Promethean Finance Limited v The Financial Conduct Authority

Section 19 FSMA provides that a person must either be authorised by the Authority or exempt from authorisation in order to carry on regulated activities in the UK by way of business. Regulated activities include advising borrowers about the liquidation of a debt owed under a credit agreement or consumer hire agreement.

Section 24(1) FSMA provides that it is an offence if a person:

Schedule 6, FSMA sets out the threshold conditions that must be met in order to be authorised by the Authority. Section 55B(3) FSMA requires the Authority to:

The Authority’s general duties are set out in s1B FSMA, these include at subsection (3)(a) the “consumer protection objective”. This objective is addressed in s1C(1) FSMA, which requires the Authority to have, as one of its objectives, “securing an appropriate degree of protection for consumers”. Section 1C(2) requires the Authority to have regard to the “needs that consumers may have for the timely provision of information and advice that is accurate and fit for purpose”.

Section 347 FSMA requires the Authority to maintain a record of authorised persons and certain appointed representatives, which includes such information as the Authority considers appropriate. The record is publicly accessible.

On 21 October 2022, the Authority published guidance about the use of trading names by authorised persons. This states that:

The Authority has power to make rules under s137A FSMA. These rules are published in its Handbook. The rules apply not only to authorised firms, but also to their appointed representatives – under s39 FSMA, an authorised firm is responsible for the activities of its authorised representatives, and anything done by an authorised representative is treated as if it were an act of the authorised firm.

The PRIN, SYSC and GEN sourcebooks within the Handbook apply to all authorised firms.

PRIN 2.1.1R sets out, at a high level, principles for business. These include (Footnote: ²):

SYSC 3.1.1R and 3.2.6R require an authorised firm to take reasonable care to establish systems and controls appropriate to its business, including for compliance with the requirements and standards applicable under the regulatory system. SYSC 3.1.4G and 3.2.3G provide guidance that an authorised firm has specific responsibilities regarding its authorised representatives, in respect of whom appropriate safeguards should be in place.

GEN 4.5 deals with requirements relating to statements about the authorisation and regulation of businesses by the Authority. GEN 4.5.3R and 4.5.4R require that an authorised firm must not indicate or imply that it is authorised, regulated or otherwise supervised in respect of businesses for which it is not authorised or regulated by the FCA. GEN 4.5.6G provides guidance that it is likely to be misleading for a firm that is not authorised by the FCA to state or imply that it is.

CONC is the consumer credit sourcebook, which includes rules and guidance that apply to firms, such as Promethean, that provide debt-counselling services to consumers. These included rules and guidance that:

The Authority published guidance on the use of trading names on the Register on 21 October 2022. It was reissued in February 2023 with minor editorial changes. Both state that

Section 55L FSMA gives the Authority power to impose such requirements on authorised firms as the Authority considers appropriate. Section 55L(2) provides that the Authority may exercise its power to impose requirements in relation to an authorised person (“A”):

Some confusion arose as a result of the relevant legislation (such as s21 FSMA) referring to “investment activities”, and whether this included debt counselling. Subsections 21(8), (9) and (15) give the Treasury power make orders defining the scope “investment activities” for the purposes of FSMA. In consequence of paragraph 5B, Schedule 1, Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (SI 2005/1529) (“FPO”) “debt counselling” is treated as falling within the definition of “investment activity”:

The background facts are not in dispute, and we find them to be as follows.

Promethean’s business is as a “debt packager”. It provides advice to indebted consumers who have vulnerable characteristics. Its advice takes the form of “debt solutions”, namely advice on ways in which its clients can discharge or liquidate their debts. Promethean does not itself provide those “debt solutions”.

Promethean advertises its business using, inter alia, financial promotions published on the internet.

Promethean has been authorised by the Authority to perform regulated activities since 25 July 2016. It has permissions relating to regulated consumer credit activities – including credit brokering, debt adjusting and debt counselling (but excluding the administration of debt management plans), and agreeing to carrying on a regulated activity.

Prior to the events subject to this reference, the Authority had been in contact with Promethean in respect of breaches of the financial promotion rules. In October 2020, the Authority wrote to Promethean about financial promotions that failed to make it clear that Promethean was not qualified to offer debt solutions directly, and that its signposting to free debt advice was not sufficiently prominent. These concerns were resolved by Promethean at the time.

On 6 December 2022, Google updated its advertising policy, to require businesses advertising financial services (including debt advice to consumers) either to be authorised by the Authority, or included in the Register as an exempt professional firm or a recognised investment exchange. It further specified that insolvency practitioners would no longer be able to place advertisements on the basis that they were regulated by a recognised professional body (“RPB”) for the purposes of the Insolvency Act 1986.

In consequence of Google’s new advertising policy, Promethean entered into commercial arrangements with a number of insolvency practitioners (“the IPs”) who offer types of debt solutions. The IPs were not authorised by the Authority, but were authorised as insolvency practitioners by an RPB. Because of the changes to Google’s policies, the IPs were no longer able to advertise to consumers using the Google platform. Under these commercial arrangements, Promethean included the relevant IP’s website domain name on the Register as one of its trading names.

