FCA successfully appeal over right to take regulatory action against Carillion

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In August 2020, ICCJ Jones concluded that the FCA required permission under section130(2) of the Insolvency Act 1986 (the Act) to pursue regulatory action against Carillion and some of its directors. ICCJ Jones granted that permission.

The FCA had not previously been required to seek permission to issue final notices.  To require such permission would have significant implications for the FCA’s performance of a wide range of its functions under FSMA.  The FCA appealed ICCJ Jones’ decision, seeking clarification on the statutory construction of section 130(2) of the Act.

In broad terms, the FCA's case was that section 130(2) of the Act is limited to court actions and proceedings or materially similar actions and proceedings, such as arbitration. The FCA argued that neither its decision-making processes (including reference to the Regulatory Decisions Committee [RDC]) nor its ability to issue warning notices and decision notices are analogous to court proceedings, especially in circumstances where it was seeking the public censure of Carillion and not a financial penalty (which could impact on the creditors).

Hearing the appeal, Green J found that s.130(2) should be subject to a narrow interpretation of legal or quasi legal proceedings. Further, the RDC is an internal decision-making committee of the FCA, and whilst it can hear representations from parties, it is not equivalent to a judicial body.

Allowing the appeal, Green J declared that the FCA does not require the court’s permission for the purpose of taking action against Carillion under ss.91 and/or 123 FSMA. Green J did not, however, extend his decision to other FCA actions permissible under FSMA, and accepted that it may be necessary to determine such questions in a future liquidation.

Carillion PLC, Re, [2021] EWHC 2871 (Ch)

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