Stephen Joseph Burdett & Anor v The Financial Conduct Authority

On 19 August 2022, the Financial Conduct Authority (the “Authority”) issued Decision Notices to Stephen Burdett (“Mr Burdett”) (through its Regulatory Decisions Committee (“RDC”)) and to James Goodchild (“Mr Goodchild”) (through its Settlement Decision Makers (“SDM”)).

In the Decision Notices the Authority decided to impose a financial penalty of £311,762 on Mr Burdett pursuant to s63A Financial Services and Markets Act 2000 (“FSMA 2000”) and of £47,600 on Mr Goodchild pursuant to s66 FSMA 2000. The Authority also decided to make orders prohibiting Mr Burdett and Mr Goodchild from performing any function in relation to any regulated activity carried on by an authorised person, exempt person or exempt professional firm under s56 FSMA 2000 and withdrew Mr Goodchild’s approval to perform the controlled function of SMF27 (Partner) at Westbury Private Clients LLP (“Westbury”).

Mr Burdett and Mr Goodchild have referred their respective Decision Notices to the Tribunal and the Tribunal directed that these references be case managed and heard together.

The Authority contends that Mr Burdett and Mr Goodchild created arrangements “to funnel a large proportion of the pension funds of retail clients into high risk and illiquid investments” connected with The Resort Group plc (“TRG”). TRG is the holding company, incorporated in Gibraltar, of an offshore property development group which was engaged in tourist development projects in Cape Verde. These investments failed, and pension holders have claimed compensation from the Financial Services Compensation Scheme (the “FSCS”). The investments in TRG involved three legal forms (together, the “TRG Investments”) namely:

The Authority’s case was pleaded on the basis that Mr Burdett and Mr Goodchild lacked integrity, or alternatively that they failed to act with due skill, care and diligence. These allegations were denied by Mr Burdett and Mr Goodchild.

We have concluded that Mr Burdett and Mr Goodchild both acted without integrity, with Mr Burdett knowing he was performing the CF1 (Director) function without approval and acting without integrity in that role, and Mr Goodchild acting without integrity in performing his controlled functions. The references against the prohibition orders are dismissed. The Tribunal determines that the appropriate action for the Authority to take is to impose a financial penalty on Mr Burdett of £265,071, plus continuing interest on the amount of the benefit received by Mr Burdett since the date of his Decision Notice calculated as set out in this decision, and £47,600 on Mr Goodchild, and the references are remitted to the Authority with directions that effect be given to our determinations.

The Authority was represented by Adam Temple. Mr Burdett had been represented for a short period of time during the Authority’s investigation but then represented himself when referring the matter to the Tribunal and throughout most of the proceedings; he then instructed Gregory Bull KC before the hearing. Mr Goodchild had also been represented for at least part of the Authority’s investigation (with his advisers attending his interviews with the Authority) but has also represented himself for the proceedings before this Tribunal. As explained further below, Mr Goodchild did not attend the hearing, nor was he represented at the hearing, and the Tribunal decided that it was in the interests of justice to proceed in his absence. We have taken all of the parties’ submissions into account in making our decision, but we considered it was not necessary to refer to each and every submission made or to each document to which we have been referred. The fact that we have not referred to a submission or to a document does not mean that it has not been taken into account in making our decision.

The hearing of the references was listed for eight days, from 3 to 12 November 2025.

Mr Goodchild sent his skeleton argument to the Authority, copied to the Tribunal, on 27 October 2025 (the “Goodchild SkA”). The Goodchild SkA was accompanied by three new witness statements, namely Mr Goodchild’s second witness statement (of 18 pages) (“Goodchild WS2”) and first witness statements of Alan Molloy (compliance officer of Westbury) dated 5 June 2024 and Alex Warren (compliance assistant of Westbury) dated 6 June 2024, together with exhibits.

At 14.40 on Friday 31 October 2025, the working day immediately preceding the first day of the hearing, Mr Goodchild emailed the Tribunal stating that he would not be attending the hearing for medical reasons but that he would instead be represented by a legal representative. That email included an explanation of his medical condition and he attached a Statement of Fitness for Work from a doctor dated 31 October 2025 stating that he was not fit for work. Mr Goodchild did not provide any further details of his representative.

At 10.30 on 3 November 2025, the first day of the hearing, there was no representative for Mr Goodchild in attendance. The Tribunal called Mr Goodchild on the telephone number held on file but there was no answer. The Authority (Mr Temple and those instructing him), Mr Burdett and Mr Bull were present.

The Tribunal needed to decide whether to proceed with the hearing in Mr Goodchild’s absence. Rule 38 of The Tribunal Procedure (Upper Tribunal) Rules 2008 (the “Tribunal Rules”) provides that if a party fails to attend a hearing the Tribunal may proceed with the hearing if the Tribunal (a) is satisfied that the party has been notified of the hearing or that reasonable steps have been taken to notify the party of the hearing; and (b) considers that it is in the interests of justice to proceed with the hearing.

We were satisfied that Mr Goodchild had been notified of the hearing. The issue which needed to be decided was whether it was in the interests of justice to proceed with the hearing.

Mr Temple submitted that the hearing should proceed. His submissions included:

Mr Temple confirmed that the Authority’s position on Goodchild WS2 was that they did not object to its admission but submitted that no weight should be placed on it, noting that Mr Goodchild’s absence meant he was not available for cross-examination and that, even if he did attend a re-convened hearing, he would not be obliged to call himself as a witness.

Mr Bull submitted that it was in the interests of justice that the hearing be adjourned; and that this was for both Mr Burdett and Mr Goodchild. Mr Bull submitted that the Tribunal should be wary of proceeding in Mr Goodchild’s absence, as the reality was that this would effectively result in shutting out Mr Goodchild’s reference, as without him present there was no useful evidence in support of his reference. Mr Bull submitted that it was in the interests of justice for both references to be heard together. For Mr Burdett, much of his appeal was based on what the Tribunal found as fact based on the nature of the relationships between various individuals, including Mr Goodchild, and the cross-examination of Mr Goodchild on such matters would be relevant for this purpose.

Having heard from Mr Temple and Mr Bull there was a short adjournment, following which the panel gave its decision that it was in the interests of justice that the hearing of the two references proceed as listed:

The hearing proceeded in the absence of Mr Goodchild. In making our decision, we have been mindful throughout of the need to ensure that Mr Goodchild’s submissions have been fully considered. Considering the difficulties which have been faced by Mr Goodchild, we considered that the Goodchild SkA and the Goodchild WS2 helpfully and clearly set out Mr Goodchild’s position and enabled us to understand his challenges to the Authority’s allegations.

The hearing bundle was extensive (more than 30,000 pages). We read in full the Decision Notices, the references, the Authority’s statements of case, the responses filed by Mr Burdett and Mr Goodchild, the parties’ skeleton arguments, all witness statements and written closing submissions. As to the remaining documents, we read those documents to which we were taken during the hearing, and those which the parties relied upon in their skeleton arguments or written closing submissions. However, we also read in full:

In overview, the Authority submitted that Mr Burdett and Mr Goodchild created the arrangements under which some portion of pension holders’ pension funds were invested into TRG Investments, their companies both had responsibilities to ensure that the investments were suitable, the proportions of pension funds put into TRG Investments were wholly unsuitable for, at least, low and medium risk pension holders and demonstrated a reckless disregard for the interests of those individuals, Mr Goodchild was responsible for naming the three model portfolios and two of those names were misleading, Mr Burdett was responsible for the contents of the reports sent to pension holders and knew that the stated target asset mix did not, or was highly unlikely to, match the asset mix within the Westbury SIPP, and Mr Burdett acted as a director of Synergy Wealth Ltd (“Synergy”) without the Authority’s approval, knowing that the Authority had not given approval.

The key allegations made against Mr Burdett in the Decision Notice were that during the period between 10 January and 1 December 2016 (this being the “Relevant Period” in the context of Mr Burdett’s reference):

In its Re-Amended Statement of Case in respect of Mr Burdett, the Authority ceased to rely on those parts of the Decision Notice which referred to misleading others at SWUK and Synergy and the instructions given to the investment adviser (referred to at [21(2)(c)] and [21(2)(d)] above). In summary, the Re-Amended Statement of Case set out the Authority’s case as being that during the Relevant Period Mr Burdett:

The allegations of a lack of integrity were based on Mr Burdett’s conduct being said to be reckless.

The Authority sought a financial penalty of £311,762 (with continuing interest) pursuant to s63A FSMA 2000 and to make an order pursuant to s56 FSMA 2000 prohibiting Mr Burdett from performing any function in relation to any regulated activity carried on by an authorised person, exempt person or exempt professional firm.

Mr Burdett referred the decision to the Upper Tribunal on 25 August 2022. In that reference he stated:

“There are a number of errors in the findings of the FCA. These errors have led to an incorrect judgement.

I have never been interviewed by the FCA and was denied the ability to do so on several occasions. My evidence has not been considered as part of their investigation and I was not given sufficient time to prepare substantive responses to the allegations. This is in part owing to me living outside the UK and Covid restrictions in place in the UK in December 2021 when travel to the UK was restricted. My legal team were appointed in 2022 and their request to extend the deadline to provide responses was rejected. This caused further issues for them when their requests for access to evidence from the FCA was delayed and then rejected. Without access to what they believed was very relative evidence, they were hindered in their ability to defend my position within the timeframe set out by the FCA.

There is also an issue regarding limitation in relation to the fine. My legal advisers presented theis [sic] argument to the FCA, as the 6 year deadline had passed before I received the Warning Notice in Spain. This was another point where access to evidence was rejected, resulting in them being unable to carry out their duties as best as they believed possible. …”

Mr Burdett subsequently sent a statement to the Tribunal on 31 October 2022 with a further explanation of his position, which addressed or alleged:

Mr Burdett’s position was that he acted openly, honestly and in good faith and that a significant amount of evidence had been withheld by Mr and Mrs Whittam.

Mr Bull’s oral and written submissions included:

The key allegations made against Mr Goodchild were that during the period between 7 October 2015 and 5 August 2016 (this being the “Relevant Period” in the context of Mr Goodchild’s reference):

In its Amended Statement of Case the Authority pleaded that Mr Goodchild had been reckless or negligent (in breach of Statement of Principle 2) both in his decisions to expose low and medium risk pension holders to the high risk TRG Investments and in recklessly or negligently giving two of the model portfolios misleading names, implying that they were lower risk investments.

Accordingly, the Authority contended that Mr Goodchild breached the requirement of Statement of Principle 1 to act with integrity in carrying out his controlled functions during the relevant period, or alternatively that he breached the requirement of Statement of Principle 2 to act with due skill, care and diligence. The Authority sought a financial penalty of £47,600 pursuant to s66 FSMA 2000, to make an order pursuant to s56 FSMA 2000 prohibiting Mr Goodchild from performing any function in relation to any regulated activity carried on by an authorised person, exempt person or exempt professional firm, and to withdraw Mr Goodchild’s approval to perform senior management functions at Westbury pursuant to s63 FSMA 2000.

Mr Goodchild set out his position in various responses to the Tribunal, including annotations on the Warning Notice, annotations on the Authority’s Statement of Case and what he described as a precis of the case. In the Goodchild SkA he stated at [1] that it “supersedes and replaces” all prior rebuttals submitted by Mr Goodchild. We have, therefore, focused on the submissions made in the Goodchild SkA.

Mr Goodchild submitted that the Authority’s findings were erroneous in fact and law:

We have decided that the Authority has established that Mr Burdett acted as a director of Synergy knowing that he was performing a role for which he required approval and that he did not have such approval, acted without integrity by acting as a director in these circumstances and whilst performing this role; and that Mr Goodchild acted without integrity whilst performing controlled functions at Westbury. We have therefore dismissed the references and made directions in relation to sanctions as set out at the end of this decision.

The Authority’s alternative case was pleaded on the basis that Mr Burdett and Mr Goodchild had both failed to act with due skill, care and diligence. In the light of our conclusions that they acted recklessly and lacked integrity, we have not addressed this alternative case further.

Our decision is organised as follows:

The Authority’s regulatory objectives, set out in s1B(3) FSMA 2000, include securing an appropriate degree of protection for consumers and protecting and enhancing the integrity of the UK financial system.

Section 59 and Part V FSMA 2000 make provision concerning the performance by individuals of controlled functions at authorised firms.

SUP 10A sets out the controlled functions for which approval was required, including at SUP 10A.6.7R the controlled function CF1 (Director). By SUP 10A.1.15R and SUP 10A.4.4R, this description of the Director function applies to an appointed representative of a firm. An application was made for Mr Burdett to be approved for the CF1 (Director) function of Synergy, which was an appointed representative of SWUK.

The director function is the function of acting in the capacity of a director (other than non-executive director) of that firm. “Director” is then defined in the Handbook’s Glossary as, in relation to (among other things) a body corporate:

“any person appointed to direct its affairs, including a person who is a member of its governing body and (in accordance with section 417(1) of the Act):

(i)

a person occupying in relation to it the position of a director (by whatever name called); and

(ii)

a person in accordance with whose directions or instructions (not being advice given in a professional capacity) the directors of that body are accustomed to act.”

SUP 10A.6.12R makes provision for the CF2 (Non-executive director) function.

Pursuant to s64A FSMA 2000 the Authority has issued a number of Statements of Principle that are within the part of its Handbook entitled Statements of Principle and Code of Practice for Approved Persons (“APER”). APER sets out descriptions of the conduct which, in the opinion of the Authority, do not comply with a Statement of Principle. It also sets out the factors which, in the Authority’s opinion, are to be taken into account in determining whether an approved person’s conduct complies with a Statement of Principle.

In these references the Authority alleges that Mr Goodchild engaged in conduct that was reckless, demonstrating a lack of integrity. Accordingly, Statement of Principle 1 is relevant, which provides (at APER 2.1A.3R) that an approved person must act with integrity in carrying out his accountable functions. In order to find a breach of Statement of Principle 1, the behaviour that the Authority alleges amounts to failing to act with integrity must be linked to the controlled functions for which the individual concerned has approval. Mr Goodchild held the controlled functions of CF4 (Partner – now SMF27) and CF30 (Customer) at Westbury. We need to assess whether Mr Goodchild acted without integrity when undertaking those responsibilities.

APER 3.1.3G (since 7 March 2016) clarifies that, when establishing compliance with, or a breach of, a Statement of Principle, account will be taken of the context in which a course of conduct was undertaken, including the precise circumstances of the individual case, the characteristics of the particular controlled function and the behaviour expected in that function.

APER 3.1.4G provides that approved persons will only be in breach of a Statement of Principle if they are personally culpable, that is, where their conduct was deliberate or where their standard of conduct fell below that which would be reasonable in all the circumstances.

Section 63 FSMA 2000 provides that the Authority may withdraw an approval under s59 in relation to the performance by a person of a function if the Authority considers that the person is not a fit and proper person to perform the function.

The Tribunal has considered the meaning of “integrity” on a number of occasions. In Seiler v Financial Conduct Authority [2023] UKUT 00133 (TCC) (“Seiler”) the Tribunal summarised the position as follows, which we gratefully adopt:

“41.

