Catalyst Investment Group was the UK distributor of bonds issued by ARM Asset Backed Securities, a securitisation vehicle based in Luxembourg.
The ARM Capital Growth and ARM Assured Income Plan were listed on the Irish Stock Exchange and invested in traded life, or senior life settlement policies, with trading suspended in November 2010.
To issue the bonds, ARM needed a licence from the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg but failed to secure one.
Having applied in July and then November 2009, ARM was asked to cease issuing bonds until it was granted a licence.
Timothy Roberts and Andrew Wilkins were directors of Catalyst, with the former also a director of ARM.
Ring fenced
According to the FCA: “Mr Roberts allowed Catalyst to continue promoting the bonds and collecting funds from potential investors after November 2009 in circumstances where the funds collected from potential investors were not ring fenced so that they could be paid back if ARM was refused a licence.“
Roberts and Wilkins allowed Catalyst to provide misleading information about ARM’s licence position in a letter to IFAs in December 2009.
Roberts also approved a letter to investors containing misleading information about ARM’s licence position in March 2010.
In August 2013, the FCA decided to fine Roberts £450,000 and prohibit him from working in regulated financial services. Wilkins was fined £100,000 and banned from undertaking “significant influence” functions but the pair referred the decisions to the Upper Tribunal.
On 11 August 2015, with further developments released on 18 September, the Tribunal upheld the FCA’s assigned penalties of Roberts but decided to fine Wilkins just £50,000.
Reckless disregard
It also rejected the allegation that he was not deemed fit and proper.
The Tribunal found Roberts’ conduct “demonstrated a reckless disregard for the interests of investors” and demonstrated a serious lack of integrity.
While it agreed with the FCA that Wilkins had acted “without due care, skill and diligence”, it rejected the argument that he had acted recklessly and without integrity.
It also rejected the argument that he lacked competence and noted a number of steps taken by Wilkins demonstrated his concern for investors and their funds.
The Tribunal also noted that Wilkins had relied on his compliance function, his lawyers and on Roberts during the relevant period. Roberts’ judgement is open to appeal.