Promethean entered into these commercial arrangements with a number of IPs (some of whom traded under multiple names and had multiple websites). In addition, Promethean was Principal to six ARs. The contract between Promethean and an IP authorised the IP to make use of a specified trading name (in practice the web address(es) for the IP’s website(s)) so that the IP “may continue to advertise to consumers for the purposes of debt advice as defined by [FSMA] as it pertains to insolvency practitioners’ exemption.” The IP was required under the terms of the contract (amongst other things) to comply with the Authority’s rules and with Promethean’s procedures. It was required to refer customers to Promethean if their indebtedness was less than £6000 and they had at least two creditors.

We note that the operation of the Register (at least as regards the inclusion of trading names) is automated – and that trading names can be added to (and removed from) the Register by an authorised firm without any intervention by the Authority. Under the contract the IPs had concluded with Promethean, Promethean added the web addresses of the IPs to the Register as trading names of Promethean. Because the IPs’ websites now appeared as trading names on the Register, the IPs were able to advertise to consumers using the Google platform for the purposes of providing debt advice.

We note also that Promethean’s entry on the Register included warnings that, as well as Promethean undertaking regulated activities, it also undertook activities that are not subject to regulation by the FCA.

Typically, a customer would first engage with the IP, having identified the IP’s website through a Google search or a Google advertisement (the IP’s website was operated by the IP and not Promethean). If the IP was unable to advise the customer, the IP would refer him or her to Promethean.

In October 2022, a consumer complained to the ASA that a website using a Promethean trading name was promoting its services on Google as a “government approved service”. The ASA referred the complaint to the Authority. The Authority’s Supervision Division in consequence reviewed Promethean’s activities, and identified further concerns about Promethean’s financial promotions. The Supervision Division was concerned that Promethean appeared to be in breach of the Authority’s financial promotion requirements in a relatively short period following its previous engagement with the Authority.

On 7 November 2022, the Authority sought to arrange a telephone call with the Promethean, but Mr Maddison instead asked the Authority to put its questions in writing. Later that same day, the Authority wrote to Promethean with concerns about its financial promotions, which appeared not to be fair, clear and not misleading. A number of issues were identified by the Authority, including that there were two websites that stated on their face that they were operated by authorised representatives, but were in fact operated by insolvency practitioners using NGTNs.

The Authority’s letter identified the following concerns:

Promethean was invited to agree to a “voluntary imposition of a requirement” (“VREQ”) which included, amongst other things, a requirement that it must conduct a review of its systems and controls, and its policies and procedures in relation to both its own financial promotions and those of its ARs. The terms of the VREQ were attached to the letter as Annex 1.

Also attached to the letter, as Annex 2, were screenshots of the Google advertisements and of the websites that were discussed in the letter. Mr Maddison did not dispute that the screenshots were accurate copies of the advertisements and websites, and we find that the description of the advertisements and websites in the letter was accurate (we address the evaluative conclusions drawn in the letter in the discussion below).

Promethean responded on 14 November 2022 declining to enter into the proposed VREQ on four grounds. These were:

Promethean stated that it was willing to enter into an undertaking to adhere to the contents of the voluntary requirements relating to amending financial promotions and communications across websites under its operation, conducting a review of its systems and controls and policies and procedures in relation to its own financial promotion activity, providing the Authority with details of the outcome of the review, and providing a report of the number of financial promotions withdrawn or amended - but subject to whether the requirements would be amended. However, it was not prepared to amend or withdraw all financial promotions across all trading names operated by it and those of its ARs that failed to comply with the Authority’s Handbook of Rules and Guidance.

It was only as a result of Promethean’s letter of 14 November 2022, that Authority became aware of the fact that the websites registered as Promethean trading names were not in fact websites operated by Promethean or for which it was responsible. It was only at this stage, therefore, that the Authority became aware that Promethean was registering trading names on the Register which were not names (other than the firm’s official registered name) being used by Promethean to carry out its own business. It was also at this stage that the Authority became aware that many of the financial promotions rule breaches raised in its 7 November letter in fact related to promotions for or on websites operated by independent IPs, (with the exception of some also related to Promethean’s ARs and one to itself).

The Authority was also concerned that Promethean’s explanation for registering IPs’ trading names may not have been accurate, as the first such trading name was registered in March 2022, seven months before Google announced its new policy (October 2022) and nine months before the policy came into effect (6 December 2022). Mr Maddison’s evidence was that the operators of the websites registered prior to Google’s announcement may not have had a full-time (or any) IP, so they “packaged cases out”, and referred their customers to Promethean. Mr Maddison said that this was a “commercial opportunity” and he “just sold the opportunity on”, paying the originator a percentage of the amount Promethean obtained from the case. So, in the case of onlinedebtoptions.co.uk, it was “purely a lead generator”.

Mr Maddison was asked why he used the websites of IPs to generate referrals, rather than advertise Promethean (or its ARs) on Google itself. Mr Maddison’s evidence was that Google’s previous policy was not to allow authorised firms to advertise unless they were authorised to hold client money, so Promethean could not advertise itself. In consequence, Promethean relied on referrals from IPs to generate references through Google advertisements.

The Supervision Division of the Authority decided not to take forward Promethean’s suggestion of an undertaking instead of a VREQ, because it considered that a VREQ was the appropriate and proportionate action given the scale and severity of the issues.

On 17 November 2022, the Authority sought to arrange a telephone call with Promethean, but it declined the call and offered to communicate by email instead.

