Judgment summary
This case concerned References made to the Upper Tribunal by Richard Fenech and Heather Dunne against Decision Notices issued by the Financial Conduct Authority on 2 January 2024, imposing financial penalties and prohibition orders under sections 66 and 56 of FSMA. Ms Dunne was a pension transfer specialist and appointed representative of Financial Solutions Midhurst Ltd (FSML), which was owned and operated by Mr Fenech.
The Authority alleged that Ms Dunne breached Statement of Principle 2 by failing to act with due skill, care and diligence in giving pension transfer advice, and Statement of Principle 1 by dishonestly providing a backdated Appointed Representative agreement. Mr Fenech was alleged to have breached Statement of Principle 7 for inadequate supervision of Ms Dunne, and Statement of Principle 1 both for recklessness and for dishonesty in relation to the same backdated agreement.
The Tribunal found that the Authority was time-barred under FSMA s 66(4) from relying on Ms Dunne's 'transfer in isolation' (TII) advice model for penalty purposes, though not for the prohibition order. Having independently reviewed a sample of 16 client files (reduced from an original sample after recalibration issues), the Tribunal found that 62% of the sampled advice was suitable and 38% unsuitable, extrapolating that at least 18% of Ms Dunne's clients received unsuitable advice.
The Tribunal found Ms Dunne breached SoP 2 due to unsuitable advice and other compliance failings, and breached SoP 1 through dishonesty in relation to the backdated agreement and in providing misleading Confirmation Letters to pension schemes. Mr Fenech was found to have breached SoP 7 through inadequate supervision, but was found not to have been reckless, and breached SoP 1 through dishonesty regarding the backdated agreement, treated as an isolated and out-of-character act.
Background
Ms Dunne, a pension transfer specialist with decades of industry experience, operated a 'two adviser' or 'transfer in isolation' (TII) model, under which she gave pension-specific advice while a client's independent financial adviser (IFA) advised separately on the destination of transferred funds. For most of the relevant period, Ms Dunne did not know the details of the receiving scheme's funds or charges.
Mr Fenech was the sole director of FSML, of which Ms Dunne became an appointed representative in 2012. The Authority's Enforcement division later investigated FSML and the Applicants following a review process, using an internal Defined Benefit Advice Assessment Tool (DBAAT) and outside reviewers from Grant Thornton (GT).
GT's original review of a statistically valid sample of Ms Dunne's files found that eight of 17 cases were suitable. The Authority subsequently directed GT to 'recalibrate' those files to non-compliant on the basis that Ms Dunne lacked information about the receiving scheme's funds and charges, resulting in all sampled files being classified as non-compliant. The Authority accepted it was time-barred from relying on the TII model itself for penalty purposes against Ms Dunne, as it had known of that model since July 2015, more than six years before the Warning Notice was issued in March 2023.
Separately, in June 2017, following an FCA visit and a voluntary suspension of FSML's pension transfer business, Mr Fenech located only an unsigned draft Appointed Representative agreement. He and Ms Dunne then signed an agreement backdated to 30 August 2012 and provided it to the Authority, which later discovered the true signing date.
Core dispute
The core disputes were whether Ms Dunne's TII advice model and the individual files in the Grant Thornton sample demonstrated a breach of Statement of Principle 2 (due skill, care and diligence), notwithstanding that the Authority was time-barred from relying directly on the TII model for penalty purposes; whether Mr Fenech had failed adequately to supervise Ms Dunne in breach of Statement of Principle 7; whether Mr Fenech had acted recklessly in permitting continuation of the TII model in breach of Statement of Principle 1; and whether both Applicants had acted dishonestly, in breach of Statement of Principle 1, by providing the Authority with a backdated Appointed Representative agreement, with a further allegation against Ms Dunne concerning Confirmation Letters sent to ceding pension schemes.
Court findings
The Tribunal found that the Authority was time-barred under FSMA s 66(4) and (5ZA)(b) from relying on Ms Dunne's operation of the TII model for penalty purposes, as the six-year limitation period had expired before the Warning Notice was issued, but it was not barred from relying on the TII model in relation to the prohibition order.