The Tribunal recently summarised the correct legal approach to the concept of “integrity” in the financial services regulatory context in Andrew Page and others v FCA [2022] UKUT 124 (TCC) (“Page”) at [56] to [59], adopting the summary of the relevant case law in Tinney v Financial Conduct Authority [2018] UKUT 0345, at [10] and [11] and Forsyth v FCA and PRA [2021] UKUT 0162(TCC) at [40] to [44].

42.

We need not set out that summary in full, but for the purposes of this decision the following points are relevant:

(1)

There is no strict definition of what constitutes acting with integrity. It is a fact specific exercise.

(2)

Even though a person might not have been dishonest, if they either lack an ethical compass, or their ethical compass to a material extent points them in the wrong direction, that person will lack integrity.

(3)

Acting recklessly is another example of a lack of integrity not involving dishonesty. A person acts recklessly with respect to a result if he is aware of a risk that it will occur and it is unreasonable to take that risk having regard to the circumstances as he knows or believes them to be.

(4)

To turn a blind eye to the obvious and to fail to follow up obviously suspicious signs is a lack of integrity.

(5)

There are both subjective and objective elements to the test of what constitutes a lack of integrity. The test is essentially objective but nevertheless involves having regard to the state of mind of the actor as well as the facts which the person concerned knew.

…

46.

As the authorities demonstrate, recklessness has both subjective and objective elements. The subjective element focuses on the state of knowledge of the individual concerned as to the risks concerned. The objective element focuses on the question as to whether it was reasonable for the person concerned to have ignored the risk. Clearly, in considering a person’s state of awareness in relation to a risk, it is appropriate to have regard to what would reasonably have been appreciated or understood by persons in the same position as the individual in question, as the passage in Ford and Owen set out above clearly states. As Mr Jaffey submitted, the fact that the first element of the test of recklessness is subjective does not mean that the Tribunal cannot have regard to the inherent probabilities and, in particular, how a reasonable professional would respond in the relevant situation. By having regard to those factors, the Tribunal may conclude that the risks concerned would have been obvious to the person concerned and therefore can draw the inference that he or she was aware of the risks in question.”

The part of the Authority’s Handbook entitled “The Fit and Proper Test for Approved Persons” (“FIT”) sets out the criteria that the Authority will consider when assessing the fitness and propriety of a candidate for a controlled function. FIT is also relevant in assessing the continuing fitness and propriety of an approved person.

FIT 2.1.3 provides that the matters to which the Authority will have regard include but are not limited to:

The section of the Authority’s Handbook entitled Conduct of Business Sourcebook (“COBS”) sets out detailed rules relating to the conduct of business by the firms which the Authority regulates.

COBS 2.2.1R imposed the basic requirement on all regulated firms:

“A firm must act honestly, fairly and professionally in accordance with the best interests of its client (the client's best interests rule).”

Chapter 9 deals with Suitability (including basic advice). COBS 9.1.1R provides that this chapter applies to a firm which makes a personal recommendation in relation to a designated investment and COBS 9.1.3R provides that this chapter applies to a firm which manages investments. “Managing investments” is described in the Glossary to the Handbook as:

“the regulated activity, specified in article 37 of the Regulated Activities Order (Managing investments), which is in summary: managing assets belonging to another person in circumstances which involve the exercise of discretion…”

COBS 9.2 places obligations on firms to assess the suitability of the recommendations that it makes. In particular, COBS 9.2.1R states:

“(1)

A firm must take reasonable steps to ensure that a personal recommendation, or a decision to trade, is suitable for its client.

(2)

When making the personal recommendation or managing his investments, the firm must obtain the necessary information regarding the client's:

(a)

knowledge and experience in the investment field relevant to the specific type of designated investment or service;

(b)

financial situation; and

(c)

investment objectives;

so as to enable the firm to make the recommendation, or take the decision, which is suitable for him.”

“Client”, for these purposes, is as defined in COBS 3.2, which starts with COBS 3.2.1R:

“(1)

A person to whom a firm provides, intends to provide or has provided:

(a)

a service in the course of carrying on a regulated activity; or

(b)

in the case of MiFID or equivalent third country business, an ancillary service,

is a "client" of that firm.

(2)

A "client" includes a potential client. …”

Section 63A FSMA 2000 provides:

“(1)

If the [Authority] is satisfied that -

(a)

a person (“P”) has at any time performed a controlled function without approval, and

(b)

at that time P knew, or could reasonably be expected to have known, that P was performing a controlled function without approval,

it may impose a penalty on P of such amount as it considers appropriate.

(2)

For the purposes of this section P performs a controlled function without approval at any time if at that time -

(a)

P performs a controlled function under an arrangement entered into by an authorised person (“A”), or by a contractor of A, in relation to the carrying on by A of a regulated activity; and

(b)

P, when performing the function, is not acting in accordance with an approval given under section 59.

(3)

The [Authority] may not impose a penalty under this section after the end of the limitation period unless, before the end of that period, it has given a warning notice to the person concerned under section 63B(1).

(4)

“The limitation period” means the relevant period beginning with the first day on which the [Authority] knew that the person concerned had performed a controlled function without approval.

(5)

For this purpose the [Authority] is to be treated as knowing that a person has performed a controlled function without approval if it has information from which that can reasonably be inferred.”

Section 56 FSMA 2000 provides that the Authority may make an order prohibiting an individual from performing a specified function, any function falling within a specified description or any function, if it appears to the Authority that that individual is not a fit and proper person to perform functions in relation to a regulated activity carried on by an authorised person, exempt person or a person to whom, as a result of Part 20, the general prohibition does not apply in relation to that activity. Such an order may relate to a specified regulated activity, any regulated activity falling within a specified description, or all regulated actives.

Under s66(3) FSMA 2000 the Authority may impose a financial penalty on any approved person if it is satisfied that he has failed to comply with a Statement of Principle.

The Authority’s statement of policy with respect to the imposition and amount of penalties under FSMA 2000, as required by s69(1), 93(1), 124(1) and 210(1) FSMA 2000, and guidance on those matters is provided in Chapter 6 of DEPP.

Section 133(4) FSMA 2000 provides that, on a reference, the Tribunal may consider any evidence relating to the subject matter of the reference whether or not it was available to the decision-maker at the material time. This is not an appeal against the Authority’s decision on each of the references but a complete rehearing of the issues which gave rise to the decision and which the applicant wishes the Tribunal to consider.

Section 133(5) to (7) provides as follows:

“(5)

In the case of a disciplinary reference or a reference under section 393(11), the Tribunal must determine what (if any) is the appropriate action for the decision-maker to take in relation to the matter, and on determining the reference, must remit the matter to the decision-maker with such directions (if any) as the Tribunal considers appropriate for giving effect to its determination.

(6)

In any other case, the Tribunal must determine the reference or appeal by either –

(a)

dismissing it; or

(b)

remitting the matter to the decision-maker with a direction to reconsider and reach a decision in accordance with findings of the Tribunal.

(6A)

The findings mentioned in subsection (6)(b) are limited to findings as to –

(a)

issues of fact or law;

(b)

the matters to be, or not to be, taken into account in making the decision; and

(c)

the procedural or other steps to be taken in connection with the making of the decision.

(7)

The decision-maker must act in accordance with the determination of, and any direction given by, the Tribunal.”

Pursuant to s133(7A), “disciplinary reference” includes a decision to take action under s66 FSMA 2000, ie to impose a financial penalty on a person. The term does not include a decision to impose a prohibition order under s56. Thus, these references are disciplinary references in respect of the penalties imposed and non-disciplinary references in respect of the prohibition orders.

In the case of a non-disciplinary reference, the Tribunal must determine the reference by either: “(a) dismissing it; or (b) remitting the matter to the decision-maker with a direction to reconsider and reach a decision in accordance with the findings of the Tribunal” (s133(6)). It does not itself determine what the appropriate action is for the Authority to take.

Otherwise than in cases where the Tribunal dismisses the reference, its powers are confined to giving directions to the Authority to remake its decision in light of the matters within the scope of s133(6A) which the Tribunal considers appropriate (Page v Financial Conduct Authority [2022] UKUT 124 (TCC) (“Page”) at [113]).

Accordingly, as set out in Carrimjee v Financial Conduct Authority [2016] UKUT 447 (TCC) at [39] to [40] and Page at [114] to [115], under s133(6), the Tribunal has various options when dealing with a “non-disciplinary” reference:

The Tribunal may have regard to any evidence, whether or not it was available to the Authority at the time.

A reference of a decision to impose a financial penalty is a “disciplinary reference” and the Tribunal has the power to determine at its discretion what (if any) is the appropriate action for the Authority to take, including a determination as to whether or not to impose a financial penalty and, if so, the amount of such penalty.

As the Tribunal indicated in Tariq Carrimjee v Financial Conduct Authority [2015] UKUT 0079 (TCC), the Tribunal is not bound by the Authority's policy when making an assessment of a financial penalty on a reference, but it will pay the policy due regard when carrying out its overriding objective of doing justice between the parties. In so doing the Tribunal looks at all the circumstances of the case.

Similarly, in Westwood Independent Financial Planners v Financial Conduct Authority [2013] 11 WLUK 630, the Tribunal held at [181]:

“In considering the appropriate level of a penalty we are not bound by the Authority’s tariff for particular misconduct, or even the factors the Authority takes into account, but may reduce or increase a penalty which is the subject of a reference on any grounds we think fit, within the parameters of the proper exercise of judicial discretion. In practice, the Tribunal respects the Authority’s tariff, in the interests of consistency between applicants, while departing from it in an appropriate case.”

This approach was adopted by the High Court in FCA v Da Vinci Invest Ltd [2015] EWHC 2401 (Ch) where Snowden J said in the context of the imposition of a penalty for market abuse at [201]:

“It was the FCA's submission, and I accept, that in determining any penalty under section 129, the starting point for the court should be to consider the relevant DEPP penalty framework that was in existence at the time of commission of the market abuse in question. To do otherwise would risk introducing an inequality of treatment of defendants depending upon whether the proceedings were taken against them under the regulatory route or the court route and depending upon how long the proceedings had taken to come to a conclusion. By the same token, however, in common with the Upper Tribunal, the court is not bound by that framework, or by the FCA's view of how it should be applied. But if the court intends to depart from the framework in a particular case, it should explain why it considers it appropriate to do so. It occurred to me that in this regard there is some analogy with the approach of the criminal courts to the application of the sentencing guidelines produced by the Sentencing Council.”

The burden of proof is on the Authority to establish the matters on which they rely.

The standard of proof is the civil standard of the balance of probabilities.

Mr Burdett and Mr Goodchild each filed a short witness statement in September 2024. They also set out their position in their references themselves and in various responses to the Tribunal and, as recorded above, Mr Goodchild filed Goodchild WS2 with the Goodchild SkA. We decided to admit this second witness statement, notwithstanding that there was no explanation for its lateness, given its relevance to the matters referred.

Mr Goodchild also served and filed witness statements from Mr Molloy and Ms Warren with the Goodchild SkA. These were more than one year late (even though they were both dated June 2024), with no explanation for their lateness, and neither Mr Molloy nor Ms Warren attended the hearing (with Mr Molloy having explained in his statement that he would not be able to do so). The Authority objected to their admission. We decided to refuse to admit both witness statements. The absence of Mr Molloy and Ms Warren meant that minimal weight could be attached to their statements, Mr Molloy’s statement largely comprised matters of opinion and other aspects (eg due diligence) which were addressed in Goodchild WS2 and the documentary evidence, and the statement of Ms Warren was of minimal (if any) relevance since she was not employed as a compliance officer of Westbury until September 2016.

The Authority relied on witness statements from the following witnesses:

The members of the Authority’s Authorisations Division had each produced witness statements in respect of the referral by Mr Burdett, and whilst their statements contained other details, the focus was on SWUK’s application for Synergy to be approved as its appointed representative and the application for Mr Burdett to be approved to perform the CF1 (Director) function at Synergy. Ms Kareer, Ms Maloney and Mr Brent were available to attend the hearing for cross-examination but Mr Bull informed the Authority (and the Tribunal) that they were not required. On that basis, we accept their evidence.

Three of these pension holders were unable or unwilling to attend the hearing. One pension holder was willing to attend and arrangements were made for him to give evidence remotely but technical difficulties meant that we were not able to hear his evidence.

The Authority also relied on an expert report dated 1 January 2025 from Robert Lockie.

We also had a significant amount of documentary evidence, which included the communications between Synergy and pension holders, the Westbury SIPP model portfolios, documentation related to the TRG Investments (the instruments themselves, offering supplements and marketing materials), emails, a transcript of a call involving Mr Burdett, Mr Goodchild and others from 27 July 2016 (the “July 2016 Call”), and transcripts of interviews with the Authority (including those of Mr Goodchild, Mr Whittam and Mr O’Donovan).

We address below our approach to the remaining witnesses, and also our conclusions on matters raised by the parties in relation to the documentary evidence that was before us.

Mr Burdett’s evidence included his explanation of his understanding of the status of the application for approval for him to perform the CF1 (Director) function, his activities at Synergy, his review of the documentation used by Synergy, the roles and level of involvement of Mr and Mrs Whittam at Synergy and his knowledge and/or understanding of the way in which pension funds transferred to the Westbury SIPP were to be invested, in particular as to the amounts to be invested in TRG Investments.

Mr Temple submitted that we should be wary of placing weight on Mr Burdett’s evidence save where supported by contemporaneous documents. Mr Temple’s reasons for this submission included:

Our conclusions as to the credibility of Mr Burdett’s evidence were mixed:

Nevertheless, as a whole Mr Burdett’s evidence in cross-examination helped the Tribunal to understand what had happened. He accepted large parts of the Authority’s case against him, albeit continuing to refute some of its conclusions. Whilst we have not accepted all of Mr Burdett’s evidence, there is much that we have accepted.

Mr Goodchild’s first witness statement was very short and put forward only a small part of his response to the allegations which had been made by the Authority, with more detail being found in his various replies to the Tribunal. In Goodchild WS2 he addressed issues of fact in support of the submissions he had put forward in the Goodchild SkA, including his description of his cooperation with the Authority (in this matter and at other times in his career), the effects on him of the publication of the Decision Notice, Westbury’s business model (and its role being limited to receiving and executing Synergy’s instructions at a wholesale level), the level of exposure to TRG of 232 clients (focusing on what he described as the “Resort Group fund”), and his concerns as to the Authority’s investigative decisions.

Goodchild WS2 (alongside the Goodchild SkA) was of considerable help to the Tribunal in enabling us to understand Mr Goodchild’s case. The issue is then the weight to give to that evidence in circumstances where Mr Goodchild did not attend the hearing and was not therefore available to be cross-examined either by the Authority or on behalf of Mr Burdett. We must make this decision in accordance with the overriding objective in the Tribunal Rules to deal with cases fairly and justly; this includes fairness not just to Mr Goodchild but also to the Authority and Mr Burdett.