The Authority wrote again to Promethean on 30 November 2022 requesting details of how Promethean would address all of the issues raised in the 7 November letter, clarification on the use of trading names by insolvency practitioners, and details of the contractual arrangements in place with them. The Authority noted that Promethean had registered 20 trading names (excluding its own legal name), and requested information about them (to the extent not previously provided). Promethean was reminded that it must not use the Register to record trading names owned, controlled, or used by third parties as trading names of Promethean.

Promethean replied on 7 December 2022 (although the letter attached to Promethean’s covering email is dated 14 November 2022) stating it had addressed the risks identified by the Authority or considered that the further steps envisaged in the proposed VREQ were unnecessary. Promethean stated that a VREQ would have serious reputational consequences for the firm, potentially affecting its viability and that it considered the Authority could be biased towards Promethean and the debt packager industry due to a Consultation Paper it had recently published (CP21/30) to potentially end the debt packager market. Promethean stated that it had removed non-compliant advertisements from Google, had adequate systems and controls in place, and “all the sites apart from some ARs (where only minor points were made about disclaimers and such were made) are all dual regulated”.

As regards the NGTNs, Promethean stated that

A copy of the form of commercial agreement concluded between IPs and Promethean was attached to the letter. Relevant provisions of the form of agreement include the following:

Mr McGruer’s evidence was that he did not believe that Promethean had conducted a review of its financial promotions or those of its ARs, or otherwise conduct a review of its policies and procedures governing financial promotions following the Authority’s request of 7 November 2022 (although Promethean made some changes to an AR’s website that the Authority had specifically identified, he believed that Promethean had not conducted a more holistic assessment of its financial promotions or those of its ARs). Mr Maddison was cross-examined on this point, and his evidence was that as Google was a dynamic platform, it was difficult to review the Google advertisements themselves. If an IP was running several hundred advertisements, it was not possible to see them all. He did check the Google advertisements if they appeared when he undertook his review, and he checked the home pages of the websites listed as Promethean trading names. Mr Maddison’s view was that the IPs were outside the perimeter of regulation by the Authority, as they were regulated by the RPBs, and were either exempt or excluded from regulation by the Authority.

As it appeared to the Authority that Promethean had not conducted a proper review of its (and its ARs) financial promotions, nor conducted a review of its policies and procedures, and its actions had not addressed all of the issues of concern, the Authority wrote again to Promethean on 15 December 2022 with a second proposal for a VREQ. The letter reaffirmed that where a registered trading name is used in communication with a customer, Promethean had to ensure that the communication was clear, fair, and not misleading. Further, the Authority was concerned that Promethean’s use of trading names was intended to allow unregulated entities to circumvent Google’s advertising policy. The letter noted that Promethean had registered a further 15 trading names since the 7 November letter, despite being aware that the Authority had serious concerns about this practice. The proposed VREQ set out the following requirements:

On 20 December 2022, Promethean wrote to the Authority declining to enter into the second proposed VREQ on the grounds that the trading names were exempt from authorisation, and the financial promotions “also fall under the exemptions in the FSMA Financial Promotions Order 2005, Part 6 Article 55B by virtue of FSMA Regulated Activities Order 2001 Part 2 Chapter 17 Article 72H”. Further, trading names are not separate legal entities. Promethean suggested that the Authority’s concerns could be addressed by including the following statement on websites to clarify which activities are regulated and which are not:

Promethean stated it thought there was actually no need for such a statement because it considered that the IPs are “exempt”, and that the listing of the trading names on the Register did not imply regulatory status. Further, there was no risk of consumer harm because the trading names “cannot be found by the consumer on a layman’s search of the internet”. Promethean also stated that it believed the Authority was acting unreasonably.

Between 15 December 2022 and 21 March 2023, Promethean registered a further 19 trading names, which the Authority considered to be further websites operated by IPs and not by Promethean. By 21 March 2023, Promethean had 32 trading names registered, of which 30 were the active website domain names of IPs, and two were genuine trading names. In the course of reviews of Promethean’s financial promotions and communications conducted by the Authority in January 2023 and March 2023, the Authority identified further concerns of the kind identified in the 7 November 2022 letter. The following examples were given in Mr McGruer’s witness statement:

Mr McGruer authorised the issue of the First Supervisory Notice on 11 April 2023 under s55L FSMA. A bundle of evidence was also served on Promethean. Mr McGruer’s grounds for imposing the requirements were to advance the Authority’s operational objective of securing an appropriate degree of protection for consumers (section 55L(2)(c) and section 1B(3)(a) FSMA), and because it appeared to him that Promethean was failing, or was likely to fail, to satisfy the threshold conditions in Schedule 6, FSMA (section 55L(2)(a)). In particular, it appeared to him that Promethean was failing, or likely to fail, the suitability threshold condition that it must be a fit and proper person (paragraph 2E of Schedule 6). Mr McGruer also considered that Promethean was failing to comply with the requirements of the PRIN sourcebook, in particular Principle 6 (customer interests) and Principle 7 (communications with clients), as well as other rules and guidance contained in the Authority’s Handbook and guidance published on the Authority’s website. He considered the matter sufficiently urgent that the requirements should be imposed with immediate effect, and with specified dates. The fact that the IPs might be “exempt” under article 55B, Financial Services and Markets Act 2000 (Financial Promotion) Order or article 72H, Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 was irrelevant to the question of whether IPs’ websites registered as trading names were indeed genuine trading names of the Promethean.

