Third Party Rights In FCA Supervisory Notices: Room For More?

Shail Patel of 4 New Square considers the decision of the Upper Tribunal in UK Innovative TI Limited v Financial Conduct Authority [2018] UT 0136 (TCC), confirming that third parties have no statutory rights in relation to supervisory notices issued by the FCA. However, with evident dissatisfaction at the potential prejudice this could cause, Judge Herrington suggested the answer might not always be as clear cut.

The Issue

When the FCA publishes a notice setting out its case against a regulated firm, it is often necessary for it to refer to the deeds and intentions (and indeed misdeeds and bad intentions) of third parties; be they other firms, directors, managers, employees, or contractors.

The position in relation to warning and decision notices is relatively well known; see my previous article on the statutory position under s.393 of FSMA, and the two leading cases of Macris and Grout here.

In UK Innovative TI Limited v FCA the question of third party rights arose where the FCA had issued a supervisory notice. As will be seen, the statutory position is different, but the Tribunal suggested that the common law might come to a third party's rescue.

The Facts

On 07.07.17 the FCA published the first supervisory notice ('FSN') under s.55L of FSMA varying the permissions of a regulated firm ('Stargate') in relation to certain investment management activities. The FSN named an unregulated company ('UKITI') and its director ('Mr S'), and expressed concerns that they might be carrying out regulated activities relating to Stargate's business, in breach of the general prohibition.

The FSN was picked up and publicised on an industry news website on 13.07.17, and the FCA's stance on the potential breach of the general prohibition became well known.

While the precise reason is not clear, the FCA had in fact re-published the FSN with references to UKITI and Mr S redacted, on 10.07.17. However, by then it was too late and the damage was done.

Stargate referred the FSN to the Tribunal and made representations to the FCA.

UKITI and Mr S also purported to refer the FSN to the Tribunal. The Tribunal permitted them to file representations. Ultimately, however Stargate settled, and the FCA applied to strike out the UKITI/Mr S reference. Those third parties maintained their case that their business had been "defamed and destroyed" by the FCA's decision to identify them in the original FSN.

The Decision

The FCA's case was simple; s.393 of FSMA confers an express...