We have carefully considered the entirety of Mr Goodchild’s witness statements in making our decision. However, we have throughout only placed weight on the statements made to the extent that matters are either not disputed between the parties, or where they are supported by other evidence before us. This means, eg, that we place no weight on the statement by Mr Goodchild at Goodchild WS2 [34] that “I was told by Mr Steve Burdett that The Resort Group constituted a suitable and robust pension investment for his professional SIPP clients”.

Mr Whittam was the sole shareholder of SWUK and a director at SWUK from 5 November 2008 to 8 December 2019. He held various controlled functions at times throughout this period, but held CF1 (Director), CF10 (Compliance Oversight) and CF11 (Money Laundering Reporting) functions at SWUK during the Relevant Period. He was a director at Synergy from its incorporation and was approved by the Authority for this function on 8 March 2016. He was interviewed by the Authority on 25 September 2017 (and we have a transcript of that interview). In his witness statement Mr Whittam described the business of SWUK and Synergy, his relationship with Mr Burdett, and his knowledge of Mr Burdett’s activities.

Mr Bull cross-examined Mr Whittam, challenging him as to his involvement with, and knowledge of, First Review Pension Services Limited (“FRPS”) (the introducer of potential clients to Synergy) and TRG, his knowledge of how the pension funds would be invested by Westbury, and Mr Whittam’s description of the recorded calls of Mr Burdett and the way in which Mr Burdett conducted calls (using the meeting room rather than in the open plan office and switching to his mobile phone rather than continuing calls on the (recorded) telephone lines in the office).

In assessing the credibility of the evidence of Mr Whittam, we identified that Mr Whittam was not neutral and concluded that this influenced the evidence he gave to the Tribunal. The Authority has not taken enforcement action against Mr Whittam, but Mr Whittam was the sole shareholder of SWUK and 50% shareholder of Synergy; these businesses collapsed as a result of the events with which these references are concerned. Mr Whittam placed significant blame on Mr Burdett and made accusations as to what Mrs Whittam had told him that she had heard on recordings of telephone calls conducted by Mr Burdett. Mr Whittam said that all evidence (including recordings of calls) had been handed over to the Authority.

On the basis of all the evidence, we concluded that Mr Whittam understated his awareness of the relationship between FRPS and TRG and his knowledge that a proportion of the funds transferred to the Westbury SIPP would be invested in TRG. This was not credible where FRPS was the only introducer to Synergy and thus the source of all of their clients, Mr Whittam had visited both FRPS and TRG, he and Mr Burdett had worked together in Gibraltar in an open plan office, and there were various emails which showed information relating to TRG being shared between Mr Burdett and Mr Whittam (as well as with Mrs Whittam). We have therefore not accepted large parts of Mr Whittam’s evidence. This has not however, as explained further below, been of much assistance to Mr Burdett, as we need to address the Authority’s allegations in respect of Mr Burdett’s conduct.

Georgina Whittam was Georgina Barry in the Relevant Period, subsequently marrying Mr Whittam. She was an employee of both SWUK and Synergy, holding the CF1 (Director) function at SWUK from 1 June 2015 (having previously held the CF30 (Customer) function from 22 May 2012 to 2 January 2013) and was the compliance manager at both SWUK and Synergy. Mrs Whittam described this role of compliance manager as largely administrative and being the liaison with their compliance consultants. Her evidence was that she had been based in the UK at this time (at SWUK’s office in Deeside) rather than in Gibraltar (which was where Mr Burdett worked).

Mr Bull challenged Mrs Whittam as to the nature of her responsibilities (submitting she was far more than the PA she was trying to describe herself as) and her level of knowledge in relation to Westbury and the investments made within the Westbury SIPP, which included challenging the amount of time that she was spending in Gibraltar during 2016.

Mrs Whittam sought to put all the blame for the events on Mr Burdett, and during cross-examination made two notable accusations:

Both of these allegations are problematic for the credibility of Mrs Whittam’s evidence. They formed no part of the Authority’s case. Mr Whittam (who was also copied in to some of the emails said to have been falsified) had not challenged their authenticity and the Tribunal cannot identify any reason on the face of the emails themselves to doubt that they are what they purport to be. Mr Burdett was aware that calls in the office were recorded (as the recording facilities had been installed at his instigation) and Mrs Whittam said that the evidence she had uncovered had been handed to the Authority, such that if it was damaging to Mr Burdett’s case we would have expected the Authority to put it before the Tribunal and make its case accordingly. We do not accept these allegations.

Furthermore, we shared Mr Bull’s scepticism as to Mrs Whittam’s knowledge of events during the Relevant Period – she was a qualified, experienced compliance manager, and received a number of emails (not only those she said were falsified) relating to TRG and the Westbury SIPP.

We have read the witness statements of the four pension holders, who have given evidence as to how their pension fund transfers into the Westbury SIPP had come about; all four of them have subsequently received compensation from the FSCS. Those witness statements each exhibited documents including a Retirement Planning Report, a Risk Profile Report and the Westbury SIPP application form.

As these witnesses were not able to be cross-examined by Mr Bull we have placed no weight on these statements save to the extent they were supported by other evidence or where the matters addressed were not in dispute. We do make the following points:

Mr Lockie is a financial planner and independent financial adviser and branch principal of Bloomsbury Wealth, a role which he has held at Bloomsbury since 2005. Mr Lockie described the instructions he had been given as follows:

“11.

I understand that the Upper Tribunal has requested expert evidence as follows: “The parties have permission to rely on expert evidence in relation to the risks, and risk level, of the TRG Investments and Model Portfolios (as defined in the Authority’s Statements of Case).”

12.

The Authority asked me to provide my opinion on these issues assuming that a company (Synergy), of which Mr Burdett was a director and 50% shareholder, advised retail pension holders to switch their pensions into SIPPs managed by a firm (Westbury) that was managed and controlled by Mr Goodchild, with Messrs Burdett and Goodchild agreeing that Westbury would use pension holders’ risk profile scores as generated by Synergy from a model supplied by Distribution Technology to select investments for pension holders based on one of Westbury’s three Model Portfolios, and with Messrs Burdett and Goodchild agreeing that each of the three Model Portfolios would have a 40% allocation to TRG Investments. The Authority has asked me to assume that the remaining 60% of each client’s pension was allocated to a mix of suitable assets, such as suitable low risk bonds for clients with a low appetite for investment risk or suitable growth assets for clients more willing to accept investment risk in return for higher returns. Where I have made other assumptions and relied on documents in formulating my opinions, I have identified these assumptions and documents below in this report. The Authority has also asked me to comment on the titles given by Westbury to its Model Portfolios and on the recommended target asset allocation illustrated by pie charts contained in Risk Profile Reports prepared by Synergy.”

In his report Mr Lockie set out the role, duties and required competence of financial advisers and investment managers, addressing the levels of qualifications and experience of both Mr Burdett and Mr Goodchild, an overview of general investment principles relevant to the assessment of risk, including asset classes and principles of investment planning and diversification, and the steps a reasonable financial adviser or investment manager might take to determine which specific products will be employed to build a client’s portfolio. Mr Lockie then looked at the information which he had been provided in relation to the TRG Investments (which included the financial statements of TRG, and offer documents) before then opining on the due diligence conducted by Westbury. Mr Lockie also gave his opinion on various matters which had been raised by Mr Burdett and Mr Goodchild, including in relation to diversification, weighting and volatility. He then assessed the portfolios of the pension holders, including by reference to the risk profile scores which they had been allocated.

Mr Lockie attended the hearing and was available for cross-examination.

Mr Bull declined to cross-examine Mr Lockie, submitting in closing that it was not for Mr Burdett to challenge evidence that did not really concern him. The case presented by Mr Burdett was that it was Westbury alone that had the duty to carry out proper due diligence on the TRG Investments. Mr Goodchild did challenge parts of Mr Lockie’s report (including not only Mr Lockie’s conclusions on risks and suitability but also on the level of exposure to TRG Investments) in the Goodchild SkA. Mr Bull submitted that Mr Goodchild’s absence had prejudiced Mr Burdett as the Tribunal was unable to hear and test these challenges to the expert evidence. At the hearing the panel also put a small number of questions to Mr Lockie.

We have, as with all of the submissions made by Mr Goodchild in the Goodchild SkA, taken account of Mr Goodchild’s challenges to Mr Lockie’s expert evidence when assessing that evidence and reaching our own conclusions.

We found Mr Lockie’s evidence to be helpful and have accepted his conclusions, as explained further below.

We have already referred to the fact that the hearing bundles were extensive. We address two points arising from the evidence of Mr Burdett, Mr Whittam and Mrs Whittam.

Mr Burdett had said in his representations to the Tribunal that Mr Whittam had revealed to him that he and Mrs Whittam had spent a weekend at SWUK’s offices in Deeside deleting emails from the server. We infer that this was being said to have been done before the Authority’s investigation. Mr Whittam denied this in cross-examination, and says he does not know how to delete emails from the server.

Mr Temple explained that Mr Burdett’s emails had not been found by the liquidators of SWUK and Synergy, that very few of Mrs Whittam’s emails were located, and the files that were obtained lacked recent correspondence.

We were not taken to any communications with the liquidators in relation the attempts to retrieve emails, or provided with any more forensic explanations of the position.

We accept that the Authority has not been able to obtain all relevant emails from SWUK and Synergy. We make no findings as to the reason for this. We had a large number of emails in the hearing bundles, most of which had been provided by Westbury in response to information requests from the Authority (which included communications with SWUK and Synergy) and Mr Burdett was able to provide some emails from the Relevant Period (which had been accessible to him on his laptop).

We are satisfied that there is a sufficient array of emails before us to enable us to make findings of relevant facts.

Telephone calls on the office lines in Gibraltar (as well as at Mr Burdett’s office at home in Spain) were recorded. Mr and Mrs Whittam both gave evidence that, after the Authority had started its investigation, Mrs Whittam had listened to these call recordings, was concerned by their content, and provided the recordings to the Authority.

We were taken to the transcript of the July 2016 Call, on which Mr Burdett was cross-examined and which is addressed in our findings of fact. That was the only recording that was disclosed in these references – the Authority did not rely on any other recordings of calls from the Relevant Period, nor were they potentially undermining of its case.

After the hearing, Mr Burdett did provide a further recording, of a conversation he had with the Authority in 2017 in relation to the Authority’s request to interview him in the UK as part of its investigation. We have listened to that recording.

Mr Burdett and Mr Goodchild have both made submissions in relation to different aspects of the conduct of the Authority – including as to its own failure to warn of any risk concerning TRG, the way in which it conducted its investigation, and its decisions in relation to the taking of enforcement action. It is important to identify at the outset that these references relate to the Authority’s allegations in respect of the conduct of Mr Burdett and Mr Goodchild, and not that of the Authority. We address the key criticisms below.

Mr Burdett attended, with Mr and Mrs Whittam, a Supervision meeting with the Authority in November 2016 (which was after the Relevant Period for both Mr Burdett and Mr Goodchild). Mr Whittam was subsequently interviewed by the Authority (in September 2017). Mr Burdett has not been interviewed by the Authority.

Mr Burdett had stated in his reference to the Tribunal that he had been “denied the ability” to be interviewed by the Authority. Mr Temple submitted that Mr Burdett had been invited to attend a compelled interview on multiple occasions, had chosen not to do so (a choice he was able to make as he was living outside the UK at the time) and that, in any event, the absence of an interview (and what the Authority submits is a lack of cooperation) is only relevant to the consideration of any mitigation of the penalty assessed by the Authority.

We have been taken to the correspondence between the Authority and Mr Burdett, the Authority’s notes of its telephone conversations with Mr Burdett and have been sent (by Mr Burdett) a recording of a telephone call which he described as having taken place during the second half of 2017.

We find that Mr Burdett was repeatedly informed by the Authority that they would like to interview him (in person in the UK by way of a compelled interview) – initially during two telephone calls, one in September 2017 (of which we had the recording) and one in November 2017 (by which time the Authority had written to him asking him to provide dates on which he could attend an interview). During the call in November 2017 Mr Burdett agreed to supply the Authority with available dates by the end of that week. We find that Mr Burdett did not provide dates on which he could attend an interview in the UK.

The Authority emailed him several times thereafter, including on 6 February 2018, 11 December 2020, 15 October 2021 and 12 and 23 November 2021. We find that Mr Burdett did not correspond with the Authority between these dates.

Mr Burdett did then write to the Authority (on 24 and 26 November 2021), suggesting that a meeting could be “beneficial” and that he had not seen the earlier invitation to meet in December 2020.

The Warning Notice issued to Mr Burdett was dated 4 March 2022 (and its date of service is addressed in the context of the penalty issued to Mr Burdett). The Authority granted an extension of time for Mr Burdett to provide representations on the Warning Notice, but Mr Burdett did not provide representations within the extended period, and on 12 July 2022 Mr Burdett stated by email that he had come to the view that “due to the unfair (and what appears to me biased) way in which these proceedings have been managed, the only course of action now reasonably open to me is not to engage in the RDC process”.

Whilst Mr Burdett had not, before 12 July 2022, expressly refused to be interviewed by the Authority, we agree with Mr Temple that the evidence before us presents a clear picture of the Authority repeatedly attempting to interview Mr Burdett, and him failing to provide any specific response. It is not the case that Mr Burdett has been denied the opportunity to present his explanation during the course of the Authority’s investigation.

Mr Goodchild criticised the investigation undertaken by the Authority on the basis of procedural unfairness and breach of natural justice. He referred in particular to:

These complaints, even if well-founded (and we are not persuaded that they are, on the basis of the evidence which was before us), are not relevant to the issues before this Tribunal which concern the conduct of Mr Goodchild (and Mr Burdett).

Mr Goodchild submitted at Goodchild SkA [32] that “One of the gravest procedural unfairness’s was the FCA’s decision to publish the Decision Notice (and a related press release naming Mr Goodchild) while this matter was still awaiting determination by the Tribunal. Although the FCA has the statutory ability to publish notice of a Decision Notice, doing so in a contested case is a choice that carries significant prejudice.” Mr Goodchild submitted this destroyed his livelihood and reputation, and that this, coupled with a freezing order which was obtained (and later released) shows a disproportionate exercise of the Authority’s powers.

This issue as to the timing of the publication of the Decision Notice had been raised by Mr Goodchild previously on at least two occasions, and, as the Tribunal has previously decided, the Authority was permitted to publish the Decision Notice and such publication was not premature.

Mr Burdett and Mr Goodchild had both made privacy applications which were heard by the Tribunal at a case management hearing on 22 March 2024. Those applications were refused by Judge Baldwin in a decision which was released to the parties on 3 April 2024. The Authority published the Decision Notices in May 2024. The Tribunal’s decision was subsequently published (with some redactions) on 4 June 2024. This date of publication did not change the date on which it had been released, and does not mean that the publication by the Authority of the Decision Notices had been premature.

Mr Goodchild has criticised the Authority for instructing Mr Lockie to give expert evidence to the Tribunal in these references in circumstances where, at the investigation stage, they had relied on a report from a different expert, Jeremy Beckwith. Mr Goodchild submitted as follows in the Goodchild SkA:

“31.

