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The Use of Judicial Review to Challenge the FSA - By Stine Dulong

There has been much criticism lately directed at the FSA’s power to publish Decision Notices. It is a power, the critics argue, that can lead to great injustice and perhaps one does not need to look further than the recent case of Ian Hannam (now ex-JP Morgan Cazenove) to form a view on this. Mr Hannam resigned following the publication by the FSA of a Decision Notice against him. The FSA did not challenge his fit and proper status and accepted that he acted with honesty and integrity. Still, Mr Hannam felt he had no other option but to resign pending the outcome of his appeal which could be in a year from now.   No one has yet sought to challenge a decision by the FSA to publish a Decision Notice but it is pertinent that in a recent Judicial Review (“JR”), 25 May 2012, The Queen (on the application of C) v FSA, Mr Justice Silber quashed the decision of the FSA to issue a Decision Notice.In this case, following an RDC hearing, the FSA issued a Decision Notice finding that over a 2-week period in 2008, the claimant had breached Principle 6 (due skill care and diligence in performing a significant influence function) and was therefore guilty of misconduct.  In essence, the FSA believed that the claimant had failed to ensure that effective risk management was in place at bank D where he worked. A warning notice was issued to the claimant on 14 May 2010 and at his subsequent hearing before the RDC on 14 September 2010, certain factual matters were accepted by the FSA’s Enforcement Division to be incorrect. The claimant contended that if the RDC were to decide that any disciplinary procedure was appropriate, it would need to revisit the allegations set out in the warning notice and then to amend them before issuing any Decision Notice. On 27th October, the RDC issued a Decision Notice to the claimant which was broadly in the same terms as the warning notice, save for certain amendments.  The FSA argued that the claimant’s application for judicial review should be refused on the basis that he had a suitable alternative remedy; namely the right to refer the matter to the Upper Tribunal. Mr Justice Silber stated in his judgment that the wrong suffered by the claimant is a failure to have reasons explaining why his case was rejected by the RDC and a remission to the Upper Tribunal would not be a remedy capable of remedying this wrong as well as not being suitable for it. He concluded that the reasons given in the Decision Notice are basically just saying that the RDC accepts the FSA’s case, but if fails to give any or any adequate reasons as to why the detailed case for the claimant was rejected […] and that as a result the decision of the RDC fails to satisfy the test for adequacy of reasons [the test under Section 388(1) FSMA 2000].
This is the first successful use of a JR to challenge a Decision Notice and whilst the judgment does not explain the detailed reasons for the decision, it shows a willingness to allow a JR when Decision Notices are inadequately reasoned. As a result of this case, either detailed reasons will have to be given or we could see many more Decision Notices challenged in the future. By Stine Dulong