In summary, Mr McGruer’s reasons for imposing the requirements set out in the First Supervisory Notice were that (a) the trading names registered by Promethean on the Register were not owned, controlled, or used in the carrying out of debt advice by Promethean, and (b) Promethean’s ARs had issued financial promotions which appeared to contravene the Authority’s rules and guidance. Mr McGruer was concerned that the registration of NGTNs could result in consumers being misled into believing that they are dealing with a business authorised and regulated by the Authority (and benefiting from the protections available to customers of authorised firms), when in fact they are dealing with an entity which is not regulated under FSMA. As regards Promethean’s ARs, the Authority had identified breaches of its rules relating to financial promotions, which Promethean had failed to identify or remedy. Mr McGruer was concerned that that the breach of the Authority’s rules and guidance may result in consumer harm – for example as a result of consumers entering into transactions which they would not have otherwise entered into. In Mr McGruer’s opinion, Promethean had failed to address the Authority’s concerns, despite the Authority having communicated their significance and the risk of harm to consumers on a number of occasions.

The requirements set out in the First Supervisory Notice are virtually identical to those in the Second Supervisory Notice. As it is the Second Supervisory Notice (and not the First) that is the subject of this Reference, we have not set out all the terms of the First Notice in this decision.

Requirement 1 of the First Supervisory Notice required Promethean to remove all NGTNs from the Register by 4.30pm on 12 April 2023. As it had not done so, on 18 April 2023 Mr McGruer decided that the NGTNs should be removed from the Register in order to prevent further risk of consumer harm. In consequence, the Register still included the NGTNs but showed that the names were no longer in use. According to Mr McGruer, this is consistent with how they would be displayed on the Register had Promethean complied with Requirement 1. The Authority notified Promethean that it had taken this action on 18 April 2023.

The deadline for making representations in respect of the First Supervisory Notice was 25 April 2023. As no such representations had been received, the Authority wrote to Promethean on 28 April 2023 noting that Promethean was in breach of the requirements – and potentially, as a consequence – of the Threshold Conditions.

The First Supervisory Notice was referred to the Tribunal by Promethean on 5 May 2023, and the reference included an application to suspend its effect.

Mr McGruer granted Promethean an extension of time for the submission of representations, and Promethean submitted written representations to the Authority on 18 May 2023. In these representations Promethean:

The Authority’s Supervision Division considered the representations and made recommendations to Mr McGruer. He decided not to amend any of the requirements, and issued the Second Supervisory Notice on virtually identical terms to the First Supervisory Notice. Mr McGruer considered that the imposition of Requirements continued to be desirable in order to secure an appropriate degree of protection for consumers, or, alternatively, that Promethean was continuing to fail, or continuing to be likely to fail, to satisfy the suitability threshold condition. In addition, he considered that events since the First Supervisory Notice was issued indicated a continuing failure by Promethean to address the concerns that had been raised by the Supervision Division.

The Second Supervisory Notice was issued on 1 June 2023. The Notice was referred to the Tribunal by Promethean on 15 June 2023 and the reference included an application to suspend its effect. Promethean later withdrew the suspension application.

Correspondence took place between Promethean and the Authority following the issue of the Second Supervisory Notice concerning compliance with the various requirements, including the terms of the notice to appear on Promethean’s website under Requirement 12 and the notifications to be made to customers under Requirement 13.

The Authority was concerned about the effect on consumers of the length of time during which Promethean had not complied with notification provisions contained in Requirements 9 and 10, and that some of the IPs’ websites continued to state that they were trading names of Promethean despite having been removed from the Register on 18 April 2023. The Authority was concerned that consumers may be misled that they were dealing with an authorised firm. In addition, the Authority considered that the IPs may be in breach of s24 FSMA, which makes it an offence for an unauthorised person to describe themselves as, or hold themselves out in a manner which indicates that they are, authorised. On 9 June 2023, the Authority informed Promethean that it intended to publish a consumer warning in relation to the NGTNs, and that it would also notify the operators of the relevant NGTNs that it is a potential breach of s24 FSMA to purport to be a trading name of an authorised firm where that is no longer the case. Promethean objected to the Authority’s proposed course of conduct. But on 15 June 2023, the Authority published a consumer warning stating that it had removed the NGTNs from the Register. The text of the warning is as follows:

The warning included a statement that Promethean had referred this matter to the Upper Tribunal, which would consider representations from the Authority and Promethean, and either dismiss the reference or ask the Authority to reconsider its decision. On 16 June the Authority wrote to the various IPs that it had identified as continuing to state on their websites that they were trading names of Promethean, drawing their attention to the removal of the trading names from the Register, and referring to s24 FSMA. Further letters were sent in some cases on 7 and 10 July 2024. On 16 June 2024, the Authority wrote to one of the NGTNs which was continuing to state that it was an AR of Promethean, when it had ceased to be so on 31 May 2023.

It is not disputed, and we find that:

The Authority’s decision to impose requirements under s55L may be referred to the Tribunal pursuant to s133 FSMA.

In resolving any issues, the burden of proof lies on the Authority, and is to the usual civil standard (balance of probabilities).

There is a distinction between the powers of the Tribunal on what is described in s133 as a “disciplinary reference” and other references. In relation to non-disciplinary references (such as this one), the powers of the Tribunal are set out in ss133(6) and (6A) as follows:

The decision-maker for the purposes of s133(6)(b) is the Authority (acting by Mr McGruer).