Expert Evidence – “Cherry Picking” and Withholding: The FCA’s handling of expert evidence in this case is another aspect of unfairness. As noted earlier, the FCA initially engaged an independent expert (Mr Beckwith) to review the investment and Westbury’s conduct. Mr Beckwith’s report was not entirely unfavourable; he found that the Resort Group fund had some positive features and fell within standard asset criteria, and he did not conclude that Mr Goodchild had obviously breached his duties. Rather than accept this or disclose it and perhaps recalibrate the case, the FCA chose to discard Mr Beckwith and obtain a second expert opinion that was more aligned with enforcement’s narrative. The Appellant contends that this tactic – effectively shopping for a harsher expert view – is inconsistent with the FCA’s duty as a public authority to deal fairly and to assist the Tribunal with the full picture. It contravenes the spirit of Part 35 of the Civil Procedure Rules (analogous, though not strictly applicable here) and the principles that expert evidence should be independent. Moreover, the Appellant, being bankrupt or in severe financial strain due to these proceedings, has been unable to commission his own expert to counter the FCA’s second expert. The inequity is apparent: the FCA had two bites at the apple in obtaining expert evidence, whereas the Appellant cannot afford even one. This Tribunal should therefore approach the FCA’s expert evidence with caution and consider whether the ousted first expert’s views (which are known to some extent from disclosure) cast doubt on the conclusions of the second. The way the FCA handled this matter arguably breaches natural justice – akin to not calling a witness likely to assist the defence, which the Seiler Tribunal criticised as a failure of the FCA’s duty to assist the Tribunal.” (bold in original)

Pursuant to the directions of Judge Baldwin which were made following the case management hearing on 24 March 2024, all parties were given permission to rely on expert evidence. There was no requirement that they instruct any particular expert. The Authority were therefore entitled to instruct and rely upon the expert report of Mr Lockie.

Mr Goodchild’s submissions were, however, potentially relevant to the conclusions we were able to reach in relation to Mr Lockie’s report (and his conclusions set out therein). We were concerned to identify whether there was any basis for concluding, as submitted by Mr Goodchild, that the first expert’s opinions cast doubt on Mr Lockie’s. Mr Temple submitted that Mr Goodchild had criticised the expert report of Mr Beckwith as showing bias, and for that reason the Authority decided to instruct an independent expert (and by this time Mr Beckwith was no longer employed by the Authority).

We had a copy of the expert report of Mr Beckwith, which was dated 10 November 2021. Mr Beckwith was employed by the Authority and Mr Temple described him as “an internal expert”. As to that report:

The Authority appears to have sought independent expert evidence, from someone other than an employee of the Authority, to ensure the objectivity of its approach. This is entirely reasonable. In any event, the Tribunal has critically assessed the expert evidence of Mr Lockie before reaching its conclusions in relation to that evidence.

Mr Goodchild submitted at Goodchild SkA [20]:

“20.

… The FCA’s very own conduct facilitated consumer harm. It is respectfully submitted that any alleged consumer harm arising from investments into The Resort Group cannot lawfully or logically be attributed to me, nor to Westbury Private Clients LLP. Rather, it was the failure of the FCA itself to act in accordance with its statutory objectives that created a regulatory vacuum in which consumers were exposed. Failed to issue any consumer or industry warning regarding The Resort Group, despite holding information that could and should have triggered a s.166 review, public warning, or perimeter alert under its PRIN 3.3.1G duty to protect consumers…” (bold in original)

Mr Temple submitted that the Authority’s position is that it does not issue alerts merely because an investment is high risk; and it is unclear what “warning” the Authority could or should have issued – the existence of high risk investments itself is not problematic. It becomes problematic when regulated individuals inappropriately invest consumer pension monies into them.

The Authority’s policy or practice in relation to the issuance of consumer or industry warnings is outside the scope of this Tribunal’s jurisdiction.

Mr Burdett and Mr Goodchild have both submitted that they have been made scapegoats and that others were equally or more culpable.

Mr Bull submitted that Mr Burdett had been made a scapegoat by Mr and Mrs Whittam who were seeking to escape responsibility for their own involvement in the actions of Synergy, drawing attention to the fact that Mr Burdett and Mr Whittam had been equal shareholders in Synergy and they had each received dividends of £150,000 from Synergy. He submitted that Mr and Mrs Whittam had, through the supervisory and enforcement process, sought to place the blame on Mr Burdett.

Mr Goodchild submitted as follows at Goodchild SkA [33]:

“33.

Selective Enforcement/Scapegoating: … The evidence shows that others were arguably more directly responsible for any failings: for instance, Westbury’s own Compliance Officer, whose job was to oversee regulatory compliance, was not sanctioned or even mentioned by the FCA and indeed both he and the compliance assistant have written witness statements supportive of Mr Goodchild. Synergy’s management (the firm that gave the advice) – aside from the Appellant, who had no role at Synergy – have not faced similar enforcement in relation to these investments. The principal firm, Strategic Wealth, that was obliged to supervise Synergy, also appears to have avoided action. And as mentioned, Gaudi, the SIPP trustee, operator and administrator was found to have issues and got shut down only after investors had been harmed through poor pension advice. This gives rise to a reasonable perception that Mr Goodchild was singled out, perhaps because he was a convenient target – a regulated person involved, but not a large institution.” (bold in original)

We need to determine the references which have been made by Mr Burdett and Mr Goodchild. That involves making findings in relation to their conduct and evaluating the allegations made against them by the Authority. The Tribunal does not have jurisdiction to decide who else might or should have been the subject of enforcement action; that is a decision for the Authority.

We make the following findings of fact on the basis of the evidence, including our conclusions on the credibility of witnesses.

There was (taking account of all oral and written submissions) a large amount of agreement between the parties as to what the Authority termed the “Customer Journey”. In this section we make findings on the following issues:

We have made additional findings of fact in our evaluation of the references of each of Mr Burdett and Mr Goodchild.

SWUK was a regulated financial advisory firm based in Deeside which had been established by Mr Whittam in 2008. Mr Whittam was the sole shareholder of SWUK.

Mr Burdett was employed as a financial adviser by SWUK, and held the CF30 (Customer) function from 8 April 2013. Mr Burdett lived in Spain and (before the Relevant Period) spent most of his time working for Strategic Wealth Limited (“SWL”). SWL was also owned by Mr Whittam, and was a financial advisory firm advising retail clients based in Gibraltar. It was regulated in Gibraltar (and not by the Authority). Mr Burdett was a director of SWL and the Head of Private Client Services. Part of SWL’s business involved producing reports for pension trustees of Qualifying Recognised Overseas Pension Schemes (“QROPS”). Mr Burdett was engaged in this work, and produced reports for Optimus (a pension trustee) in relation to the Optimus QROPS.

At a board meeting of SWUK on 4 January 2016 SWUK resolved to appoint Synergy (which had not yet been incorporated) as an appointed representative of SWUK offering restricted pensions advice (for UK pension holders).

Synergy was incorporated on 11 January 2016 with Mr Whittam as the sole shareholder. At the time of its incorporation, Mr Whittam was registered as the sole director and Mrs Whittam as the company secretary. Shortly after incorporation, Mr Burdett became an equal shareholder in Synergy and he was appointed as director of the company on 29 January 2016. Mr Burdett’s appointment was registered at Companies House on 2 February 2016.

SWUK applied to the Authority for approval to appoint Synergy as an appointed representative of SWUK. The Authority approved the appointment on 10 February 2016 and updated their records with effect from that date. Synergy then employed Mr O’Donovan as investment adviser. Mr O’Donovan had previously worked with both Mr Whittam and Mr Burdett.

SWUK applied for approval for Mr Burdett to perform controlled function CF1 (Director) of Synergy, submitting Short Form A on 17 February 2016 (which also recorded that he held the CF30 (Customer) function at SWUK), and Long Form A on 23 March 2016. This application was not approved by the Authority.

Mr Goodchild was a co-founder of, and partner in, Westbury, a discretionary investment manager which had been established on 15 November 2010. He was Chief Investment Officer and held controlled functions CF4 (Partner) and CF30 (Customer). Westbury had been the investment manager for the Optimus QROPS since at least mid-2015.

On around 18 February 2016 Mr Burdett signed the Westbury Terms of Business for Intermediaries (the “Westbury Terms of Business”) on behalf of Synergy. This governed the relationship between Synergy and Westbury.

The following companies were involved in various aspects of the arrangements:

The initial contact with individual pension holders was made by FRPS, and it was FRPS’s agents who had all the in-person contact with pension holders. Having made contact with these potential clients, FRPS started to introduce them to Synergy from mid-February 2016.

The forms which were completed by pension holders were provided to FRPS by Synergy, and were Synergy-branded.

At the first meeting with potential clients, FRPS provided them with a copy of Synergy’s client agreement and the pension holders completed a “Personal Client Retirement Planning Questionnaire”:

This completed questionnaire was then sent to Synergy by FRPS. There was then a call between Mr O’Donovan at Synergy and the pension holder, following which Synergy produced a “Risk Profile Report”.

The Risk Profile Reports:

This pie chart did not reflect the investments that were then made in the Westbury SIPP.

Synergy then produced a Retirement Planning Report for each pension holder to whom they were introduced, which included:

The earliest Retirement Planning Report in the bundle was dated 15 March 2016, and we find that this was when Synergy started to send such reports to pension holders, either via FRPS or directly.

To switch their pension into the Westbury SIPP, the pension holder then signed:

The Retirement Planning Reports were not sent to Westbury at this time; the only evidence of such a report being sent to Mr Goodchild was a copy of one report which was sent on 27 June 2016. Instead, Synergy informed Westbury of the risk profile score of each pension holder who applied to transfer their pension to the Westbury SIPP.

The Authority’s position was that in each case approximately 40% of the assets of each pension holder which were transferred to the Westbury SIPP was invested in TRG Investments. Mr Goodchild submitted it was less than this amount, and in any event that TRG Investments were low risk; and Mr Burdett disputed what had been envisaged and submitted that responsibility for suitability lay with Mr Goodchild. We consider these submissions further below.

We first make some findings relevant to the Westbury SIPP.

232 pension holders transferred their pensions to the Westbury SIPP and had some of their pension funds invested in TRG Investments. These pension holders were each sent a Risk Profile Report with a target asset mix.

Westbury had three strategies, or “model portfolios”, which it stated were to be used for the investment of assets in the Westbury SIPP. These model portfolios were named Global Cautious, Global Balanced and Global Growth. The description of these portfolios and the factsheets in relation to them did not include any TRG Investments.

The amounts that were transferred to the Westbury SIPP which were not invested in TRG Investments, or remained in cash, were invested in accordance with these model portfolios; and the relevant portfolio to be used was determined by reference to the risk profile score which was allocated by Synergy to the individual pension holder. The Authority did not challenge the suitability of this (non-TRG) portion of the investments.

As at 30 September 2016, £4,065,146.01 was invested by Westbury in TRG Investments. At that date, the total value of assets held in the Westbury SIPP was £10,474,376.42 (recognising that this would not have been the value transferred as there would have been movement in the value of non-TRG Investments albeit that the absence of volatility in the TRG Investments meant that they were recorded as amounts invested).

On 30 June 2016 the Authority emailed Mr Molloy of Westbury asking questions about Westbury, including why so much of the business introduced from Synergy was invested in TRG Investments.

From around 4 July 2016 Gaudi stopped accepting new transfers into the Westbury SIPP and no further money which had been transferred to the Westbury SIPP was invested in TRG Investments.

On around 11 July 2016 a BBC Panorama programme aired making allegations about FRPS and TRG. We were not shown this programme or any part of it; but accept that the tenor of the programme was negative about the pension reviews conducted by FRPS and the investment in TRG’s operations in Cape Verde.

The Authority visited Mr Goodchild at Westbury’s offices on 4 and 5 August 2016. On 5 August 2016 Mr Goodchild undertook that Westbury would stop any pension-related business.

On 16 and 17 November 2016 SWUK and Synergy (Mr Whittam, Mr Burdett and Mrs Whittam) attended a meeting at the Authority. On 21 November 2016 SWUK applied for a Voluntary Requirement to be imposed, requiring SWUK and Synergy to cease all pensions business and to retain assets.

We have summarised at [20] to [33] above the allegations by the Authority which they relied upon in support of the imposition of the prohibition orders and the assessment of penalties, as well as the responses of Mr Burdett and Mr Goodchild.

By way of overview of the parties’ positions on suitability:

We remind ourselves that recklessness has subjective and objective elements, and that the subjective element focuses on the state of knowledge of each of Mr Burdett and Mr Goodchild as to the risks concerned and the objective element focuses on the question as to whether it was reasonable for them to have ignored those risks.

The data presented by the Authority in relation to the level of the investments in TRG Investments had not been challenged until Mr Goodchild did so in the Goodchild SkA and Goodchild WS2. Mr Goodchild previously apparently accepted that the percentage of funds invested by Westbury in TRG Investments was 39% – in his notes on the Warning Notice, which had referred to a 40% exposure to TRG Investments, Mr Goodchild had said the allocation to TRG was “below 40% it was actually 39%”.

Nevertheless, in Goodchild WS2 Mr Goodchild challenged both whether the TRG Investments were unsuitable and high risk and the level of exposure to these assets:

“21.

The FCA’s Decision Notice alleges, among other things, that I “invested 207 pension funds in unsuitable, high-risk investments.” This appears to refer to the number of pension clients whom the FCA believes ended up invested in the Resort Group Falcon SICAV Class B2 GBP Fund (“Resort Group fund”), which the FCA characterises as high-risk and unsuitable. This allegation is misleading and factually inaccurate. Based on the FCA’s own data (as disclosed in the enforcement investigation), there were 289 relevant clients in total whose pensions were under Synergy’s management and were reviewed by the FCA. Of those, 57 clients’ portfolios contained 100% cash and no exposure to the Resort Group fund (or to any other investments) – these clients held only cash in their Self-Invested Personal Pension (SIPP) accounts. That leaves 232 clients who had any allocation to the Resort Group fund at all. Thus, the figure of “207” cited by the FCA does not accurately represent the number of clients invested; in fact, the universe of clients with the investment was 232, and 57 clients had no investment in the fund whatsoever.

22.

Moreover, the level of exposure to the Resort Group fund among those 232 clients was far more modest than the FCA has portrayed. According to the data analysis, the average weighting of the Resort Group fund across those 232 portfolios was approximately 22.3% of the portfolio value – not the 39% (or 40%) that the FCA asserts. Indeed, many of those clients’ portfolios contained significantly lower exposures to the fund. Several portfolios had single-digit percentage allocations (well below 10%). The FCA’s characterisation of my conduct as having placed “nearly 40%” of each client’s pension into a high-risk investment is therefore inaccurate and grossly overstated. The reality is that the portfolios were diversified, and the Resort Group fund, where present, constituted roughly a fifth (on average) of the pension portfolios, with many cases being much less. With over 1000 underlying investments on average in each portfolio.

