Where a lack of fitness and propriety is demonstrated in relation to activities falling within the auspices of the Financial Services Act 2008 (“the Act”) or the Collective Investment Schemes Act 2008 (“the Schemes Act”), the Isle of Man Financial Services Authority (“the Authority”) will undertake to use its disciplinary tools. The Authority’s powers with respect to "not fit and proper" are contained within the Act.
The Authority’s Licensing Policy for Regulated Activities under the Financial Services Act 2008 in relation to business regulated under the Act details the Authority’s ”fit and proper" person criteria in respect of such business. The “fit and proper” criteria applies to all licence applicants and licenceholders under the Act, as well as persons acting or seeking to act as controller, director, or "key person" of such businesses. "Key person" is defined in the Act and includes individuals with significant powers or responsibilities in a licenceholder. The Act’s “fit and proper” criteria cover integrity, competence and solvency, both on initial license application, or vetting, and on a continuous basis.
This guide explains the role of the Disciplinary Unit (“DU”), it is not intended to provide an exhaustive explanation of the DU process. In reading this you should also refer to the DU Decision Procedure Flowchart (“DU flowchart”) which illustrates the process that the Authority will follow for a disciplinary case under the Act, where the matter is dealt with through the Authority’s administrative powers.
The DU is a sub-division of the Authority’s Enforcement Division. The role of the DU is to take appropriate and meaningful action against licenceholders under the Act and / or individuals that fail to meet the required standards and where disciplinary action will result in the advancement of the Authority’s regulatory objectives. The Authority’s regulatory objectives are:-
- securing an appropriate degree of protection for policyholders, members of retirement benefits schemes and the customers of persons carrying on a regulated activity;
- the reduction of financial crime; and
- the maintenance of confidence in the Island’s financial services, insurance and pensions industries through effective regulation, thereby supporting the Island’s economy and its development as an international financial centre.
The approach to disciplinary action is tailored to each case and its specific details. Each case varies and requires different investigation techniques and disciplinary tools. However, cases that result in disciplinary action will proceed through all key stages as detailed within the DU flowchart.
The main disciplinary tools that can be used against individuals are:
Warning Notices Section 11 the Act & Section 11F the Schemes Act
The Authority has the power to issue a "warning notice" to a person who is, or who has been a director, key person or controller (“the relevant person”) of a permitted person under the Act and to a person who is or who it is proposed should become a member of the governing body of a scheme under the Schemes Act. A warning notice is a lesser sanction than a "not fit and proper" direction and may be issued instead of or before a "not fit and proper" direction. A warning notice under these sections is a notice that the Authority has grounds to believe that such activities or circumstances as are specified in the notice are prejudicial to the relevant person's fitness and propriety. Warning notices are “issued” to the relevant person but are not “made public” / “publicised”.
Not Fit and Proper Directions Section 10(1) & (2) the Act & Section 11A the Schemes Act
The Authority may issue a direction to prevent a licence applicant or licenceholder under the Act from allowing a person to become or continue as a controller, director, "key person" or a member of the governing body of a collective investment scheme, if it has reasonable grounds for believing that the person is “not fit and proper” for the role. Prior to the Authority gaining the power to issue prohibitions, it was obliged to publish the fact of a Section 10 direction but is no longer obliged to do so. The register of "not fit and proper" directions existing at the date of the new prohibition power coming into force may be accessed below.
Prohibitions Section 10A the Act and Section 11B the Schemes Act
In terms of Section 10A of the Act, as inserted by the Financial Services (Miscellaneous Amendments) Act 2013, the Authoritymay impose a prohibition if it appears to it that an individual is not a “fit and proper” person to perform one or more functions in relation to a regulated activity carried on, or proposed to be carried on by a permitted person. The power is not restricted to individuals who are, or have been, “key persons”. Such a prohibition may prevent an individual from performing, either in relation to a particular permitted person, a specified class of permitted person, or generally:
- Any function;
- A specified function; or
- A function of a specified class
Furthermore a prohibition may relate to:
- Any regulated activity;
- A regulated activity specified in the prohibition; or
- A regulated activity of a specified class.