The powers of the Tribunal in relation to non-disciplinary references are supervisory. The law relating to supervisory references was described by this Tribunal in its decision in Markou v FCA [2023] UKUT 101 (TCC):

It follows that whilst we conduct a full rehearing of the issues, we can only determine the reference by either dismissing it or by referring it to the Authority for reconsideration. We have no power to determine what action the Authority ought to have taken.

We must dismiss the reference unless we make findings which lead us to the conclusion that the decision reached by the Authority was one that was not reasonably open to it.

Even if we decide that the Authority made an error in reaching its decision, it would not be appropriate to remit the reference to the Authority for further consideration if our overall findings meant that it was inevitable that the Authority would make the same decision.

We note that there was a degree of confusion around the use of the phrase “non-genuine” by the Authority in relation to the trading names included on the Register. Some of the confusion relates to the fact that the Authority only first appreciated that the NGTNs were not trading names of Promethean, but of independent IPs, in consequence of Promethean’s letter of 14 November 2022. In particular there was confusion around the use of the term “non-genuine trading names”, as the names on the Register were genuine trading names used by the IPs. However, we find that the use of the term “non genuine” by the Authority was rather to the fact that the relevant websites domain names recorded on the Register were not bone fide trading names used by Promethean itself.

Mr Fell submitted that the Authority has two areas of concern. The first is the inclusion of NGTNs on the Register. The second is the use of non-compliant financial promotions by Promethean’s ARs.

As regards the NGTNs, the Authority’s case is that Promethean was adding trading names to the Register that were not genuine trading names used by Promethean. They were in fact website domain names used by independent third-party IPs. This compromised the purpose of the Register under s347(1) FSMA as a user of the Register would be under the impression that these NGTNs were trading names used by an authorised firm. This could result in consumers:

The inclusion of the IPs’ websites as trading names of Promethean on the Register (as well as any such description on the website) may be in breach of s24 FSMA. The Authority submitted that the use of NGTNs was in breach of principles 6 and 7 of PRIN 2.1.1R and of GEN 4.5.6G. We were also referred to the Authority’s guidance on the use of trading names (see [16] above).

As regards the non-compliant financial promotions, the breaches were set out in section C of the Authority’s letter of 7 November 2022. Mr Fell conceded that the breaches might be regarded as technical in nature, but the contraventions were material, and provided a backdrop to the Authority’s actions.

Mr Fell referred to the complaints received by the Authority from the ASA. Whilst these might have been the origin of the Authority’s concerns, they were not the basis of the Authority’s case. The issue before the Tribunal is the use of the NGTNs and the problematic content of the NGTN websites.

Mr Fell submitted that it reasonably appeared to the Authority that Promethean does not meet the suitability threshold condition, namely that it “must be a fit and proper person having regard to all the circumstances” including “the need to ensure that [its] affairs are conducted in an appropriate manner, having regard in particular to the interests of consumers”. Further, it reasonably appears to the Authority that Promethean’s actions undermine the consumer protection objective.

In consequence Mr Fell submits that the powers under s55L FSMA are engaged, and the requirements imposed by the Second Supervisory Notice are within the range of reasonable regulatory/supervisory judgments that the Authority could make in response to the circumstances. He submitted that it was highly proportionate (and therefore reasonable) for the Authority to require its written permission before Promethean enrolled new trading names on the Register, and for the Authority to require Promethean to review its financial promotions and systems, and to report back to the Authority.

Mr Maddison’s first submission related to the prohibition in s21 FSMA to non-authorised persons making financial promotions. Mr Maddison submitted that IPs benefitted from the exemptions in art 72H, Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544) (“RAO”) and art 55B, FPO. It therefore followed that the Google advertisements placed by the IPs and the IPs’ websites did not breach s21 FSMA (or any other law).

Secondly, the NGTNs registered on the Register are not legal entities, but rather are website domain names. And because the NGTNs are not legal entities, the inclusion of these names on the Register does not breach the Authority’s guidance on trading names, and there can be no implication for consumers using the websites that they are dealing with authorised firms. Further, the Authority is using its guidance to formulate a breach of regulatory rules where no such breach has occurred.

Thirdly, Mr Maddison submitted that the Authority acted in breach of the human rights of Promethean. The issue of the Second Supervisory Notice and the publication of the consumer warning was disproportionate and unfair and gave rise to financial damage to Promethean. Mr Maddison submitted that the Authority did not appreciate that Google’s policy allowed IPs to benefit from someone else’s authorised status. Promethean had contracts with IPs to provide a service to provide trading names on the Register, and the IPs agreed to include regulatory language on their website.

Further, it was unfair that the Authority took nearly four months to respond to Promethean between Promethean’s response of 20 December 2022 to the Authority’s second proposal for VREQ, and the issue of the First Supervisory Notice on 11 April 2023. It is not reasonable for a firm to have to wait for this length of time if (as the Authority alleges) the issues are so serious.

Mr Maddison referred us to Promethean’s rights under Article 1 of Protocol 1 (“A1P1”) of the European Convention on Human Rights. A1P1 provides as follows

Mr Maddison submits that that the right to carry out an economic activity is a “possession” for the purposes of A1P1, and referred us to the decisions of the European Court of Human Rights and of the English Courts, including R (oao Malik) v Waltham Forest NHS PCT [2007] EWCA Civ 265, Tre Traktorer Aktiebolag v. Sweden (App. no. 10873/84) [1989] ECHR 10873/84, and O'Sullivan McCarthy Mussel Development Ltd v Ireland (Application No 44460/16) (2018) 68 EHRR 509.