23.

It appears that the FCA, in its analysis, erroneously included the 57 cash-only clients in its calculations or general narrative, which had the effect of inflating the perceived scale and severity of the issue. By lumping in dozens of clients who had no exposure to the fund, the FCA distorted the overall figures – for example, any average “allocation” statistic is skewed if one includes a large subgroup that was not invested at all. This approach created a false impression of “mass” high-risk investment, where in truth a significant portion of the client base had no such investments. Such data misrepresentation by the FCA is troubling and, in my view, forms part of a wider pattern of unfairness in how the case against me has been pursued.” (bold in original)

We have considered Mr Goodchild’s arguments as to the level of exposure within the Westbury SIPP and reach the following conclusions:

We reject Mr Goodchild’s submission that the Authority has misrepresented the data. Furthermore, whilst Mr Goodchild says that “The reality is that the portfolios were diversified”, we agree with Mr Lockie’s opinion that this was not the case.

The Authority’s allegations included that the TRG Investments were obviously high risk, and that this risk was compounded by the risks arising from a 40% allocation to TRG Investments.

In the Goodchild SkA Mr Goodchild’s submissions included the following:

“7.

The Resort Group Fund and its Inclusion in Portfolios: The investment at the heart of the FCA’s case is an open-ended fund known as Resort Group Falcon SICAV Class B2 GBP (referred to herein as “the Resort Group fund” or “the Fund”). In or around late 2014 to early 2015, Synergy proposed to include the Resort Group fund as a constituent in several of its model portfolios which Westbury managed on an execution basis for Synergy. Prior to accepting Synergy’s request to add this fund to the portfolios, Westbury undertook extensive due diligence on the Fund. The due diligence process, which will be evidenced in documents and testimony, included, inter alia: (a) reviewing the Fund’s offering documents and regulatory status (confirming it was structured as a regulated SICAV fund and, notably, that it qualified as a “standard asset” permissible in Self-Invested Personal Pensions (SIPPs) under HMRC/FCA rules); (b) obtaining third-party verification of the Fund’s key commercial arrangements – for example, confirming that the TUI Group (a major, reputable travel company) had contracted to underwrite approximately 85% of the Fund’s future income, thereby providing a significant revenue backstop; (c) analysing the Fund’s financial statements, including the 2014 audited accounts (audited by Deloitte) which showed a profit of €23.67 million, indicating the Fund’s underlying projects were, at least at that time, profitable; (d) consulting Westbury’s internal compliance and risk officers, and using industry-standard risk assessment tools (such as Distribution Technology’s risk profiling system) to evaluate how the Fund would comport with the risk/volatility targets of the model portfolios. The Distribution Technology tool in fact assigned the Fund a “low volatility” risk score, consistent with it being a relatively moderate investment suitable for inclusion in cautious or balanced portfolios. It is important to note that Distribution Technology was the choice risk profile tool used by Synergy on its clients and Westbury NEVER carried out any client risk profiling whatsoever.

8.

FCA’s Lack of Warning: It is notable that during the relevant period when Synergy (through Westbury) was investing in the Resort Group fund for its clients (approximately mid-2015), the FCA had issued no warnings or alerts to the industry about the Fund. There is no suggestion that the Fund was on any FCA watchlist or that firms were cautioned against it. The Fund was, on its face, a regulated vehicle and even the FCA’s own initial expert (Mr. Beckwith) opined that it fell within the FCA’s definition of a standard asset and did not pose obvious concerns. Only after Westbury had already begun facilitating these investments (and indeed only a few months after the first investments were made) did the FCA commence an intervention. …

15.

… The Appellant will demonstrate that the FCA’s factual assertions about the portfolio composition and risk levels are materially incorrect, and that, in any event, the Resort Group fund was not obviously inappropriate for inclusion in the portfolios given the information available at the time.” (bold in original)

There are a number of problems with the due diligence described at Goodchild SkA [7]. We consider the lack of evidence of critical scrutiny of the risks in the context of our evaluation of the conduct of Mr Goodchild. In any event, it is sufficient at this stage to record that eligibility under HMRC rules has nothing to do with an asset’s riskiness; the TUI arrangement did not exist in the form suggested when Westbury started to make investments into TRG Investments; audited accounts of a building project cannot be expected to reveal losses with respect to an ongoing construction project until it is finished; and volatility risk measures the fluctuations in the value of an asset not its propensity to fall significantly in value – an asset which lacks a secondary market will frequently lack volatility.

The Tribunal prefers the opinion of Mr Lockie. Mr Lockie convincingly explained why, in line with their own documentation, each of the TRG Investments were “high risk”. He rejected Mr Goodchild’s analysis. Mr Lockie’s conclusion at [203] to [205] of his report, with which the Tribunal agrees, was:

“203.

On the basis of my review of the materials provided, it is clear to me that not only were the various TRG Investments high risk and consequently unsuitable for most pension investors, particularly those who were inexperienced and unsophisticated, but that it should have been obvious to any experienced investment manager or financial adviser that this was the case. The allocation of such a high percentage of the Model Portfolios to the TRG Investments linked to a single entity dependent on a single industry and based in a tiny economy would have been speculative (as one of TRG’s own offer documents stated) even without considering the weak financial position of TRG.

204.

The high-risk nature of all three of the TRG investments would have been obvious to a reasonable investment manager and a reasonable financial adviser from the documentation provided by the issuers. Consequently, their inclusion at such a high percentage of the three Model Portfolios also rendered those Model Portfolios obviously high-risk and therefore unsuitable for low- and medium-risk investors identified by risk profile scores of 3 to 7 because the c.40% TRG Investments allocation increased the risk beyond what they would reasonably have expected given their assigned risk categories. For investors with higher risk profile scores (8 to 9), they would reasonably be expecting appropriate compensation in the form of higher potential returns for the additional risk that they would be expecting given their risk categories. However, despite the high unsystematic risk of the TRG Investments, both the TRG Corporate Bonds and the Falcon RDF were debt investments (the Escher Marwick ETP appears to have entailed some property rights of an unclear nature) and so would have had limited upside compared to the diversified equity investments which would be more typical for such risk groups. It is therefore my opinion that the TRG Investments were obviously also unsuitable for around 40% inclusion in the Model Portfolios in which investors in risk profile categories 8 and 9 would be investing.

205.

Since individual risk profiles had been produced for each investor and these included a target portfolio mix appropriate to their allocated risk group, it would have been reasonable for them to have concluded that their actual portfolios would resemble, at least to a reasonable extent, those targets unless it had been clearly explained to them that this would not be the case. I have not seen evidence that these differences were explained to investors, so Synergy’s documentation would have been misleading. Further, by widely employed convention, portfolios managed by the same entity which bear the names ‘Cautious’, ‘Balanced’ and ‘Growth’ would be expected by a reasonable investment manager or financial adviser to reflect an increasing exposure to equities from Cautious to Growth, with the exposure to cash and bonds reducing accordingly. The evidence shows that in reality, the average allocation to TRG Investments was fairly consistent across all Model Portfolios at around 40% of the total. This made all of the Model Portfolios high risk regardless of what other assets made up the balance and consequently the names ‘Cautious’ and ‘Balanced’ were misleading.”

In response to a follow-up question “For an investor who has expressed a willingness to take high risk, are there parameters for the extent of the holding you might expect an investment manager to decide was acceptable?”, Mr Lockie’s opinion was:

“…In my experience investors don't tend to seek high risk. They may be willing to accept high risk in pursuit of their objectives and they are more likely to seek high returns, to help them achieve their objectives, and high risk comes along with an expectation of high returns.

But I never find that investors turn up saying "I want something very risky" and then expect you to come up with something very risky. They might say "I want something that should generate a high return and I am willing to accept the risk to take that." Whether it transpires they actually are and they should is a different matter, but I have never come across anyone who says "I want something really risky".

Mr Lockie was then asked about the position where a manager identifies a class of assets that they decide may give the high returns but carries with it the high risk, what percentage composition of a portfolio might this look like. Mr Lockie’s opinion was as follows:

“…for somebody with a portfolio where they are focused on the very long-term, sort of ten years plus or maybe even longer than that, … then maybe 10%. But that is assuming that that 10% is going into something which is diversified within that asset class. So it doesn't mean 10% of something risky, where if it all goes wrong then they would lose the lot.

The approach we take with the kind of things where we think the value could go to zero is more along the lines of probably absolute maximum 5% of their investable assets and we would exclude it from their plan. So if it does going to zero, then it shouldn't affect anything. It is just bad luck. But then their future is not dependent on it working.”

Mr Lockie was referred to Mr Goodchild’s evidence at Goodchild WS2 [22] that the level of exposure was in fact 22.3% (which we have found was not correct), and said that

“even 20% of a portfolio invested in a single company, in a single tiny economy, in a single sector, would be massively overweighting.

…the GDP of the Cape Verde islands at the time was about 1/500^th of 1% of global GDP. So I would have to have an extremely optimistic view as to the importance of that economy to justify putting 20% of a portfolio into it.”

We accept and agree with Mr Lockie’s expert opinion.

In Mr Burdett’s reference, the two areas of dispute between the parties related to:

There is a large amount of overlap between the facts and matters which are relevant to our consideration of these issues. We address various aspects of the conduct of Mr Burdett which were relied upon by the Authority and then reach conclusions on the key allegations which have been made by the Authority.

By the beginning of the Relevant Period, Mr Burdett was an experienced financial adviser. He had worked as a financial adviser for 11 years prior to the Relevant Period and had held the CF30 (Customer) function at SWUK since 8 April 2013.

Mr Burdett held Financial Planning Certificates 1, 2 and 3 from the Chartered Insurance Institute (“CII”) since November 2004, obtained a Level 4 diploma from the Institute of Financial Services in January 2011 (“IFS”), had completed the required “gap filling” continuing professional development and was a member of both the CII and IFS.

In cross-examination Mr Temple explored Mr Burdett’s understanding of the role of a financial adviser. Mr Burdett was asked about how you would decide whether an investment was suitable for a client, and responded:

“That is quite a big question. So typically an investment would come down to the client's objectives: whether they were looking for income or for growth; the investment time frame; their attitude to risk; whether they've got any ethical concerns. So there is a number of things that you would take into consideration.”

Mr Burdett agreed an adviser would take into account the importance of a diversified portfolio.

Mr Burdett did not always read publications directed at financial advisers and had not been aware of, or read, an alert published by the Authority in April 2014 titled “Pension transfers or switches with a view to investing pension monies into unregulated products through SIPPS – Further alert”.

That alert clearly set out the Authority’s view (under the heading “Our view”):

“We believe pension transfers or switches to SIPPs intended to hold non-mainstream propositions are unlikely to be suitable options for the vast majority of retail customers. Firms operating in this market need to be particularly careful to ensure their advice is suitable.”

Mr Burdett accepted that this view, and the Authority’s position on what this means for firms, was reasonable. When put to him that Synergy should have concerned itself with the suitability of the underlying investment, Mr Burdett’s response was that Synergy did concern itself with Westbury as the investment manager, and deemed Westbury to be suitable as an investment manager.

Mr Burdett did accept that he needed to know into which kind of investments Westbury was going to invest; and the rough percentages in which they were going to invest.

Mr Burdett and Mr Goodchild were introduced to each other in late 2015. Both were already involved with the Optimus QROPS at that time – Westbury was the discretionary investment manager for the QROPS and SWL was writing reports for the pension trustee. FRPS introduced clients to Optimus on the understanding that some of the funds transferred by these clients to the Optimus QROPS would be invested in TRG Investments. The Authority and Mr Burdett did not agree as to the proportion of the funds transferred to the Optimus QROPS which were invested in TRG Investments, and there was insufficient evidence before us to make a specific finding, but we are satisfied (and find) that it was not less than 30% of the funds transferred (this being accepted by Mr Burdett) and for some pension holders was up to 50% or 60%.

Mr Burdett agreed, and we find as fact, that:

Mr Burdett described it as being normal for investments to be introducer-led, with his explanation for this in cross-examination being as follows:

“Q. As an IFA why would you be looking to put investments into something that the introducer wanted you to invest in?

A. Because when they send referrals through, often an introducer will send clients that are interested in investing in their products. So they will say we have these clients, they need advice either setting up a suitable structure or vehicle or pension to enable them access to these investments. So it was normal for investments to be introducer-led.

Q. Well, as an IFA, isn't it your duty to select the most suitable investment for your client, not something that the introducer wants?

A.

If you are having referrals for a particular thing then you are looking at a particular thing.”

Mr Temple suggested it was wholly inappropriate to allow the introducer to dictate the investment, to which Mr Burdett’s response was:

“The client at the end of the day has the option of saying yes or no. If somebody introduces the client with the intention of doing one thing and then you try and do something different with the client then the client is going to object to that.”

Notwithstanding this explanation being based on what the client apparently wanted, FRPS was the introducer for all of Synergy’s clients and Mr Burdett did not discuss with FRPS what their agents talked to potential clients about. Mr Burdett knew that these agents were there in the initial meeting with pension holders to gather information and to complete documentation which would then be sent on to Synergy. Mr Burdett did not speak to the pension holders or advise them himself, he did not know whether the pension holders spoke to Mr O’Donovan about the prospect of investing in TRG, nor did he discuss with FRPS what they would be saying to the clients at meetings once Mr O’Donovan had produced the report.

Instead, the discussions Mr Burdett was having with FRPS at the beginning of 2016, shortly before the meetings between FRPS and pension holders began, were about the process flow of how documents would be sent from Synergy to FRPS, and on to agents and returned to Synergy.

Before the hearing, Mr Burdett had accepted the Authority’s allegation that “by 4 April 2016 at the latest, Mr Burdett knew that all pension holders switching their pensions into the Westbury SIPP would have up to 40% of their funds allocated to the TRG investments, and that Gaudi were raising questions about the allocation and the “unusual” circumstances”. Mr Burdett emphasised that Westbury had informed Synergy that they would allocate “up to 40%”, and that it was an expectation that different risk profiles would have a different weighting to the TRG assets – “only the most adventurous would hold up to 40%”, and Westbury had 100% discretionary control over the portfolios.

This supports a finding of fact that Mr Burdett knew by 4 April 2016 that Westbury would invest up to 40% of pension funds transferred to the Westbury SIPP in TRG Investments. However, the Authority’s case went further than this, and was that, from the very beginning Mr Burdett knew that funds would be invested by Westbury in TRG Investments and that this would be a standard proportion of 40% (or approximately 40%), irrespective of the risk profile score of the relevant pension holder.

In assessing this question of fact, we have taken account of all of the evidence, including the emails to which we were taken (and Mr Bull’s submission that some emails could be explained as being a reference to the Optimus QROPS rather than the Westbury SIPP), Mr Burdett’s evidence at the hearing and the transcript of the July 2016 Call.

On the basis of all of the evidence, we find that, from the beginning of the arrangements, when FRPS was having the discussions with pension holders in February 2016 and then introducing them to Synergy, Mr Burdett knew that the intention was that approximately 40% of the funds of each pension holder that were transferred to the Westbury SIPP would be invested by Westbury in TRG Investments, and that this was to be the case irrespective of the risk profile score of each pension holder. We explain this below.

