A High Court judge has ordered that a decision notice issued by the Financial Services Authority (FSA) against a banker be quashed after a successful judicial review.
The notice, issued in October 2010, proposed to censure the banker and fine him £100,000 for failures during the financial crisis of 2008, specifically a breach of Principle 6, which requires "due skill, care and diligence in managing the business of the firm for which he is responsible".
However, the banker argued it should be quashed because the FSA's Regulatory Decisions Committee (RDC) had failed to give proper or adequate reasons for its decision, in breach of its duty to do so.
Although the FSA contended that the banker had alternative remedy available to him, in the form of an appeal through the Upper Tribunal, Mr Justice Silber agreed that it was the lack of evidence and the process, rather than the decision itself, that was being challenged.
This was despite the FSA's argument that a successful judicial review could undermine the existing processes.
In his judgment, dated 25 May, Silber added: "I must disabuse the FSA of this fear and should stress that although the Decision Notice in this case will be quashed, this does not mean that any challenge or indeed anything other than very few challenges to the decisions of the FSA can be the subject of successful judicial review applications."
With most of the RDC members who considered this case now having retired, the judge ordered that, subject to counsels' submissions, the matter will have to be remitted to a different RDC for reconsideration.
Alex Lincoln-Antoniou, an associate at law firm Reynolds Porter Chamberlain, described the judgment as "potentially costly and embarrassing" for the FSA and said it underlined the need for legal advice throughout the enforcement process.
He added: "It has never been doubted that the RDC must provide reasons for its decisions. What [this case] makes plain is that those reasons must not only justify the FSA's decision to bring enforcement action but must also detail why the subject of an investigation has not succeeded in its defence.
"The reasons must address the substance of all written and oral representations and leave the subject of the investigation in absolutely no doubt as to why enforcement action has been taken."
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