He submits that the publication of the consumer warning by the Authority gives rise to breaches of Article 6 and of A1P1. By publishing the consumer warning, the Authority has damaged Promethean’s goodwill and reputation – especially as the Authority’s guidance is not law, and it is not reasonably foreseeable that breach of the guidance gives rise to a breach of rules or law. He submits that the effect of the notice was to publish the Authority’s opinion on the genuineness of the NGTNs, and by publishing that opinion, Promethean’s reference to this Tribunal was prejudiced.

Mr Maddison submits that the Authority’s procedures are not compliant with Article 6 of the Convention (namely the right to a fair trial), as there are no safeguards against arbitrariness on the part of the Authority – especially as regards alleged breaches of guidance, which the Authority can use to allege a breach of rules.

Mr Fell submitted that the Authority’s procedures and the regime prescribed by FSMA does not breach any of Promethean’s rights. As regards Article 6, Promethean has a right to refer the First and Second Supervisory Notices to this Tribunal – which right it has exercised. And the reference to this Tribunal is Article 6 compliant.

As regards A1P1, Mr Fell submitted that there had been no interference with Promethean’s possessions, and in any event the actions taken by the Authority were proportionate. He referred us to the decision of the Court of Appeal in Batra v FCA [2015] EWCA Civ 394 in which one of the grounds for permission to appeal was that proper consideration had not been given to the Appellant’s A1P1 rights. Vos LJ, refusing permission said:

Mr Fell submits that the right to future income is not a possession for A1P1 purposes (see R (oao Bloomsbury Institute) v Office for Students [2020] EWHC 580 (Admin)). In Bloomsbury, the applicant accepted that neither registration nor expected future income are possessions for A1P1 purposes. However marketable goodwill is a possession, and that a decision which causes a loss of marketable goodwill is an "interference" for the purposes of A1P1. Cavanagh J held while it was not easy to reconcile the domestic authorities with the ECtHR authorities, it was bound (as are we) by the authorities of the Court of Appeal and the guidance given by Lord Bingham in Countryside Alliance [2007] UKHL 52 that registration does not have an impact on marketable goodwill:

Mr Fell submits that even if A1P1 is engaged, the actions of the Authority are proportionate, and are within the scope of paragraph 2 which allow the UK to enforce laws to control the use of property in accordance with the general interest. He referred us to the decision of the Supreme Court in Bank Mellat v HM Treasury [2013] UKSC 39 at [20] where the Court set out the following four requirements in order to determine whether the action of a public authority is rational and proportionate:

Mr Fell submits that the purpose of the consumer warning was to notify consumers about the reasons for the removal of the NGTNs from the Register, as otherwise they may not understand that these names are not (and have never been) trading names of Promethean itself. He submits that (i) the objectives of the Authority are important – namely the protection of consumers; (ii) it is self-evident that the Authority’s actions are rationally connected with the objectives; (iii) whether there were other less intrusive measures that could have been used by the Authority involves a value judgment, and he submits that the measures taken are “not that intrusive”; and (iv) overall the Authority has struck a fair balance.

In this context, Mr Fell referred us to the decision of the House of Lords in Wilson v First County Trust (No 2) [2004] AC 816 which addressed, inter alia, whether A1P1 was engaged when the rights of a lender to enforce recovery of a debt were limited by the Consumer Credit Act 1974. Lord Scott said:

Mr Fell noted that the supervisory notices took effect immediately (s55Y(4)(b) FSMA), and that when a supervisory notice takes effect, the Authority is required to publish such information about the matter to which the notice relates as it considers appropriate (s391(5) FSMA). However, the Authority did not immediately publish the contents of the supervisory notices, but instead negotiated with Promethean the terms of a notice that would appear on Promethean’s website. To the extent that publication of the terms of the requirements is required under s391 FSMA, publication of references to those requirements cannot be unfair. In this context, Promethean applied to the Tribunal for the requirements to be suspended, but subsequently did not pursue that application.

Mr Fell submitted that it cannot be unfair for the Authority to publish a reference to the requirement in the supervisory notices for the trading names to be removed from the Register, and the fact that this requirement had been referred to the Tribunal. It was necessary that the movement of the IPs’ trading names from the “active names” to the “previous names” sections of the Register be explained.

Fourthly, the allegations raised by the Authority are matters of opinion, and not of fact – and should be tested. Mr Maddison noted that neither Promethean nor the IPs had received any complaints from consumers in respect of the trading names listed on the Register. There was no evidence that there had been any consumer detriment.

Fifthly, Promethean’s entry on the Register included a notice that not all of its activities were subject to authorisation by the FCA, and that consumer protections may not be available for the non-authorised activities. Consumers would therefore be aware that they might not be able to benefit from the consumer protection that is otherwise available to customers of authorised entities.

Sixthly, the October 2022 and February 2023 guidance issued by the Authority in respect of trading names was defective, as no consultation about the guidance had been carried out in accordance with s139A(5) FSMA. Mr Maddison notes that the guidance states that the addition of trading names to the Register has no legal effect, and relies on this in support of Promethean’s position that the inclusion of the NGTN’s does not give rise to any breach of FSMA.