During cross-examination, Mr Burdett accepted that he knew FRPS and TRG worked very closely together, and he thought “probably between 15 and 25”% would be going to TRG, depending on the client’s risk profile. His evidence was that he only became aware it was 40% in TRG Investments after the investments stopped.

Mr Burdett had been involved in discussions with FRPS and Mr Goodchild (who was ultimately managing the Westbury SIPP and was making the investments in TRG Investments) from the end of 2015. They were working together throughout the establishment of the arrangements, generally speaking to and meeting with FRPS together, both being involved in the various emails exchanges with Directus (and where Mr Goodchild had an exchange of emails with Directus this was, on at least some occasions, then forwarded to Mr Burdett).

Before any pension holders transferred their pension funds to the Westbury SIPP, Mr Burdett was already familiar with the investments which had been made by Westbury for the Optimus QROPS, where there were high levels of investment in TRG Investments. (Mr Burdett agreed that the lowest level there was 30%).

Furthermore, Mr Burdett’s evidence was not consistent with the various email exchanges from the beginning of 2016:

We were not shown any email where Mr Burdett had challenged this reference to “up to 40%”. In cross-examination, Mr Burdett’s explanation was that he was not aware that it was to be 40% across all pension holders. We have difficulty accepting this explanation on the basis of all the evidence, and these doubts are reinforced by subsequent events and Mr Burdett’s subsequent actions:

We record for completeness that our finding of fact is consistent with the explanation which Mr Goodchild provided to the Authority when he was interviewed in July 2017. Mr Goodchild was asked “what was the minimum allocation for Resort Group on the portfolios?” and stated 40%. He explained that they (which we infer was Westbury) characterised TRG as a low risk investment and the balance, the other 60% was made up of higher risk assets as you went up the risk scale. Mr Goodchild repeatedly referred to this 40% allocation, saying:

Mr Goodchild’s explanation was that Mr Burdett and Synergy had been involved throughout in the decision as to how much to invest in TRG, stating that Mr Burdett had initially wanted this to be 60%, but that the Westbury Investment Committee had decided that the allocation would be 40%.

We recognise that Mr Goodchild’s non-attendance as a witness meant that Mr Bull was not able to cross-examine Mr Goodchild on these statements; and that Mr Goodchild (in the Goodchild SkA and Goodchild WS2) has now backed away from this position by focusing only on the Resort Group fund, ie the Falcon RDF. We have not placed any weight on this hearsay evidence when making our findings in relation to Mr Burdett’s knowledge.

When asked about what due diligence enquiries and investigations he had done into TRG, Mr Burdett’s evidence was that he wasn’t responsible for the due diligence; he had passed all the documents on to Mrs Whittam to carry out that task. This included, eg, reading the offering supplements and satisfying herself of liquidity. Mr Burdett also referred to knowing that the investment manager had done due diligence on TRG and was happy to allocate to TRG Investments.

We find that Mr Burdett had sent documentation relating to both Westbury and TRG to Mrs Whittam; Mrs Whittam had said this was to be put on the file, and she had not done anything else with the documentation relating to TRG (as her evidence was that she did not know what TRG was or that any investment would be made in TRG). There was no documentary evidence of Mr Burdett asking Mrs Whittam about the results of this due diligence (other than a reference to Mrs Whittam having said that she had the due diligence, which we infer refers to her having received the documentation which Mr Burdett had forwarded).

Mr Burdett did not meet any of the pension holders, and was not the investment adviser at Synergy.

Mr Burdett did, however, know what documentation was being sent to pension holders by FRPS. That documentation included the Personal Client Retirement Planning Questionnaire, the Risk Profile Report and the Retirement Planning Report.

Mr Burdett did not accept that he had reviewed and amended the templated text in the documents that were used by Synergy. He said they were the documents used by SWUK, which had been approved by SWUK’s compliance consultants, on which he had changed the logos and made amendments to remove references to SWUK and to reflect Synergy’s restricted adviser proposition. We accept that the documentation was based on that which was being used by SWUK. However, we find that Mr Burdett had read the templated text and he knew what it said. In particular, he knew:

Mr Burdett’s evidence was that this pie chart was “just an illustration”; but the report very clearly states that this is the recommended target asset mix, based on that pension holder’s attitude to risk

Mr Burdett knew what clients were being told in these documents; and accepted that “any adviser would agree that asset allocation is one of the most important things”. We find that when pension holders were advised by Synergy, they were receiving a document recommending a target asset mix that Mr Burdett knew would not reflect the actual investments that would be made by Westbury. Mr Burdett’s knowledge is then, we infer, the reason for his lack of action when, towards the end of the arrangements, on 24 June 2016 in an email from Gaudi to Mr Burdett (copied to Mr Goodchild), Gaudi identified that for a particular client the target asset mix in the report “bears no correlation to a fund that is invested into one SICAV”. He knew throughout how the information was being presented to pension holders.

We agree with Mr Lockie’s conclusion at [205] of his expert report that:

“205.

Since individual risk profiles had been produced for each investor and these included a target portfolio mix appropriate to their allocated risk group, it would have been reasonable for them to have concluded that their actual portfolios would resemble, at least to a reasonable extent, those targets unless it had been clearly explained to them that this would not be the case. I have not seen evidence that these differences were explained to investors, so Synergy’s documentation would have been misleading.”

In July 2016 Gaudi stopped accepting new applications for the Westbury SIPP and stopped investing the money that had already been transferred to it in TRG Investments. A few days later, the Panorama programme was shown on TV.

The July 2016 Call involved Mr Burdett, Mr Goodchild, Optimus and Directus, and included discussions in relation to both the Optimus QROPS and the Westbury SIPP. After Optimus had left the call (because the participants had finished discussions in relation to the Optimus QROPS), the Directus participants were explaining that they had a call later with TRG and would need to explain that it was not their fault that Gaudi would not change their mind (and allow more investments to be made into the TRG Investments) and that it was not their fault that all this money was “in the system”. The focus in this call was not on the pension holders, but on placating TRG, and Mr Burdett told the others that there was “no immediate short term solution that’s going to give [TRG] everything they need”, and once they received the returned application forms from Gaudi, they would see which clients they were and they could put those with another company.

Throughout 2016, the Authority’s SUPP 10A.4.4R contained a definition of “director” which applied for the purposes of the CF1 (Director) function within an appointed representative, and which refers to SUP 10.6.7R and 10.6.8R. The latter includes within the definition of “director”:

“the function of acting in the capacity of a person:

(a)

who is a director, …. and

(b)

whose decisions or actions are regularly taken into account by the governing body of the firm.”

Synergy had two appointed directors, Mr Burdett and Mr Whittam, with Mrs Whittam acting as compliance manager and Mr O’Donovan as the investment adviser.

Mr Burdett’s evidence suggested that he had tried to avoid carrying out any regulated activities and was acting as a non-executive director. Acting as a non-executive director would have required a different application to the Authority for approval because such a director of an appointed representative would have to be approved to hold the CF2 (Non-executive director) function. No such application was ever made.

We have assessed the actions of Mr Burdett and have concluded that the contemporaneous documentation (including emails and signed agreements) and the evidence of Mr Burdett as to his meetings and role support the conclusion that, in line with his appointment as such by Synergy, Mr Burdett was acting in the capacity of a person who is a director and “whose decisions or actions are regularly taken into account by the governing body of the firm” throughout the Relevant Period.

It is clear that Mr Burdett was dealing with external counterparties on behalf of Synergy, using an email signature that stated that he was a director:

Mr Burdett was clearly involved in setting the proportions of funds that would be invested in TRG Investments and in creating the Synergy proposition, dealing with both FRPS (the only introducer to Synergy) and Westbury (the investment manager of the only product that was recommended by Synergy).

Whilst Mr Burdett’s evidence included that Mr Whittam was fully involved in the decisions which form the subject-matter of this reference, he has never stated that he was just following Mr Whittam’s instructions. This reflects the picture we can see from the documentation – Mr Burdett did send some information to Mr Whittam by email (eg on 27 February 2016 Mr Burdett updated Mr Whittam on a discussion he had had with Mr Goodchild about the selection of the risk-based investment strategy), but there is no evidence in the emails that Mr Burdett needed to obtain, or said he needed to obtain, Mr Whittam’s approval of any actions undertaken on behalf of Synergy.

Mr Burdett signed key documents on behalf of Synergy:

Whilst Mr Whittam had met with FRPS and TRG at an early stage, Mr Burdett accepted that he was the “face of the company”. Mr Burdett was meeting third parties, negotiating with them (to the extent required), making decisions and signing documents on behalf of Synergy. It does not matter for this purpose that he was not advising clients himself. We conclude that not only was Mr Burdett appointed as a director by Synergy but that he was acting in the capacity of a person who was a director of Synergy and whose decisions or actions were regularly taken into account by the board of Synergy.

It is not sufficient for the purposes of s63A FSMA 2000 that Mr Burdett was performing a controlled function without approval, that section requires that “at that time [Mr Burdett] knew, or could reasonably be expected to have known, that [he] was performing a controlled function without approval”.

Mr Burdett knew that approval was required for him to act as a director of Synergy. He already held a controlled function at SWUK, and whilst he emphasised that he had been based in Gibraltar in recent years and was less familiar with the UK regulator, this would have been known to him from his training and his experience in the UK market. He did accept this in cross-examination.

Mr Burdett was involved in the preparation of the applications to the Authority for approval (albeit that such applications were submitted by Mrs Whittam). Mrs Whittam (for SWUK) submitted Short Form A on 17 February 2016 (which also recorded that Mr Burdett held the CF30 (Customer) function at SWUK), and Long Form A on 23 March 2016.

We have referred at [82(4)] to Mr Burdett’s evidence as to what he knew about whether approval had been granted.

On the basis of all of the evidence we do not accept that Mrs Whittam told Mr Burdett that he had been approved, and find that Mr Burdett knew at all relevant times that he had not been approved and knew that he was therefore acting as a director without approval. In reaching this conclusion we have put particular weight on the contemporaneous emails, as the events in question were more than nine years before the hearing and occurred in a relatively short period:

We have reached our conclusions above in relation to the suitability of TRG Investments, concluding they were obviously high risk. We have also made findings in relation to Mr Burdett’s knowledge that the intention was that approximately 40% of the funds of each pension holder that were transferred to the Westbury SIPP would be invested by Westbury in TRG Investments, and that this was to be the case irrespective of the risk profile score of each pension holder.

From the cross-examination of Mr Burdett, it was clear that:

Whilst Mr Burdett was not the investment adviser at Synergy, and nor was he the investment manager, he nevertheless knew that funds would be invested in TRG Investments and he knew the high risks to which all investors were being exposed.

In the Decision Notice one of the allegations relied upon by the Authority was that Mr Burdett recklessly gave those with compliance responsibilities at SWUK and Synergy misleading information about the investments that pension holders would be making. The Authority ceased to rely upon this in their Statement of Case. Nevertheless, Mr Temple cross-examined Mr Burdett on the emails which he had sent to Mr and Mrs Whittam attaching factsheets for the three model portfolios which did not include TRG Investments. Mr Burdett denied having misled Mr and Mrs Whittam, saying that everyone in the office was fully aware of the role that Synergy was engaged in with FRPS, Westbury and TRG.

Mr Bull cross-examined Mr and Mrs Whittam about their involvement and knowledge in relation to the arrangements.

We need to assess these allegations in relation to the involvement and knowledge of Mr and Mrs Whittam. Mr Bull heavily relied upon what he submitted was their involvement and knowledge of the arrangements. At the hearing the Authority’s case was presented as including that Mr Burdett had sent misleading information to Mr and Mrs Whittam, and in the Authority’s written closing submissions Mr Temple submitted that Mr Burdett had been “keeping others in the dark”.

We have set out above our doubts as to the credibility of both Mr Whittam and Mrs Whittam. We do not accept all of their evidence.

Mr Whittam’s evidence included that he had met with FRPS once, and had been shown the offices of TRG as a company that FRPS did the marketing for but was not aware that TRG was an investment provider. He could not recall if he was aware that FRPS was owned by TRG during the time when Synergy was providing the advice. He said that the Supervision meeting in November 2016 was when he first realised that the model portfolios for the Westbury SIPP were invested in TRG Investments.

Mrs Whittam’s evidence was also that she did not know that the Westbury SIPP would be invested in TRG Investments, and did not know that the references to the “Resort clients” in emails from Mr Burdett (eg on 7 March 2016) were references to TRG and did not recall being sent the brochure for TRG.

We were taken to the factsheets for the model portfolios which were sent by Mr Burdett to Mrs Whittam and find that these factsheets do not refer to TRG Investments. However, we do not accept that Mr Burdett was misleading Mrs Whittam when he was sending this (and other) information to her, or that he was misleading Mr Whittam generally. This is because we find that they were both aware of the overall arrangement with FRPS, Westbury and TRG, and knew that some of the pension funds of pension holders introduced to Synergy by FRPS who transferred their pension funds to the Westbury SIPP would have some of those funds invested in TRG Investments. Once they had this knowledge, it is not misleading for Mr Burdett to send them information about the remainder of the portfolio.

Our conclusion as to the knowledge of Mr and Mrs Whittam is primarily based on the contemporaneous emails, including:

We also take account of the fact that the arrangements in issue were the sole activity of Synergy; its clients were from one source, FRPS, and there was only one product which was recommended by Synergy namely the Westbury SIPP. In this situation we consider it inherently unlikely that Mr Whittam, who had set up Synergy as an appointed representative of his wholly-owned company, SWUK, would not have kept himself involved in and aware of the overall arrangements; and Mr Whittam and Mr Burdett were working in the same office in Gibraltar.

We conclude that Mr Burdett did not mislead Mr Whittam or Mrs Whittam about the investments that would be made by Westbury as investment manager of the Westbury SIPP. They knew that some of the pension funds of pension holders introduced to Synergy by FRPS who transferred their pension funds to the Westbury SIPP would have some of those funds invested in TRG Investments.

We have concluded above that the requirements of s63A(1) FSMA 2000 are met. The Authority alleges that by acting as a director in these circumstances Mr Burdett acted without integrity and that he acted without integrity whilst performing this role. The Authority’s case on acting without integrity was based on its submission that Mr Burdett acted recklessly. As summarised by the Tribunal in Seiler at [41(3)], a person acts recklessly with respect to a result if he is aware of a risk that it will occur and it is unreasonable to take that risk having regard to the circumstances as he knows or believes them to be.

Mr Burdett knew that transferring funds from a pension to a SIPP and decisions as to the investment of those funds was a regulated activity, yet he was involved in discussions with the investment manager about the extent to which funds would be invested in TRG Investments and signed the Westbury Terms of Business. It is hard to imagine a more obvious activity that falls within the controlled functions of a director of a restricted adviser.

