FCA publishes an Upper Tribunal ruling, reinforcing commitment to gatekeeping senior roles under SM&CR

In another long, drawn-out enforcement case, the FCA has published an Upper Tribunal ruling which upholds its decision to decline Thomas Llewellyn Kalaris’s application to perform senior manager functions. The FCA’s decision was based on its view that Kalaris was dishonest during two previous enforcement interviews.

This is the second FCA enforcement publication in as many weeks relating to the fitness and propriety of a senior manager; the other related to Martin Sarl, whose actions led to insurance firm Perry Prowse (Insurance Consultants) Ltd entering liquidation in January 2020.

This article explores how this case highlights the FCA's enhanced gatekeeping role under the SM&CR, and how its ability to retain and utilise historical data supports its commitment to preventing individuals with questionable conduct upholding senior roles.

Background

The FCA’s original decision was published in November 2022, after it denied Kalaris’ September 2020 application for authorisation to hold a Senior Manager role at Saranac Partners.

The FCA denied the application on the basis that Kalaris had been dishonest and provided misleading information during two interviews with the FCA in 2013 and 2014, conducted as part of an investigation into Barclays’ controversial capital raising from Qatar in 2008.

Despite the time elapsed since the original statements were made, the FCA deemed Kalaris’ failure to be open and cooperative with the regulator—key requirements under SMCR- to be relevant to his fitness and propriety for the Senior Manager role he later applied for.

FCA as data-driven gatekeeper of senior roles in the financial services sector

The case serves to warn of the consequences of not being fully prepared, transparent or cooperative during FCA investigations, and highlights the FCA’s commitment to gatekeeping powerful roles- a commitment that can endure long time periods and complex Tribunal cases.

In its 2022 Decision Notice, the FCA stated that the SM&CR is "designed around the spirit of accountability with a focus on unambiguous responsibility, candour with regulators, and fitness and propriety on the part of individual."

Whilst the notion of fitness and propriety has been previously criticised as being somewhat vague, the honesty and integrity of an applicant was a key consideration for the regulator when evaluating fitness and propriety for a senior role long before the SM&CR was established.

Despite nearly a decade passing since Kalaris was interviewed by the FCA, the regulator remained committed to the view that his failure to be open and cooperative rendered him unfit to assume a senior role. This suggests that the FCA will not forget or dismiss instances where an individual has been dishonest or misled the regulator, irrespective of the time it can take to conclude complex Tribunal cases or whether criminal charges have been filed.

The case also proves the FCA’s ability to draw on a wide breadth of intelligence, including historic evidence gathered from both external sources and enforcement investigations across its directorates, to evaluate the fitness and propriety of individuals for senior roles.

Furthermore, it demonstrates the extent to which the regulator prepared to leverage such information to gatekeep approved roles within the financial services and hold individuals accountable for their actions and conduct. Perhaps a logical approach for a regulator that strives to be ‘data-driven’.

Although, the negative effect that the FCA’s decision has had on the career of Mr Kalaris may raise questions around the fairness and transparency of the FCA’s approach – especially where individuals who are not the central subject of an investigation, or lack legal representation, are being interviewed.