FCA v BlueCrest Capital Management
Judgment of the Court of Appeal [2024] EWCA Civ 1125
02 Oct 2024
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The Court of Appeal has today given judgment in a landmark case addressing the scope of the Upper Tribunal’s jurisdiction in financial services cases and the power of the FCA to impose redress requirements on individual firms. The Court allowed the FCA’s appeal and dismissed the Respondent’s cross-appeal.
As announced in December 2021 the FCA considers that the Respondent hedge fund (“BCMUK”) has failed properly to manage conflicts of interest and has decided on that basis to: (1) impose a financial penalty of £40,806,700; and (2) require BCMUK to provide redress to its investors (estimated to amount to $700m) under s.55L of the Financial Services and Markets Act 2000 (“FSMA”). BCMUK has referred the matter to the Upper Tribunal.
Before the Upper Tribunal BCMUK had succeeded in: (1) resisting a number of amendments that the FCA sought to make to its statement of case, which the Tribunal held fell outside the scope of its jurisdiction to entertain the “matter” before it under s.133 FSMA; and (2) striking out the FCA’s case on redress under s.55L FSMA on the basis that this statutory power must be construed as subject to a number of statutory preconditions, one of which the Tribunal held was not satisfied.
The FCA has now successfully appealed to the Court of Appeal on both issues.
Addressing the FCA’s amendment application, the Court of Appeal held that the scope of “the matter” referred to the Upper Tribunal encompasses that which “has a real and significant connection with the subject matter of the process, in the sense of its procedural or substantive content, which has culminated in the decision notice or supervisory notice” (at [202]). On that basis, the Upper Tribunal had erred in holding that it lacked jurisdiction to permit the amendments in question.
As for the redress issue, the Court of Appeal concluded that there is power to impose a single firm redress scheme under s.55L FSMA and the conditions for the exercise of this power are those expressly stated in s.55L. The Court of Appeal rejected the analysis advocated by BCMUK (and adopted by the Upper Tribunal at first instance) which would have put in place the statutory preconditions of establishing loss, breach of duty owed to the person who suffered loss, causation, and civil actionability.
Andrew George KC, Ajay Ratan and Ava Mayer acted for the FCA.
Javan Herberg KC, Daniel Burgess and Femi Adekoya acted for the Respondent.
The judgment can be found here.