Mr Burdett knew his acting as a director needed to be approved, and checked the Authority’s register to see if he had been approved. Yet notwithstanding that it was clear that he had not been approved, and indeed that he needed to submit a Long Form A, he continued to act in the same way. He was aware of the risk of acting as a director without approval, yet at no stage did he resign his appointment as a director of Synergy, step back from a leadership role within the company or play a subordinate role requiring sign-off from Mr Whittam for his decision-making.

We conclude that Mr Burdett acted recklessly, and thus acted without integrity, by acting as a director in these circumstances.

In making our findings of fact and evaluating the conduct of Mr Burdett we have set out some of the evidence from Mr Burdett. That evidence shows Mr Burdett’s understanding and approach to the various issues. From all of the evidence:

Mr Burdett’s actions have shown little regard for the interests of Synergy’s clients, pension holders whose pensions were transferred to the Westbury SIPP and were invested in ways which Mr Burdett knew were obviously high risk and hopelessly inappropriate.

Mr Burdett accepted that Synergy was created to be able to advise on the Westbury SIPP, and that the introductions by FRPS were part of a package which involved a percentage being invested in TRG (accepting in his evidence that this would be at least 15%, but with our finding of fact being he knew it was approximately 40%). Mr Lockie’s expert opinion was that there was no legitimate basis for investing 40% into TRG Investments and that this would have been obvious to any reasonable investment manager or financial adviser. Mr Burdett accepted that, as a financial adviser, he would not regard this type of investment concentration as acceptable yet he played an active role in enabling this to happen.

We conclude that Mr Burdett acted recklessly, and thus that he acted without integrity, in performing his role at Synergy.

We have summarised at [33] above the challenges which have been made by Mr Goodchild in the Goodchild SkA. His submissions in relation to the allegations made against him by the Authority included:

Mr Goodchild did not therefore accept that the investment of 40% of a pension holder’s pension in TRG Investments was not suitable. We have concluded above that such investments were not suitable, and were obviously high risk.

We address here the various matters relied upon by the parties.

By the beginning of the Relevant Period, Mr Goodchild was an experienced investment manager.

In 2006, Mr Goodchild obtained the Level 3 Certificates awarded by the Securities & Investment Institute (now the Chartered Institute for Securities & Investment) in financial regulation, investment management and securities and in 2002 he had obtained the Investment Management Certificate (“IMC”) qualification, offered by the Institute of Chartered Financial Analysts, which met the examination requirements to practice that function in 2016.

As investment manager of the Westbury SIPP, Mr Goodchild knew the investments that were being made. There was no dispute about this.

Mr Goodchild explained in the interviews with the Authority as follows:

We find that this was the intention from the start of the arrangements. In Westbury’s due diligence document dated 10 February 2016 (the “Westbury DD Report”) he described how the 40% would be split across the different forms of TRG Investments.

We recognise that there was a suggestion by Mr Goodchild in an email to Gaudi of 22 April 2016 that 40% was appropriate for a balanced client, with high and low risk pension holders then having more or less weightings; but there was no other evidence from Mr Goodchild’s emails that a variable approach was to be adopted, and we are satisfied that this was not in fact what happened.

Mr Goodchild relied on the due diligence which he said Westbury had conducted into TRG, and has referred to, and produced, around 1,800 pages of material which is said to evidence the due diligence undertaken by Westbury.

We find that the Authority had not issued a specific alert or warning in relation to TRG.

Westbury produced the “Westbury DD Report” into the Falcon RDF. That document is very short and superficial; it comprises largely a summary of TRG, and does not include any analysis of the risks of investing in TRG. At that time, TRG’s own brochure on the RDF set out TRG’s projects, which included two operational resorts, one under construction and three in pre-sales, planning and design stages – just 17% was shown in a pie chart as operational.

The offering supplement for the Falcon RDF includes an extensive section on risk factors, including no operating history, interest rate risks, credit risk, risk of investing in real estate markets and tourism industry market and credit risks. The section on risk factors in the offering supplement ends with the following:

“AN INVESTMENT IN THE SUB-FUND IS SUITABLE ONLY FOR EXPERIENCED INVESTORS WHO APPRECIATE THE RISKS INVOLVED, WHICH MAY INCLUDE THE LOSS OF THEIR ENTIRE INVESTMENT. INVESTMENT IS NOT SUITABLE FOR INVESTORS WHO MAY WISH TO REALISE THEIR INVESTMENT AT SHORT NOTICE.”

Mr Burdett sent a copy of that offering supplement to Mr Goodchild on 26 February 2016, ie after the date of the Westbury DD Report. We find that Westbury had, therefore, not read or considered these risks when producing its own report.

Mr Goodchild did suggest in one of his interviews with the Authority that a further document setting out Westbury’s due diligence on the risks of the Falcon RDF probably existed and said he would provide it after the interview. Nothing has since been provided that pre-dates the investments.

There was other evidence which led us to doubt the extent of any critical due diligence undertaken by Westbury before starting to invest pension holders’ funds in TRG Investments.

Mr Goodchild has referred to contracts or arrangements that TRG had with TUI, Melia and Hilton as supporting the TRG Investments.

We are not persuaded that these arrangements could have provided any level of comfort to Mr Goodchild in February 2016, before the investments started to be made by the Westbury SIPP in TRG Investments.

Mr Goodchild relied on the arrangements with TUI in Goodchild SkA at [7] where he said that the due diligence process included confirming that the TUI Group had contracted to underwrite approximately 85% of the Fund’s future income.

The contract between TUI Northern Europe Ltd, Worldwide Paradise Travel Ltd and Melia Hotels International SA, is described as a group long term agreement for the provision of hotel services (the “TUI Contract”). It was dated 1 June 2016, with an effective date of 15 March 2016, and was not sent to Mr Goodchild until 10 July 2016. At that time TRG described it to him as being “incredibly powerful”, and the email included an excel spreadsheet “demonstrating how the new TUI agreement guarantees us c57% occupancy across Tortuga, Dunas and Llana for 2017 (and beyond)…”.

The date of TUI Contract, and the timing of its provision to Mr Goodchild, means it cannot have been part of the initial due diligence undertaken as part of the decision to invest; and it is a confirmation of a source of income (rather than profits).

Melia Hotels International SA was a party to the TUI Contract. To the extent that Mr Goodchild relied on that company being a party to the TUI Contract, the conclusion in the preceding paragraph in relation to TUI applies equally to this company.

Mr Goodchild also provided a copy of another agreement, between Llana Beach Hotel, Sociedade Unipessoal SA and Sol Melia SA for the management of the Llana Beach Hotel dated 13 December 2010 (the “Operating Agreement”). Sol Melia is defined as the Manager, and the agreement is for the appointment of the Manager to operate, market, manage and supervise the hotel (which was yet to be built).

This Operating Agreement would have been available to Mr Goodchild at the time Westbury conducted any due diligence, but we do not accept that this can have provided any reassurance to Mr Goodchild as to the suitability of the TRG Investments.

Mr Goodchild also relied on Hilton. There was a letter dated 22 May 2012 from Hilton Worldwide to TRG, expressed to be “Subject to Contract and Board Approval” in relation to a proposed hotel at Cape Verde, in which Hilton confirmed that they would be interested in managing the proposed hotel subject to land acquisition currently being negotiated and outlined their proposal for a management agreement.

There was no evidence that a contract was subsequently entered into. As with the Operating Agreement, we do not accept that this letter, which was not legally binding, can have provided any reassurance to Mr Goodchild as to the suitability of the TRG Investments.

Looking at the 1,800 pages of due diligence which were relied upon by Mr Goodchild, they were presented in the form of three indexed bundles or packs:

The production of these due diligence packs does not help to explain what material was available to, read or analysed by Westbury at the time of the investments in TRG.

At later dates, Westbury asked questions of others to which it should already have known the answers if it had already conducted full due diligence on TRG.

This can be seen from the email exchanges subsequent to the Authority having contacted Mr Goodchild on 30 June 2016.

On 4 July 2016 Directus emailed Mr Burdett, copied to Mr Goodchild stating:

“Below are 2 points James would like some assistance on

1.

Suggested wording for appropriateness and suitability of the Resort Group, just a short paragraph

2.

Could James also have your notes on Resort 7% (not Falcon) so he can compare notes?”

On 4 July 2016, Mr Burdett provided some suggested paragraphs on TRG; and in a second email a few minutes later Mr Burdett sent to Mr Goodchild what he described as the research notes on the TRG Bonds. The attachment is titled “DD13 – TRG Corporate Bonds.pdf” (although we were not shown what this attachment was said to have been) but Mr Burdett stated these were the research notes he had received, and he thought they were prepared by Greyfriars LLP/Best International. (Best International was a promoter of the Falcon RDF.)

The paragraphs drafted by Mr Burdett included reference to rental yields for property in the leisure and tourism sector, and described TRG in the following terms:

“Resort Group Plc are an industry leading international commercial property developer specialising in the design, construction and delivery of hotels to large chains, such as Melia Group and Hilton Worldwide. With a track record of nearly 10 years, Resort Group Plc also have been able to secure contracts with large travel operators such as Thomson Tui, who have committed to deliver £220m of sales in the next 3 years (need to check figures). With hotel resorts in areas that have an all year round climate, they are confident that their operators can maintain these high occupancy levels. Resort Group Plc also offer fixed income securities, in the form of medium term notes (MTNs), secured against real assets, with a reasonable average coupon of 7% per year.”

For the reasons explained above, any arrangements with TUI, Melia and Hilton cannot have given comfort to Mr Goodchild at the beginning of February 2016 before he started investing funds within the Westbury SIPP in TRG Investments.

On 1 August 2016 Directus emailed TRG saying they were making sure Mr Goodchild had as much information as possible for TRG as they were putting together a report on risk, and saying “What we are putting together is a breakdown of the risk of investment and then James showing how he understands the risk and how it is mitigated”, then referring to inflation risk, liquidity risk, lack of diversification, political risk, potential problems with the structure of the investment, assets being difficult to value and currency risk. TRG then provided a memorandum. We infer that this was being produced for Mr Goodchild to show to the Authority or to use to draft his own responses to the questions raised by the Authority.

We are not satisfied that Westbury conducted any meaningful due diligence on TRG before investing funds within the Westbury SIPP in TRG Investments. The evidence before us does not show any consideration of the risks before making the investments, and indeed shows that the only effort made was compiling materials to answer the Authority’s questions after the event.

On 25 July 2016 Mr Goodchild emailed Gaudi stating that the BBC programme was subject to legal challenges for inaccuracy and asking them to re-start processing new business applications into TRG. Gaudi refused, referring to issues raised by Panorama which caused them concern and the “not inconsiderable matter of Directus and the payments made to them”.

Mr Goodchild was then one of the participants in the July 2016 Call, in which those present discussed the position of TRG.

In Goodchild SkA Mr Goodchild set out his position as follows:

“5.

… The Appellant was never an adviser to, or in direct contact with, any of Synergy’s clients. He has never met or spoken to them, nor did Westbury have any Know-Your-Client (KYC) information or client files for those individuals. All such information and the responsibility to assess suitability for those clients resided with Synergy, as their financial adviser. Westbury’s role was limited to implementing investment decisions as instructed by Synergy for Synergy’s clients, under an arrangement whereby Synergy, as the professional client, directed the portfolio allocations (often referred to as an “adviser-led” model portfolio service). Westbury’s Terms of Business with Synergy explicitly provided that Westbury would not assess suitability for the underlying clients and that Synergy retained full responsibility for the advice given to its clients. Contemporaneous documents (including the Terms of Business between Westbury and Synergy, Synergy’s own Client Agreements and other contractual documents) make this division of responsibility abundantly clear.” (bold in original)

The Authority has not asserted that Westbury was the investment adviser, nor that it was in direct contact with the pension holders who transferred their pension funds to the Westbury SIPP. We find that it was not.

Mr Goodchild’s submissions were explained in more detail in Goodchild WS2 at [14] to [20] as follows:

“14.

Westbury Private Clients LLP (“Westbury”) is an FCA-authorised firm that, at all material times, dealt exclusively with professional clients. Westbury was not authorised to provide advice to retail clients, particularly not to advise on pension investments, and it did not engage with any retail clients (emphasis added). In other words, Westbury’s regulatory permissions and business model were confined to servicing professional counterparties, not the general investing public.

15.

In 2015, Westbury entered into a Terms of Business for Intermediaries with Synergy …. Synergy was an appointed representative of Strategic Wealth UK Ltd (its FCA regulated principal responsible for Synergy’s compliance). Under this intermediary arrangement, Synergy was Westbury’s professional client. Synergy, in turn, had its own underlying clients. Synergy retained full responsibility for advising and managing its clients. Accordingly, any suggestion that Westbury owed a duty of investment suitability directly to Synergy’s underlying clients is misconceived and inconsistent with the regulatory regime itself (including the client categorisation rules in COBS 3.5 of the FCA Handbook and the outsourcing provisions in SYSC 8).

16.

It is important to clarify that Synergy’s clients were never “clients” of Westbury. Westbury had no direct relationship with those individual investors. Westbury was not provided with any personal client information or documentation for Synergy’s end-clients – for example, Westbury had no access to passports, driver’s licences, utility bills, financial fact-finds, the actual risk questionnaires, or any Know-Your-Customer records of those individuals. Westbury did not open or set up the pension or investment accounts for those clients; all such accounts and client onboarding were handled entirely by Synergy and others. Synergy was responsible for all client-facing tasks: onboarding its clients, conducting KYC and due diligence checks (including PEP and sanctions checks), providing investment advice and suitability assessments, and making all required disclosures under the Conduct of Business Sourcebook (COBS) and the Financial Services and Markets Act 2000 (FSMA). Westbury’s role was limited to receiving and executing Synergy’s instructions at a wholesale level – it acted as a platform or facilitator for Synergy, not as an adviser to any individual customer.

Contractual Terms (Clause 6.1) and Regulatory Responsibilities

17.

The FCA’s case relies on a particular interpretation of clause 6.1 of the intermediary Terms of Business between Westbury and Synergy. The FCA asserts that clause 6.1 effectively meant that Synergy’s clients “became” clients of Westbury, thus making Westbury (and me) responsible for assessing suitability for those individuals. I strongly disagree. Westbury’s Terms of Business with Synergy (EXHIBIT 1), when read as a whole, make clear that any clients introduced by Synergy remain clients of Synergy (the intermediary), and that Westbury’s dealings are solely with Synergy as its professional client. The agreement explicitly warns that any clients introduced by Synergy “will not have retail rights” with respect to Westbury’s services. It defines “Client” to mean the intermediary’s client, and it states that Westbury, from a regulatory perspective, is “facing off” only against the intermediary. In other words, Westbury “does not engage in any way on a regulatory basis” with the individual clients of Synergy. Nothing in clause 6.1, properly construed in context, converts Synergy’s retail customers into clients of Westbury or assigns Westbury a duty to those individuals.

18.

