Markos Markou was sanctioned in 2021 after the regulator concluded that his firm Financial Services Euro (FSE) transacted mortgage business without professional indemnity insurance (PII).
At the time, the regulator said Markou was aware that his firm was uninsured between July and October 2017 and failed to stop FSE from conducting mortgage business during that period. The FCA considered that Markou was not a “fit and proper” person.
Markou referred to the Upper Tribunal and it found that it was not an “appropriate action” for the FCA to fine him.
The Upper Tribunal said no fine should be imposed until the FCA found evidence of a breach and even then, it should consider supervising the firm or taking no action.
Conducting business without PII
Markou’s case was that he did not act recklessly and his actions did not lack integrity. The firm’s PII was up for renewal in May 2021 and Markou said he was not aware of this until July 2017, and his failure to stop three applications from being processed “was not unreasonable, negligent nor reckless”.
The Upper Tribunal found that FSE voluntarily stopped regulated activities and decided not to take on any new business on 10 May 2017. The decision was made as the firm awaited the outcome of a supervisory visit from the FCA.
The tribunal found that Markou’s evidence on 25 April 2022, where he said no regulated business was conducted after 9 May 2017, was “inaccurate”. However, it deemed that he was not being dishonest but was “honestly mistaken and confused”.
The Upper Tribunal said: “In terms of knowledge, we are satisfied that the applicant [Markou] did not know at the time of any of the business taking place without PII being in place and had instructed his advisers not to conduct any new business after 9 May 2017.
“He only knew PII was not in place from 10 July 2017 but did not know any regulated mortgage business was being conducted after May or July 2017. This became apparent to him only when he reviewed the material in preparation for the hearing of this reference and after he filed his witness statement in April 2022.”
The Upper Tribunal also found that Markou failed to ensure that regulated activities continued without PII in place, but said it was not satisfied that he acted “recklessly nor demonstrated a lack of integrity” in doing so.
Ongoing investigations
The Upper Tribunal found that as FSE was not trading from 10 May 2017, it could not pay its fees as it could not obtain PII due to investigations opened by the FCA which were yet to be concluded.
The Upper Tribunal said the FCA did not use its authority to stop FSE from trading following its visit and it “took the view that the concerns it had expressed in the supervision letter were not so serious that they merited further supervisory action”.
Markou’s approval to act as director and chief executive of FSE was also withdrawn. The Upper Tribunal said this should be reconsidered and supervisory action should be taken, with FSE resuming activities under Markou’s supervision.
The Upper Tribunal said: “We find as a matter of fact that after 9 May 2017, FSE was managing its business in such a way as to ensure that its affairs were being conducted in a sound and prudent manner. It did everything it reasonably could to push the enforcement process along.
“It was, of course, open to the authority [the FCA] at that point to use its supervisory powers to put the cessation of business for the time being on a formal footing until circumstances changed… for example, making it a condition that it did not resume trading until it obtained PII and paid its outstanding fees.”
It said if the outcome of the FCA’s investigation was favourable then it “would have enabled [FSE] to resume trading because it would then be likely that it would be in a position to pay the fees and obtain PII”.
It added: “Because the authority treated the case simply as a routine case of a firm simply failing to have PII and pay its fees, and it is clear from our findings of fact that there was more to the case than that, it follows that the authority has failed to take into account a number of relevant factors in reaching its decision.
“As the authorities we have referred to above demonstrate, that in itself justifies us allowing the reference and referring the matter back for reconsideration.”
FCA appeal
The FCA published an announcement saying the decision was “incorrect and irrational”.
It added: “We will be seeking permission to appeal the decision.”