In terms of Section 11B of the Schemes Act, as inserted by the Financial Services (Miscellaneous Amendments) Act 2013, the Authority may impose a prohibition, if it appears to it that an individual is not a “fit and proper” person to be a member of the governing body of a scheme. Such prohibition may prevent an individual from being a member of the governing body of:
- A scheme specified in the prohibition;
- A scheme of a description so specified; or
- Any scheme.
Before imposing any prohibition the Authority must give the person whom it proposes to prohibit an opportunity to make representations in accordance with either Section 10B of the Act or Section11C of the Schemes Act, whichever is appropriate.
The Authority’s Prohibition Policy details the criteria that the Authority will use when deciding whether to impose a prohibition in respect of an individual in terms of the Act or the Schemes Act.
An individual commits an offence if he or she performs, or agrees to perform, a function which he or she is prohibited from performing. A permitted person commits an offence if without reasonable excuse they permit an individual to perform a function which the individual has been prohibited from performing. In relation to prohibitions in terms of Section 11B of the Schemes Act, the appointment of an individual in contravention of a prohibition is also invalid for all purposes.
A person found guilty of the above mentioned offences is liable:
- On summary conviction to a fine not exceeding £5,000 or to custody for a term not exceeding 6 months, or both; or
- On conviction on information to a fine or to custody for a term not exceeding 2 years, or to both.
The Authority is obliged to maintain and publish a list of prohibitions. The list must specify the individual prohibited and the functions or descriptions of functions to which the prohibition applies. The list may be accessed from the search facility at the foot of this page.
On the application of a prohibited person, the Authority may vary or revoke a prohibition. Where such an application is made the Authority must give the prohibited person a statement of its reasons for any decision that it makes.
Unlike actions under the Company Officers (Disqualification) Act 2009 (“CODA”), “not fit and proper” directions and warning notices are not decided by the Courts.
The Authority’s policy is to publish only "Not Fit and Proper" Directions that existed prior to 1 July 2013 and all Prohibitions.
Click here to view existing "Not Fit and Proper" Directions and Prohibitions.
Discretionary Civil Penalties Section 16 the Act, Regulation 5 Financial Services (Civil Penalties) Regulations 2015
Section 16 of the Act enables the Authority to require a current or former licenceholder to pay a penalty for any contravention of the Act or any prohibition or requirement imposed under the Act. The Financial Services (Civil Penalties) Regulations 2015 came into effect on 1 August 2015, regulation 5 of which provides a framework for the imposition of discretionary civil penalties upon current and former licenceholders for serious contraventions of the Act or any prohibition or requirement imposed under the Act.
A decision to impose a discretionary civil penalty will be made by the Authority in accordance with the DU Decision Procedure. The Authority has published a Guidance Note to provide additional information on the operation of the discretionary civil penalties regime.
Section 32 of the Act and section 21 of the Schemes Act provide for appeals to be made against Authority decisions.