In my view, the FCA’s interpretation of clause 6.1 is flawed both legally and contextually. Clause 6.1 cannot be read in isolation to impose on Westbury a direct client relationship with Synergy’s investors that contravenes the rest of the agreement and the regulatory framework. The clear intent of the Terms of Business was that Westbury provided services to Synergy only, as an [sic] professional intermediary. Synergy, as an independent financial adviser, was the party solely responsible for the client-facing advice and suitability obligations. The contractual language – including the provisions I have highlighted from EXHIBIT 1 – confirms that understanding. Accordingly, I maintain that Westbury had no contractual or regulatory duty to assess suitability for Synergy’s clients, and any assertion to the contrary is wrong.

19.

Furthermore, three key documents issued by Synergy (EXHIBITS 2, 3, & 4) underscore the proper allocation of responsibilities in this arrangement. Those documents – which include Synergy’s client agreements, “Key Facts” information, and service proposition – make it indisputably clear that:

(a)

Synergy was the investment adviser responsible for all interactions with the end-clients and for determining the suitability of investments for those clients;

(b)

Westbury functioned purely as an execution-only platform, carrying out transactions as directed by Synergy, and did not advise or make suitability judgments for individual clients; and

(c)

I personally, in my capacity as a partner of Westbury, had no direct advisory relationship with any of Synergy’s clients. I never met or spoke with any of those retail clients. In short, I had no involvement in, nor obligation to perform, any suitability assessments for them. The FCA’s attempt to treat me as if I were an adviser to those individuals is without factual basis.

20.

To the extent the FCA contends that Westbury (or I) somehow owed a statutory duty of care to Synergy’s clients, I reject that contention. I put the FCA to strict proof – pursuant to the FCA’s own Handbook (for example, COBS 3.2 on client categorisation) – that any of those individual investors should legally be regarded as clients of Westbury or of mine. All evidence shows the opposite. The reality is that those investors were clients of Synergy, and Synergy was the only entity with a client relationship and advisory duty toward them.” (bold in original)

We look below at the Westbury Terms of Business and what are said by Mr Goodchild at [19] above to be the three key documents issued by Synergy. We start, however, by addressing Mr Goodchild’s submission that he owed no regulatory duty to pension holders.

COBS 9 was (and remains) the principal chapter relating to suitability and pension assets.

COBS 9.1.1R states that this chapter applies to a firm which makes a personal recommendation in relation to a designated investment (other than a P2P agreement), and COBS 9.1.3R states that this chapter applies to a firm which manages investments.

COBS 9.2.1R expressly applies to both personal recommendations, ie advice, and decisions to trade, ie investment management, and requires that the firm takes reasonable steps to ensure that a decision to trade is suitable for its client. COBS 3.2.1R then defines a client as a person to whom a firm provides, intends to provide or has provided a service in the course of carrying on a regulated activity. We accept that the result of COBS 9.2.1R may be to require a degree of duplication in effort, where an adviser and investment manager are both involved in in the same transaction.

Here, Westbury and Mr Goodchild were required to take reasonable steps to ensure that a decision to trade was suitable for pension holders, these individuals being its clients as it made decisions to trade for such individuals in respect of the pension funds they transferred to the Westbury SIPP and Westbury was remunerated by fees deducted from those pension funds.

For completeness, Mr Temple drew to our attention that COBS 2.4.3R provides a carve-out if Westbury was providing services with, or for, an agent of the underlying client. However:

The Introduction to the Westbury Terms of Business includes the following:

“We take responsibility for applying the client’s funds to the advised investment risk profile both initially and ongoing.

We have our own psychometric risk-profiling tool, which establishes clients’ attitude towards risk and ensures an appropriate investment strategy is followed and re-assessed yearly. We can also work with other established psychometric risk-profiling tools …. to help ensure a suitable investment strategy is followed.

As the client belongs to the intermediary Westbury Private Clients LLP is from a regulatory perspective “facing-off” against the intermediary. We deem the intermediary to be a professional counterparty. Therefore, any clients introduced will not have retail rights afforded to them by Westbury Private Clients LLP. We only deal with eligible parties.”

“Client” is defined as “the intermediary’s client who wishes to use Westbury for portfolio management”.

The first two paragraphs of the Introduction are clear on their terms. The difficulty is that Westbury did not in fact take responsibility for applying the pension holder’s funds to the advised risk profile score. That score was only taken into account in determining the investment profile of around 60% of the funds, ie the non-TRG Investments.

The third paragraph is then problematic. A firm cannot unilaterally “un-client” someone who meets the description of a client within COBS 3.2.1R. In support of this view, COBS 2.1.2R said that “A firm must not, in any communication relating to designated investment business seek to: exclude or restrict; or rely on any exclusion or restriction of; any duty or liability it may have to a client under the regulatory system.”

We have not addressed the question of whether Synergy was a professional counterparty, being an appointed representative rather than an investment firm itself, as that is not relevant to the references before us.

Section 6 (Scope of our responsibility to you) provides:

“6.1

We take full responsibility for ensuring the investment suitability at the point of sale and on-going is appropriate for the client.

6.2

The client is invited to undertake a psychometric risk profiling test every year to establish clients’ attitude to risk and ensuring an appropriate investment strategy is followed. We may ask you to send this invitation and report back the result.”

Section 6.1 emphasises that Westbury was providing services for the benefit of the pension holders.

Mr Goodchild submitted that the Westbury Terms of Business need to be read as a whole. Reading them as a whole, we can see that, eg at section 2 (General) it refers at 2.1 to “applications from your Clients”, and at 2.3 that “You [Synergy] are to be considered a professional counterparty to Westbury under the FCA Rules, and we regulatory engage with you solely on this basis and do not engage regulatory wise in any way with your individual clients”.

We do not consider that this assists Mr Goodchild – it remains the case that Westbury cannot contract out of its regulatory responsibilities in the way in which this purports to do.

Mr Goodchild also relied on three of Synergy’s documents: the Synergy Client Agreement for Investments and Insurances, Synergy’s Service Proposition Engagement letter and Synergy’s Key Facts document, each of which applied to the relationship between Synergy and pension holders.

We agree with Mr Goodchild that these documents make it clear that Synergy was providing investment advice to the pension holders; these individuals were Synergy’s clients (as Mr Burdett accepted) and they also make it clear that Synergy was providing restricted advice rather than independent advice.

However, this does not assist with the interpretation of the Westbury Terms of Business; nor can it answer the question as to Westbury’s responsibilities as investment manager towards the pension holders. Mr Goodchild was a qualified, experienced investment manager, and he must have known that he and Westbury were required to take reasonable steps to ensure that a decision to trade was suitable for the pension holders who transferred their pension funds to the Westbury SIPP.

The Authority also relied on Westbury’s use of the names “Global Cautious” and “Global Balanced” for two of the model portfolios, submitting that, given the percentages invested into TRG Investments, it was obvious that they were neither cautious nor balanced and that the use of these names in the Retirement Planning Reports sent to pension holders was misleading.

Mr Lockie concluded at [205] of his report that the average allocation to TRG Investments at around 40% of the total made all three of the model portfolios high risk regardless of what other assets made up the balance and consequently the names of these portfolios were misleading.

We agree with Mr Lockie’s expert opinion.

As an experienced investment manager, Mr Goodchild must have known the impression that the use of these names would create for pension holders and must have known that there was a risk that pension holders would be misled as to the risks posed by such portfolios. It was not reasonable for him to have ignored this risk and used these names.

Mr Goodchild had been involved with Mr Burdett in setting up the arrangements pursuant to which FRPS would introduce clients to Synergy who would then be recommended to transfer their pension funds to the Westbury SIPP, which would result in around 40% of the pension funds being invested in TRG Investments. Mr Goodchild (as well as Mr Burdett) had significant expertise and knowingly and actively participated in this outcome.

Mr Goodchild had a responsibility for taking reasonable steps to ensure that a decision to trade was suitable for the pension holders. We have concluded that the investments made by Westbury in TRG Investments were not suitable for pension holders. We are also not satisfied that the cursory due diligence undertaken by Westbury was even remotely sufficient to constitute reasonable steps to ensure suitability. Mr Goodchild has failed to meet his regulatory obligations in respect of the suitability of the investments in the Westbury SIPP.

The allegations by the Authority are based on Mr Goodchild having breached Statement of Principle 1 by acting recklessly. The Authority has correctly accepted that subjective knowledge of the risks to which pension holders were exposed cannot be proven merely because a reasonable investment manager ought to have known of such risks. However, the Tribunal can have regard to the inherent probabilities, including how a reasonable professional would regard the situation.

Mr Goodchild had previously (in his annotated comments on the Authority’s Statement of Case) said that the TRG Investments could be classified as low risk, explaining this on the basis that they were a combination of bonds and property and lower risk than equities; and that volatility was the only metric used by Synergy’s risk profiling system. For the reasons explained by Mr Lockie, we do not agree that the TRG Investments were low risk, and conclude that Mr Goodchild must have known this:

Mr Goodchild submitted that there was “no obvious red flag” that would have compelled Westbury to consider TRG Investments as an unacceptable risk. Mr Temple confirmed that the Authority does not say TRG is unacceptably risky for any client at any percentage; but in any event the documentation was replete with risk warnings; and investing 40% of a pension portfolio into high risk assets was inappropriate.

Mr Lockie described the risk as being “beyond the ordinary range”; and said TRG was so risky that any portfolio construction would need to anticipate the possibility that the client would lose the whole investment; and for a high risk investor, even 10% would be too high, and 5% might be acceptable but only where the client had a long term focus. We agree with this expert opinion. The due diligence which had been undertaken by Westbury which resulted in the Westbury DD Report from February 2016 cannot have reassured Mr Goodchild of any conclusion to the contrary and Mr Goodchild was aware of concentration risk.

We are satisfied that Mr Goodchild was aware that he was exposing pension holders to unacceptable risks. Mr Goodchild did not take responsibility for applying pension holders’ funds to investments in line with their risk profile scores (which scores were notified to Westbury) and presented model portfolios as being “Global Cautious” and “Global Balanced” when he must have known they were not.

We have not heard evidence from Mr Goodchild, and he has not therefore been able to answer questions that would have been put to him by Mr Temple about the explanations he has provided in Goodchild WS2. It is apparent from our findings and conclusions in this decision that we have not accepted many of Mr Goodchild’s explanations. However, one point is striking, and that is that in his own witness statements Mr Goodchild appears to be oblivious to the interests of the pension holders who transferred their pension funds to the Westbury SIPP and had to claim compensation from the FSCS, with his sole focus being to say that these individuals were not his clients.

In considering whether the deficiencies in Mr Goodchild’s conduct amount to recklessness, we have considered what an investment manager in Mr Goodchild’s position should have been doing, bearing in mind that (at least ostensibly) Synergy was offering personal recommendations to clients based on risk profile scores. It would in principle have been reasonable for Mr Goodchild to rely on an investment adviser to do the fact-finding and even the attitude to risk assessment. However, this can be of no assistance to Mr Goodchild in the context of the arrangements with FRPS, Synergy and TRG where he and Mr Burdett both knew and intended the outcome.

However, the investment manager’s role is then to construct investments that appear to be suitable bearing in mind the information supplied about the clients.

As an experienced and qualified investment manager, Mr Goodchild must have known of the risk of putting together for pension holders of varying risk appetites portfolios with any significant levels of concentration of investment into an obviously high risk project like TRG. He completely ignored this risk, without regard to the interests of the pension holders.

We conclude that Mr Goodchild was reckless in his conduct, and accordingly was acting without integrity in breach of Statement of Principle 1.

The Authority decided to make orders prohibiting both Mr Burdett and Mr Goodchild from performing any regulated activity carried on by an authorised person, exempt person or exempt professional firm under s56 FSMA 2000.

Mr Burdett’s submissions in relation to sanctions focused on the amount of the financial penalty which the Authority decided to impose. He did not make specific submissions in relation to the prohibition order (other than denying that he lacked integrity). Mr Goodchild submitted that the appropriate sanction would be at the very lowest end of the spectrum, and that a nominal financial penalty (if any) and no prohibition would amply serve justice. He submitted that the Tribunal could consider making no order at all beyond a statement of findings given the time that has elapsed and the harm already done.

Prohibition orders are necessary to protect the public and provide deterrence.

Mr Goodchild’s submission that the cost to him of these proceedings, and the time that has passed, mean justice could be served without a prohibition order is rejected. The findings we have made as to the arrangements as a whole, Mr Goodchild’s involvement, his responsibilities to pension holders coupled with his denial of any responsibility to pension holders support the conclusion reached by the Authority that he should be prohibited from performing any regulated activity. Any other result would completely ignore the purpose of prohibition orders: the public would not be protected and there would be no deterrence to others.

On the basis of the facts as found and our decision that Mr Burdett and Mr Goodchild both lacked integrity, it is clear that the imposition of prohibition orders by the Authority under s56 FSMA 2000 on the grounds that Mr Burdett and Mr Goodchild are not fit and proper persons to perform any function in relation to any regulated activity carried on by an authorised person, exempt person or exempt professional firm is a course of action reasonably open to the Authority.

We see no basis on which we should interfere with the Authority’s decisions.

The Authority decided to impose a financial penalty of £311,762 on Mr Burdett pursuant to s63A FSMA 2000 and of £47,600 on Mr Goodchild pursuant to s66 FSMA 2000.

The Authority’s policy on imposing a financial penalty is set out in that part of the Authority’s Handbook known as DEPP. DEPP 6.1.2 states that the principal purpose of imposing a financial penalty is to promote high standards of regulatory and/or market conduct by deterring persons who have committed breaches from committing further breaches and helping to deter other persons from committing similar breaches, as well as demonstrating generally the benefits of compliant business.

DEPP 6.5.2 states that the Authority’s penalty-setting regime is based on the following principles:

As set out in DEPP 6.5B, the Authority applies a five-step framework to determine the appropriate level of financial penalty, which (very briefly) is as follows.

DEPP 6.5D sets out the Authority’s approach to serious financial hardship. At DEPP 6.5D.1(1) the Authority states that its approach to determining penalties is intended to ensure that financial penalties are proportionate to the breach, and that the Authority recognises that it should consider whether a reduction is appropriate if the penalty would cause the subject of enforcement action serious financial hardship.

At DEPP 6.5D.2(1) the Authority states that its starting point is that an individual will suffer serious financial hardship only if during a reasonable period (normally no greater than three years) his net annual income will fall below £14,000 and his capital will fall below £16,000 as a result of payment of the penalty. At DEPP 6.5D.2(7) the Authority states that there may be cases where even though the individual has satisfied the Authority that payment would cause serious financial hardship, the Authority considers the breach to be so serious that it is not appropriate to reduce the penalty.

We have set out below:

We recognise at the outset that there were different decision-makers in these instances (the Decision Notice issued to Mr Burdett was issued through the RDC whereas the Decision Notice issued to Mr Goodchild was issued through the SDM) and different decisions were reached on disgorgement, aggravating factors and any adjustment for deterrence.

The Tribunal is not bound by the Authority's policy when making an assessment of a financial penalty on a reference, but it pays the policy due regard when carrying out its overriding objective of doing justice between the parties. In so doing the Tribunal looks at all the circumstances of the case.

We consider it is appropriate to follow the policy framework, but make our own decision as to the application of each step.