An end to non-professional professional misconduct?

Frensham v Financial Conduct Authority [2021] UKUT 0222 (TCC)

In December last year I wrote about the High Court’s decision in Beckwith v SRA; where the High Court gave a clear warning to regulators about the need to specifically address why a transgression arising in a professional’s private life breaches their professional code of conduct and engages the jurisdiction of the regulator. Frensham v The Financial Conduct Authority continues that trend in a much more serious factual context.

Mr Frensham was an independent financial adviser who was convicted of attempting to meet a child under the age of 16 following acts of sexual grooming. He was sentenced to 22 months’ imprisonment. The FCA, after a significant delay, made an order under section 63 of the Financial Services and Markets Act 2000 prohibiting Mr Frensham from performing a regulated activity, due to him not being a fit and proper person. The FCA contended that Mr Frensham’s conviction suggested that he lacked integrity.

The Upper Tribunal disagreed with the FCA’s assessment of Mr Frensham’s conviction. Citing Beckwith v SRA, undertaking a close examination of the relevant Code of Conduct, in this case the FCA Handbook, it found that Mr Frensham’s conduct did lack integrity. But that was not the end of the matter:

“…to justify regulatory action the behaviour concerned, when, as is the case here, it occurred in the person’s private rather than professional life, must engage the standards of behaviour required of the individual concerned by the applicable regulatory provisions. It is not simply a question of assessing whether the behaviour concerned demonstrates a lack of integrity at large, but whether the behaviour engages the specific standards laid down by the relevant regulator.

…The conduct must be qualitatively relevant because it engages the standard of behaviour set out in the regulatory code concerned.”

 The Upper Tribunal found that the way the FCA had attempted to link Mr Frensham’s lack of integrity to his professional role on the basis of the nature of the offence alone was speculative and unconvincing. Bare assertions that the public are entitled to expect professionals to be of the utmost integrity and reputation were not sufficient. Whilst Mr Frensham’s offence would undoubtedly result in revulsion on the part of right-thinking members of the public, the question was whether the offence affected the reputation of Mr Frensham as a financial adviser, and therefore had the potential to impact on the FCA’s integrity objective.

However, whilst Mr Frensham’s appeal would have succeeded on the basis of the conviction alone, he ultimately failed due to his lack of openness and transparency with the FCA. He did not report his arrest and imposition of bail conditions, a second arrest and remand in custody, the fact that the Chartered Insurance Institute (“CII” did not renew his Statement of Professional Standing, and that the CII ultimately expelled him. Those matters justified the FCA’s decision and Mr Frensham’s appeal was dismissed.

The following key lessons emerge:

1. The practice of simply pleading that conduct in a professional’s private life was serious, demonstrates a lack of integrity, and would undermine public confidence in the profession, must end. Regulators need to specifically demonstrate a qualitative link between conduct lacking integrity, and the relevant professional rules;
2. Mr Frensham is yet another salutary lesson to professionals of the value of openness with one’s regulator. The cover-up can often be far more damaging than even a serious underlying event;
3. There are obviously limits to the application of a case like Mr Frensham’s to, for example, medical professionals. But for the regulators of financial and legal professionals their jurisdiction can be regarded as significantly limited by Beckwith and Frensham. Whether that is a welcome lifting of an ever-increasing regulatory burden, or a headache in attempting to identify where the line falls between a professional’s private life and matters engaging their fitness to practise, remains to be seen.

Lewis MacDonald