Prohibition orders imposed by GFSC overturned by Appleby

The initial GFSC decision had imposed, amongst other things, prohibition orders on the Appellants of eight, four and three years respectively, along with fines of £280,000, £90,000 and £30,000.

The Royal Court has:

• Quashed the prohibition orders; and
• Remitted the fines to the GFSC for reconsideration with suggested maximum amounts of £175,000 and £60,000 (with the last fine not having been appealed).

The Judgment is a hallmark for a regulatory environment that is “firm but fair”, covering several key legal issues, including:

1. The test for ‘probity’ – being a key element for the imposition of prohibition orders;
2. The retrospective application of newly increased fining powers under the Financial Services Business (Enforcement Powers) (Bailiwick of Guernsey) Law, 2020 (the “EP Law”);
3. The various grounds of appeal under the EP Law, including, in particular, that a decision of the GFSC is considered to be “unreasonable”;
4. The relevance of ‘comparator cases’ from before the new EP Law came into force;
5. The urgent injunctive relief obtained by the Appellants, directing the Commission to remove the publication of the prohibition orders from its website;
6. Issues of fairness, reasonableness and proportionality in terms of the enforcement procedure itself and the general approach of the GFSC in this case.

Appleby say that as part of the above, the Judgment addresses in detail the findings by the GFSC purporting to show a lack of probity by the Appellants. The Judgment notes, variously, that the findings in relation to an alleged want of probity for Mr Domaille were “quite unsatisfactory”, “flawed for being made upon an error of law” and “unreasonably made”; in relation to Mrs Hannis they were “unreasonable and unjustified”; and in relation to Mr Clarke they were “quite excessive” and “not properly sustainable”.

In upholding the appeal the Judgment also went on to make a number of observations regarding the Commission’s approach in this case including its “attitude to changing goal posts”, and the “flawed and unfair introduction of charges of want of probity at the Final Notice stage, based on no relevant further evidence”.

The Judgment also made a number of important observations regarding the correct approach in enforcement cases involving historic misdeeds, as the majority of the allegations pre-dated November 2017, and in some instances related to events that occurred prior to the introduction of the obligation to obtain source of wealth information from clients. In particular, it was observed “that whilst there may be no period of prescription as regards sanctions for regulatory offences, imposing sanctions for very historic apparent misconduct as if it were recent must run the risk of being unfair on any basis.”

Ultimately, the Judgment concluded that in relation to all three Appellants there was no evidence that any of the matters of which they were accused had caused any harm to clients, beneficiaries, investors, creditors or member of public, nor to the reputation of the Bailiwick.

Appleby acted for the Appellants.

The judgement can be read here.