Seventhly, the change in the commercial arrangements between Promethean and the IPs (moving from a referral model to a fixed monthly fee) affected the commercial relationship and regulatory requirements with the IPs.

Finally, the Authority’s statement in paragraph 26 of their 7 November 2022 letter that the use of “org” domain names is limited to charities and not-for-profit organisations is wrong. Mr Fell’s response is that the use of “org” domain names is not central to the Authority’s case, and the use of the “org” domain can carry the connotation that a domain is linked with a philanthropic endeavour.

We agree with the submissions of Mr Fell and find that the inclusion of NGTNs by Promethean in the Register is in breach of s24 FSMA. We accept Mr McGruer’s evidence that there was a risk that consumers might be misled into believing that when they engaged with one of the websites listed as a NGTN, they would have the protections available to consumers dealing with authorised firms. We find that the use of NGTNs by Promethean was likely to give consumers the impression that the websites listed on the Register were those of an authorised firm and the risk that a consumer would make a decision that he would not otherwise have made. These risks are heightened by the fact that many of the consumers of the services provided by the IPs and Promethean are likely to be vulnerable by reason of heavy indebtedness, low income and/or limited financial understanding. We find that this gives rise to a breach of principles 6 and 7 of PRIN 2.1.1R and of GEN 4.5.6G.

We find that the inclusion of the NGTNs in the Register by Promethean gives rise to a risk that Promethean is in breach of the threshold condition in paragraph 2E(c), Schedule 6, FSMA having regard to Promethean’s need to ensure that its affairs are conducted in an appropriate manner having regard to the interests of consumers.

We find that Mr Maddison’s submission that the NGTNs are not legal entities does not engage with the Authority’s concern that the inclusion of the NGTNs may result in consumers being misled into believing that the registered websites belong to an authorised firm. We find that the trading name guidance was issued by the Authority to assist authorised firms to comply with their legal obligations. We agree with Mr Maddison that breach of the guidance does not of itself give rise to a breach of the requirements of FSMA or the Authority’s rules. But the breach of the guidance may have the consequence of such a breach arising – in this case a possible breach of s24 FSMA by the owners of the NGTN websites, and a breach by Promethean of principles 6 and 7 of PRIN 2.1.1R and of GEN 4.5.6G (and the risk of a breach of the threshold condition in paragraph 2E(c), Schedule 6, FSMA). We find that the fact that the NGTNs are not the names of legal entities is irrelevant. We also consider that Mr Maddison’s reference to the Authority’s guidance that the registration of trading names has no legal effect is misplaced. When taken in context, it is clear that the reference to “legal effect” in the trading name guidance is to the regulated status of the person using the trading name – in other words registering a trading name of a third party does not cloak the third party with any regulated status.

We find that the activities of the IPs using the NGTNs is not covered by any exemption from regulation. We find that art 72H RAO and art 55B FPO are limited in scope, and do not provide a blanket exemption for all activities and financial promotions of regulated insolvency practitioners. The broad exemption applying to insolvency practitioners under paragraph 52 of Schedule 1 to the Financial Services and Markets Act 2000 (Exemption) Order 2001 (SI 2001/1201) was revoked in 2014 by article 8 of the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2014 (SI 2014/366). Art 72H RAO provides that specific activities listed in the article carried on by insolvency practitioners are excluded from regulation. Art 55B FPO provides that restrictions on certain financial promotions made by insolvency practitioners do not apply to activities which would be regulated but for art 72H RAO. However, none of the activities listed in art 72H RAO are engaged in relation to the matters before us. It follows that, as none of the activities listed in art 72H RAO are engaged, the exemption in art 55B FPO (which is limited to the art 72H activities) cannot be engaged. We find that the “exemptions” in art 72H RAO and art 55B FPO do not apply to any of the activities of the IPs that are relevant to this reference. As none of the IPs are authorised representatives of Promethean, we find that they cannot benefit from Promethean’s authorised status in relation to these financial promotions either.

We find that the fact that the Register entry includes a warning that not all of Promethean’s activities are regulated is irrelevant. The inclusion of the NGTNs on the Register carries with it the implication that these websites form part of Promethean’s regulated business. We note that Promethean itself had websites that it did not include on the Register as these related to its unregulated activities (Footnote: ⁵). So, Promethean must have understood that the inclusion of the NGTN on the Register carried the implication that these trading names related to its regulated business. Indeed, the whole purpose of including the NGTNs on the Register was in order to satisfy Google that these website domains related to FCA authorised businesses.

We find that the fact that some of the NGTN websites included references and links to MoneyHelper’s website does not exonerate Promethean. This is because there were examples included in the evidence of other NGTN websites where there was no such reference, or the relevant link was to the “Money Advice Service” which was outdated. In the case of one of the websites to which Mr Maddison referred in his submissions, the evidence of Mr McGruer was that the reference to MoneyHelper was insufficiently prominent, as it was included in a footer in small print. Whilst Mr Maddison challenges Mr McGruer’s evidence about prominence, we prefer Mr McGruer’s evidence and find that the references were insufficiently prominent to meet the requirements of CONC 8.2.4R. In any event, the existence of links to MoneyHelper in some of the NGTN websites is not an answer to the Authority’s concern that consumers were at risk of being misled about the regulatory status of the NGTNs, nor to its other concerns about the NGTNs as set out by Mr McGruer in his evidence (Footnote: ⁶).