Due to the diverse nature of the activities which the Authority regulates, it is not possible to produce a definitive list of matters which may lead to the Authority taking disciplinary action. However, the following are examples of matters the Authority may have regard to in determining whether an individual or an organisation is fit and proper in terms of the Act or the Schemes Act:
- a conviction by a court, including a civil or military court, in the Island or in another jurisdiction, including a conviction that is “spent”;
- any failure to comply with a direction from the Authority or order of a court in the Island or in another jurisdiction;
- any criticism or adverse comment about the individual or organisation made by a court, tribunal or enquiry, in the Island or elsewhere, in the context of proceedings before it, including where the individual or organisation was called or attended voluntarily as a witness;
- in respect of a controller, director or “key person”, a refusal of an application for approval by a regulator, whether in the Island or elsewhere, on the grounds that the person was not considered a fit and proper person to act as a controller, director or “key person” of a deposit taking business, investment business, provider of services to collective investment schemes, money transmission services or corporate or trust service provider;
- information received from law enforcement or other supervisory agencies under “gateways” equivalent to those established under section 31 of the Act;
- a disqualification order or undertaking in relation to section 4 Company Officers (Disqualification) Act 2009 (‘CODA’) (unfit persons), section 5 CODA (unfit officers of insolvent companies), a disqualification order in terms of section 9 CODA (participation in fraudulent trading) or any equivalent legislation in any jurisdiction;
- expulsion from membership, a disciplinary finding against or any similar form of censure of an individual by his professional body;
- the effectiveness of compliance with rules, standards, principles and guidance of any relevant professional, governing, regulatory or supervisory authority;
- evidence of engaging in business practices (whether unlawful or not) appearing to the Authority to be deceitful or oppressive or otherwise improper;
- an adverse personal reference from a previous employer or professional body;
- disciplinary action taken by a previous employer or professional body;
- failure to disclose to the Authority any matters relevant to an application, including giving incomplete, misleading or untruthful answers to the questions in the vetting forms;
- providing false or misleading information to the Authority; including information relating to identity, ability to work in the Isle of Man, previous employment history and disciplinary issues;
- failure to disclose material considerations on application and other forms, such as details of court judgements, criminal convictions and dismissal from employment for regulatory or criminal breaches. The nature of the information not disclosed can also be relevant;
- serious acts of dishonesty, e.g. which may have resulted in financial crime;
- serious lack of competence; or
- serious breaches of the regulatory requirements, such as:
- Providing misleading information to clients, consumers or third parties;
- (b) Using intimidating or threatening behaviour towards clients of former clients;
- (c) Failing to remedy breaches of the general prohibition or to ensure that a licenceholder acts within the scope of its financial services licence;
- (d) Failure to undertake a program of remediation satisfactorily; or
- (e) Breaching a condition of a licence issued under the Act.
Key factors for consideration
Having identified matters which indicate conduct that is not fit and proper, in determining the disciplinary power to be used and the severity of and disciplinary action to be taken, the Authority will consider both significance and materiality of matters.
In addition to materially and significance, the decision on the action to be taken will also be influenced by any aggravating and mitigating factors.
Name: Richard Maurice Dixon
Date of Birth: 9 Mar 1958
Address (at date of the prohibition): Mount Auldyn House, Jurby Road, Ramsey, Isle of Man, IM8 3PF
Particulars of prohibition: Financial Services Act 2008, Section 10A - Prohibitions.
Mr Dixon is prohibited from acting as a director (as defined in section 48 of the FSA), Isle of Man Resident Officer (as defined in Rule 8.21(2) of the Financial Services Rulebook 2013), Money Laundering Reporting Officer or deputy Money Laundering Reporting Officer (as defined under paragraph 3 of the Anti-Money Laundering and Countering the Financing of Terrorism Code 2015) or Compliance Officer (as referred to in Rule 8.18 of the Financial Services Rulebook 2013), of any body corporate carrying on, in or from the Isle of Man, any regulated activity as defined in section 3 of the FSA.
Public statement under Section 13 of the FSA: Yes
Date on which prohibition takes effect: 19 Apr 2017
Name: Brian Charles James Monk
Date of Birth: 10 Apr 1953
Address (at date of the prohibition): Windrift, Thornhill Park, Ramsey, Isle of man IM8 3NB
Particulars of prohibition: Mr Monk is prohibited from acting as a director (as defined in section 48 of the FSA), Isle of Man Resident Officer (as defined in Rule 8.21(2) of the Financial Services Rulebook 2013), Money Laundering Reporting Officer or deputy Money Laundering Reporting Officer (as defined under paragraph 3 of the Anti-Money Laundering and Countering the Financing of Terrorism Code 2015) or Compliance Officer (as referred to in Rule 8.18 of the Financial Services Rulebook 2013), of any body corporate carrying on, in or from the Isle of Man, any regulated activity as defined in section 3 of the FSA.
Public statement under Section 13 of the FSA: Yes
Date on which prohibition takes effect: 7 November 2017