Judgment summary
This is a decision of the Upper Tribunal (Tax and Chancery Chamber) determining preliminary issues arising from a reference made by KiakiaFx Limited ("the Applicant") against the Financial Conduct Authority ("the Authority"). The reference concerned a Final Notice given to Leeds Money Transfer Ltd ("LMT") on 12 August 2024, cancelling LMT's registration as a Small Payment Institution.
The Applicant, as controller of LMT, contended it was prejudicially identified in the Warning Notice and Decision Notice preceding the Final Notice and should have been given copies under section 393 FSMA. The matter was decided on the papers, with both parties consenting to that course.
The Tribunal addressed jurisdiction, an application to suspend the Final Notice, and an application for privacy regarding publication.
Background
LMT was registered by the Authority in October 2015 to provide money remittance services, then trading as Abdul Barrie Services Ltd ("ABS"). It was re-registered as a Small Payment Institution in November 2018 (7-8). ABS reported payment transactions in 2016-2018 but zero transactions in 2019 (9).
Following a change in control in March 2020, ABS became LMT under the control of Mr Karesli in July 2020 (10-11). No payment service activity was reported for 2020-2022 and dormant company accounts were filed, leading the Authority to generate a 'use it or lose it' case in January 2023 (12).
The Applicant applied for a change in control of LMT in February 2023, which was approved in November 2023, giving the Applicant 100% shareholding in LMT (14, 23). Mr Coker is the director of the Applicant. KiaKia Finance Limited ("KKFL") is noted on Companies House as a person with significant control of the Applicant and later of LMT (18).
The Authority issued a Warning Notice on 20 May 2024, a Decision Notice on 28 June 2024, and a Final Notice on 12 August 2024 cancelling LMT's registration under regulation 10(1)(h) of the Payment Services Regulations 2017 (26-29, 36). The Applicant made a reference to the Tribunal on 18 October 2024, contending it should have been given copies of the Notices as a prejudicially identified third party (1, 37).
Core dispute
The core issues were whether the Tribunal had jurisdiction to entertain a reference concerning the Final Notice, and, if the reference was treated as concerning the earlier Decision Notice, whether the Applicant was identified within the meaning of section 393(4)(a) FSMA and, if so, whether that identification was prejudicial to it so as to trigger a right to be given a copy of the Notices.
Further issues concerned whether the Tribunal had jurisdiction to suspend the effect of the Final Notice, and whether the Applicant was entitled to a direction preventing publication of the decision on privacy grounds under rule 14 and paragraph 3(3) of Schedule 3 of the Upper Tribunal Rules.
The Applicant argued that maladministration by the Authority, including sending correspondence to incorrect addresses, meant LMT did not receive notices in time to respond, and that statements in the Decision Notice about firms not using their permissions were prejudicial to it given the costs it had incurred acquiring LMT.
Court findings
The Tribunal confirmed, consistent with Banque Havilland SA v Financial Conduct Authority [2023] UKUT 00136 (TCC), that FSMA gives no jurisdiction over challenges to Final Notices, and there is likewise no jurisdiction under the Payment Services Regulations to entertain a reference regarding a Final Notice (38-40).
Even if the Applicant were permitted to amend its reference to challenge the Decision Notice of 28 June 2024, the Tribunal found the Applicant was not identified by name or synonym in that Notice, applying the test in Macris v Financial Conduct Authority [2017] UKSC 19. The only entity identified in paragraph 7 of the Decision Notice was LMT, referred to as "The Firm" (64-65).
The Tribunal further held that, even assuming identification, the statements in the Decision Notice were not prejudicial, being general observations about firms not using their permissions, and that section 393 FSMA is concerned with criticism or allegations in the Notice itself, not the prejudicial impact of the regulatory action taken (66-69). Correspondence postdating the Decision Notice was held irrelevant to the identification test (70).
The Tribunal found no legal basis for suspending the Final Notice (72-73), and applying the principles in Prodhan v FCA [2018] UKUT 0414 (TCC) and Price v Financial Conduct Authority [2023] UKUT 224 (TCC), held that the presumption in favour of publication had not been displaced by cogent evidence of unfairness or disproportionate damage (74-75).
Outcome
The Tribunal concluded that there is no jurisdiction to refer the Final Notice dated 12 August 2024 to the Tribunal, that the Applicant does not fall within the scope of section 393 FSMA, that there is no jurisdiction to suspend the effect of the Final Notice, and that the application for privacy is refused (76).
Major issues / areas of contention
- Whether the Tribunal has jurisdiction under FSMA or the Payment Services Regulations to entertain a reference challenging a Final Notice
- Whether the Applicant could amend its reference to challenge the earlier Decision Notice of 28 June 2024
- Whether the Applicant was identified by name or synonym in the Decision Notice within the meaning of section 393(4)(a) FSMA, applying the test in Macris v Financial Conduct Authority
- Whether any identification of the Applicant was prejudicial, as required by section 393 FSMA
- Whether correspondence postdating the Decision Notice could be relied on to establish prejudicial identification
- Whether the Tribunal had jurisdiction to suspend the effect of the Final Notice
- Whether the Applicant was entitled to a privacy direction preventing publication under rule 14 and Schedule 3, paragraph 3(3) of the Upper Tribunal Rules