We agree with Mr Fell, for the reasons given by him, that A1P1 is not engaged, and that the actions of the Authority do not give rise to any breach of Promethean’s rights under the European Convention (including Protocol 1). If Promethean sold its business (including its goodwill), the purchaser would not acquire Promethean’s authorisations under FSMA, but would need to apply afresh to the Authority for authorisation. It follows from Bloomsbury, and we find, that any loss of future earnings which somehow relate to Promethean’s authorised status do not deprive Promethean of its possessions under A1P1.

But even if the rights of Promethean under the Convention are engaged, we find that the actions of the Authority are reasonable and proportionate. The NGTNs included on the Register were not trading names used by Promethean itself and in that sense were not “genuine” (and that anyone reading the consumer warning would understand that is what the Authority meant). We accept Mr McGruer’s evidence that there was a risk that consumers might be misled into believing that when they engaged with one of the websites listed as a NGTN, they would have the protections available to consumers dealing with authorised firms. The fact that no complaints had been made to Promethean, to the IPs or to the Authority (otherwise than via the ASA) is irrelevant. Also irrelevant is the absence of any evidence of actual consumer detriment. We find that it is legitimate for the Authority to take actions intended to ensure that circumstances that might lead to breaches (and complaints) would not arise. We find that there was no breach of any duty owed to Promethean by the publication of the consumer warning, and that its publication did not prejudice Promethean’s case before us. We note that the Authority was under a duty to publish the requirements imposed on Promethean pursuant to s391(5) FSMA, and we find that it must follow that reference to Requirement 1 in the consumer warning cannot give rise to a breach of any duties the Authority might owe to Promethean and must be fair.

We find that the actions of the Authority are consistent with its consumer protection objective under s1C(1) FSMA.

We find that the process followed in respect of the Second Supervisory Notice complies with Promethean’s Article 6 rights. Promethean has the right to refer the Authority’s actions to this independent Tribunal – and by doing so, Promethean has taken advantage of its Article 6 rights.

We also find that Mr Maddison’s submissions about “opinions” are misplaced. We agree with Mr Fell that the operation of the scheme of regulation under FSMA involves the Authority having opinions – and this is apparent from the language used in s55L and s133 FSMA. The issue we need to address in respect of this reference is whether the opinions held by the Authority are “reasonable” and whether the decision reached by the Authority was one that was reasonably open to it.

We find that that no consultation is required under s139A(5) FSMA in respect of the trading names guidance. These provisions only apply in respect of guidance given in relation to “rules”. We agree with Mr Fell that as the guidance in respect of trading names was not given in respect of a specific rule or rules (such as the guidance included in the Handbook using the suffix “G”), it follows that there is no obligation on the Authority to undertake a consultation in accordance with s139A(5).

We find that any change in the commercial relationship between Promethean and the IPs has no relevance to any of the issues before us.

However, we find that it was unfair for the Authority to take nearly four months to respond to Promethean’s message of 20 December 2022 – the response being the issue of the First Supervisory Notice on 11 April 2023. We also find that the Authority were mistaken in their belief that “org” domains carry an implication that the owner is a charity or not-for-profit entity. We also agree with Mr Fell that the breaches by Promethean’s authorised representatives in respect of their financial promotions were technical (although we agree they are not immaterial).

Overall, we find that the Authority’s powers under s55L FSMA were engaged, and the requirements imposed by the Second Supervisory Notice were within the range of reasonable regulatory/supervisory judgments that the Authority could make in response to the circumstances. We agree with Mr Fell that it is reasonable and proportionate for the Authority to require the NGTNs to be removed from the Register, for its written permission to be obtained before Promethean enrolled new trading names on the Register, and for the Authority to require Promethean to review its financial promotions and systems, and to report back to the Authority.

We have to consider if we remitted the reference to the Authority whether, in the light of our other findings, it would be inevitable that the Authority would make the same decision. We find that none of the errors are central to the Authority’s case, and it follows, and we find, that it would be inevitable that the Authority would reach the same decision if we were to remit the reference to it. We therefore decline to remit the reference in respect of any of the errors.

In exercising a supervisory jurisdiction, we are required to dismiss the reference unless we make findings which lead us to the conclusion that the decision reached by the Authority was not one that was reasonably open to it. As we have found that the decision reached by the Authority was within the range of reasonable regulatory/supervisory judgments that the Authority could make, we must dismiss the reference.

We make some further observations.

First – the Tribunal has no jurisdiction to require the Authority to remove or amend the consumer warning. This was addressed by Judge Herrington in his decision released on 12 July 2023. The jurisdiction of the Tribunal is confined to the particular decisions referred to in the Financial Services and Markets Act 2000 which the legislation says may be referred to the Tribunal. The issue of a consumer warning is not a decision referred to in that legislation as being a decision that may be referred to the Tribunal, and we therefore have no jurisdiction to require the Authority to remove or amend it.

Secondly, Promethean made an application on 23 April 2024 for the admission of further evidence and submissions. The Authority filed its response on 7 May 2024, and Mr Maddison filed a reply on 13 May 2024. The new evidence was:

We find that nothing in the new evidence is relevant to the issues before us. We therefore dismiss Promethean’s application and decline to admit the new evidence.

We dismiss the reference.