Having conducted its own de novo review of the 16-file Sample (reduced from an original 17 to exclude a file outside the relevant period), the Tribunal found that Ms Dunne's advice was suitable in 10 cases (62.5%) and unsuitable in 6 cases (37.5%), consistent with earlier Authority reviews in 2017 and 2019. Applying statistical extrapolation, the Tribunal found as a fact that at least 18% of Ms Dunne's clients received unsuitable advice, with a 95% confidence interval of between 18% and 62%.
The Tribunal found further compliance failings by Ms Dunne, including breaches of COBS 19.1.1R (failure to have Suitability Reports checked by a pension transfer specialist after February 2017), COBS 4.2.1R (unclear, templated and sometimes inconsistent Suitability Reports), COBS 9.2.1R (failure to gather necessary client information in five cases), and misleading conduct in sending Confirmation Letters and Advice Declarations to ceding schemes before Suitability Reports were issued in four cases. On this basis, the Tribunal found Ms Dunne breached SoP 2.
The Tribunal found that Mr Fenech had failed adequately to supervise Ms Dunne, in breach of SoP 7, but had not been reckless, because he reasonably relied on Ms Dunne's assurances after the January 2017 Alert that she would change her approach, and did not know this had not occurred until after the end of his relevant period.
On dishonesty, the Tribunal found that both Applicants knew the AR agreement was backdated and that presenting it as signed in 2012 would mislead the Authority; applying the test in Ivey v Genting Casinos, it found both had acted dishonestly in breach of SoP 1. The Tribunal also found Ms Dunne acted dishonestly in sending Confirmation Letters and Advice Declarations to ceding schemes stating that clients had received and acted on Suitability Reports before those Reports had in fact been issued. The Tribunal declined to find dishonesty in relation to certain changes in Ms Dunne's oral evidence, given the context and lack of a fair opportunity to address the point.
Outcome
The Applications were allowed in part. The Tribunal found that Mr Fenech breached SoP 7 (inadequate supervision) and SoP 1 (dishonesty regarding the backdated agreement), but did not breach SoP 1 by recklessness. The Tribunal found that Ms Dunne breached SoP 2 (unsuitable advice in at least 18% of cases and other compliance failings) and SoP 1 (dishonesty regarding the backdated agreement and the Confirmation Letters), but declined to make further findings of dishonesty against her.
The decision on the quantum of any penalties and on the prohibition notices was deferred, by agreement of all parties, to a further hearing listed for June 2026, to take place in light of the findings in this judgment. Appeal rights against this judgment are coterminous with appeal rights against the later judgment following the June 2026 hearing.
Major issues / areas of contention
- Whether the Authority was time-barred under FSMA s 66(4) and s 66(5ZA)(b) from relying on Ms Dunne's operation of the 'transfer in isolation' (TII) advice model for the purposes of imposing a penalty.
- Whether the Authority's 'recalibration' of Grant Thornton's file review outcomes, changing eight files from 'suitable' to 'non-compliant' based on the TII model, was appropriate given the limitation bar.
- Whether the sample of 16 (originally 17) client files reviewed was statistically valid for extrapolation to Ms Dunne's total client population.
- Whether Ms Dunne's Pension Transfer advice was suitable in each of the sampled cases, assessed de novo by the Tribunal.
- Whether Ms Dunne breached Statement of Principle 2 through unsuitable advice and other compliance failings, including failures under COBS 19.1.1R, COBS 4.2.1R and COBS 9.2.1R.
- Whether Mr Fenech breached Statement of Principle 7 by failing adequately to supervise Ms Dunne as her principal.
- Whether Mr Fenech acted recklessly, in breach of Statement of Principle 1, in permitting continuation of the TII model despite warnings from an external compliance consultant.
- Whether both Applicants acted dishonestly, in breach of Statement of Principle 1, by providing the Authority with a backdated Appointed Representative agreement.
- Whether Ms Dunne acted dishonestly by sending Confirmation Letters and Advice Declarations to ceding pension schemes before Suitability Reports had been issued to clients.
- Whether the Tribunal had jurisdiction to consider matters and evidence not specifically relied upon in the Authority's Decision Notices or Statement of Case.