By David Berman, Nicola Higgs, Jon Holland, Andrea Monks, Rob Moulton, and Nell Perks

The FCA stated that the perpetrator’s character is key to non-financial misconduct investigations, which suggests a mismatch with recent case law.

In last year’s Frensham[1] case, the Upper Tribunal considered how relevant a (non-dishonesty-based) criminal offence committed in one’s personal life is to the perpetrator’s regulatory “fitness and propriety”. The Upper Tribunal effectively reined in the FCA from too readily linking (i.e., considering as relevant) non-work-related misconduct to the perpetrator’s regulatory fitness and propriety to perform a regulated function. In doing so, the Upper Tribunal set out the approach to be taken when determining the relevance of non-financial misconduct in a regulatory context.

This Latham Client Alert highlights the difficulty in reconciling the FCA’s newly published ban of Mr Zahedian with the Upper Tribunal’s findings in Frensham. On the basis of the published Zahedian Final Notice[2], it is difficult to understand how (or even whether) the FCA followed and applied the approach laid down by the Upper Tribunal in Frensham. Indeed, Mr Zahedian may have felt somewhat aggrieved if he had read the Frensham judgment.

FCA Board Minutes

However, it appears that the plot may have thickened further. On 7 December 2022, the FCA published the below minutes of its 28 October 2022 board meeting (emphasis added):

“The issue of non-financial misconduct, including matters such as violence and harassment outside the workplace, was discussed. It was noted that discussions were ongoing with Enforcement regarding further guidance and FCA policy in this area to ensure consistency and clarity of decision-making. It was reflected that the issue for FCA policy and guidance to address was that of the character of the individual concerned with the investigation and not that of the specific misconduct itself. It was noted that RDC sees only the minority of enforcement cases and those that are referred are often the most complex cases dealing with novel or controversial issues.”

It is unclear on what basis or grounds this suggested (and apparent switch of) focus on the perpetrator’s character — and not on the specific misconduct itself — has been determined. Indeed, there is not a single reference to the (actual or potential) relevance of the perpetrator’s character in the Upper Tribunal’s Frensham judgment. Nor, significantly, is there any reference to character in the FCA’s FIT handbook. Furthermore and fundamentally, how, in practice, are firms supposed to go about making such character assessments? And are they even equipped to do so?

Application to Zahedian

Interestingly, in the Zahedian press release[3], Mark Steward, Executive Director of Enforcement and Oversight at the FCA, commented that (emphasis added):

“Those authorised to provide financial services are required to meet and maintain high standards of character, fitness and properness. These were serious, violent criminal offences reflecting on Mr Zahedian’s character and justifying the finding that he is not a person to be working in financial services. The FCA will continue to uphold high standards of character and conduct for those working in financial services.”

It would appear that Mr Steward was seeking to put into practice (or at least lay down a marker for) the approach conveyed in the October board meeting.

On basis of the FCA’s new focus on character in this context, it is even more difficult to reconcile the outcome of the Zahedian case — not least as the judge in his criminal trial had accepted that Mr Zahedian’s actions were “out of character”. Incidentally, this is the sole reference to character in the Final Notice — resulting in an apparent mismatch between the press release and the Final Notice. Surely, if the FCA had applied its new character focus in Zahedian, it would have arrived at a different outcome?


The Zahedian case and the approach advocated in the FCA’s board minutes may be taken as practical examples of the FCA’s commitment to take on more legal risk — as indicated in its April 2021 board minutes (emphasis added):

“6.2 The Board recognised that legal risk was one of many factors to be considered when deciding on the appropriate action for the FCA to take. It was noted that the FCA operated within the rule of law and should not engage in actions which are not legally defensible. However, a willingness to take legal risk, especially in situations where the law is unclear or FCA action is intended to prevent imminent consumer harm, was entirely appropriate. The Board therefore did not consider that the existence of legal risk should prevent the FCA from taking such action.”

A salutary warning perhaps that the more “assertive” FCA will not shy away from pushing legal boundaries and/or breaking new ground where it considers appropriate to do so.