are actually aware, and found that none of the individuals were aware of the relevant risks;
- declined to consider an allegation which the FCA had not included in the statutory warning notices it had issued to the applicants, and which was only raised by the Enforcement Department in the course of representations to the FCA’s Regulatory Decisions Committee;
- criticised the FCA’s investigation and insufficient probing of the account put forward by Julius Baer in accepting a financial penalty;
- took into account the fact that evidence the FCA had not obtained in its investigation might have cast the material before the Tribunal in a different light; and
- considered that the FCA should have called a witness who was materially involved in the events even though the FCA said that they were unable to put that individual forward as a witness of truth.