Share it

This appeal was heard by a seven-Justice Supreme Court (including the Lord Chief Justice, Lord Judge).

The Court decided the important issue of the scope of the Financial Services Authority’s (FSA) powers to prosecute offences other than those contained in the Financial Services & Markets Act 2000 (FSMA).

The appellants had been charged with money laundering offences under sections 327-8 of the Proceeds of Crime Act 2002.  They contended that the FSA’s powers to prosecute are exclusively defined by sections 401-2 FSMA, which do not expressly confer a power to prosecute for the money laundering offences in question.  The FSA, although it has public functions, is also a private company limited by guarantee. The FSA contended that it had brought the prosecutions in question as private prosecutions, even though it had not made any contemporaneous statement or disclosure to the Appellants to that effect. 

The Court of Appeal (Criminal Division) held that there was nothing in s.401-2 FSMA which restricted the FSA’s prosecutorial powers to the offences specified therein and that Parliament’s intention had not been to cut down the FSA’s functions or powers in the way contended for.  It also held that the FSA had a general power of private prosecution under s.6 of the Prosecution of Offences Act 1985 and that its non-disclosure of the private nature of the prosecutions was not material.  The only guidance issued by the FSA itself as to the use of its own powers in this regard is contained in the FSA’s Enforcement Guide at [12.1]: “The FSA may also prosecute criminal offences for which it is not the statutory prosecutor, but where the offences form part of the same criminality as the offences it is prosecuting under the Act.”

The notion that the FSA can bring private prosecutions for any offence is controversial: the concept was described by Sir Anthony May PQBD as involving  “a large degree of unreality” in R(Uberoi) v City of Westminster Magistrates’ Court & FSA [2009] 1 WLR 1905.  In that case, the FSA’s power to prosecute for offences of insider dealing (contained in Part V of the Criminal Justice Act 2003) was upheld (the primary argument being directed to whether it was mandatory for the FSA to obtain the DPP’s consent to prosecute for insider dealing) and the private prosecution point was ultimately left open. 

The Supreme Court unanimously dismissed the appeal and held that the FSA does have power to prosecute money laundering offences. Sir John Dyson SCJ gave the Court’s judgment. As to the FSA’s power to conduct a private prosecution, the Court held that the FSA, like other corporate bodies, was entitled to bring a private prosecution for any offence subject to statutory restrictions and conditions and provided that it was permitted to do so by its memorandum and articles of association. And on the core issue, the Supreme Court held that the effect of s.401 was to limit the range of bodies which could prosecute the offences specified therein (which do not include money laundering) not to limit the range of offences outside s.401 which the FSA could prosecute. The Supreme Court held that there was no policy reason which could have led Parliament to deprive the FSA of the power it previously enjoyed to bring prosecutions for offences other than those listed in sections 401 and 402. Since the objectives of the FSA as defined by FSMA included the reduction of financial crime, it would have been perverse for Parliament to deprive the FSA of its previous power to prosecute financial offences. And the Appellant’s argument would have the effect of producing multiple prosecutions in some cases – which was undesirable. The Supreme Court held that FSMA did not represent a complete code within which the FSA had to operate: it had other powers derived from non-FSMA legislation, for example.

The appeal has widespread implications and raises serious ancillary issues which appear to remain unanswered by the judgment.  The FSA’s power to prosecute for non-FSMA offences means that the FSA will not be bound by the CPS Code for Crown Prosecutors as regards those offences.  Also, it is still not clear exactly what resources the FSA is deploying when it prosecutes such offences. Is it using any of its public funds? Is it proper for it to use the industry fees it levies (via its public functions) from supervising regulated firms to fund private prosecutions? 

And what about the legality of the basis on which it has acquired the material which is being used to prosecute privately? The Supreme Court held that “the right of private prosecution does not depend on the enjoyment of corresponding powers of investigation, and it will frequently be the case that a private prosecutor lacks relevant statutory powers of investigation. The fact that the FSA does not have statutory powers of investigation in relation to offences under POCA tells one nothing about its power to prosecute those offences.”  But that begs as many questions as it answers.  If the FSA is actually two prosecutors rolled into one then can it lawfully pass, for example, material obtained using its compulsory powers of investigation (e.g. compelled interviews) to be deployed in a private money laundering prosecution? In Shannon v UK (2006) 42 EHRR 41 the ECtHR held that the passing of compulsorily obtained material to a separate prosecutor (or the police) violated Article 6, despite the existence of statutory safeguards concerning the use of such material at trial.  In Scopelight Ltd. v FACT [2010] 2 WLR 1138 the Court of Appeal (Civil Division) held that material obtained by the police could lawfully be passed to a private prosecutor but Shannon was not cited. Scopelight, however, was refused permission to appeal to the UKSC.   

The appeal also needs to be viewed in the broader context of the so-called “regulators’ turf war” in which the SFO, FSA, CPS and OFT currently have separate spheres of influence but overlapping jurisdiction.  The Chancellor’s announcement in his Mansion House speech of the new government’s intention to form a single Economic Crime Agency (ECA) in which the prosecutorial functions of the SFO, FSA and OFT would be merged formed an ominous backdrop against which this appeal was heard.  Interestingly, after the announcement of the ECA’s creation, the FSA swiftly responded by stating that it wished to retain the power to prosecute offences of insider dealing (in its new guise as the Consumer Protection & Markets Authority), rather than giving the ECA that power.  Given the breadth of the FSA’s prosecutorial powers, as clarified by the Supreme Court, it will be interesting to see whether the FSA’s wish comes true.