The Upper Tribunal of the UK financial regulatory regime has imposed fines on two men involved in a firm that distributed types of bonds, and has banned one of the pair from the financial industry.

The UK financial regulator said its upper tribunal has issued a judgement that imposes a fine on two men involved in the firm Catalyst Investment Group, which distributed bonds in circumstances that authorities said were misleading.

The Upper Tribunal has released its judgement in relation to Timothy Roberts and Andrew Wilkins of Catalyst Investment Group, the Financial Conduct Authority said in a statement.

The tribunal imposed a fine of £450,000 ($628,597) on Roberts and banned him from performing any role in regulated financial services; it also fined Wilkins £50,000. It referred back to the FCA a decision on whether to impose a prohibition on Wilkins. It remains open to the parties to appeal the Tribunal’s judgement, the statement said.

In August 2013 the FCA fined Roberts £450,000 and imposed a full prohibition on him, and fined Wilkins £100,000 and prohibited him from undertaking significant influence functions. The men referred the FCA’s decisions to the Tribunal, leading to its judgement.

Roberts was a director and chief executive of Catalyst, the UK distributor of bonds issued by ARM Asset Backed Securities, of which Roberts was also a director. Wilkins was a director of Catalyst until 23 March 2010, and was involved in compliance issues, especially in relation to financial promotions.

ARM was a securitisation vehicle based in Luxembourg. It issued bonds and used the proceeds to invest in traded life assurance policies (also known as senior life settlement policies). ARM’s bond programme was registered with the Irish Stock Exchange and traded on its regulated market.

The case

In its explanation of the case, the UK regulator said ARM understood that it needed a licence to issue bonds from the Luxembourg regulator, the Commission de Surveillance du Secteur Financier, but did not have one. In November 2009, ARM was requested by the Luxembourg regulator to cease issuing bonds until it was granted a licence.

“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,” the FCA said.

“Mr Roberts and Mr Wilkins allowed Catalyst to provide misleading information about ARM’s licence position in a letter to IFAs in December 2009. Mr Roberts also approved a letter to investors containing misleading information about ARM’s licence position in March 2010,” it continued.

The Tribunal found that Roberts’ conduct demonstrated a “reckless disregard for the interests of investors, and considered the degree to which Roberts acted with a lack of integrity to be serious”.

“The Tribunal also found that Mr Roberts had acted without due care, skill and diligence in approving ARM’s financial promotions, which failed to disclose to investors significant information relating to ARM’s regulatory position. The Tribunal agreed with the FCA’s decision to impose a prohibition order on Mr Roberts on the grounds that he is not a fit and proper person,” it said.

“The Tribunal agreed with the FCA’s decision that Mr Wilkins had acted without due care, skill and diligence. However, the Tribunal rejected the FCA’s argument that Mr Wilkins had acted recklessly and without integrity. The Tribunal has referred the FCA’s decision to prohibit him from holding significant influence functions back to the FCA to reconsider whether any kind of prohibition should be imposed on Mr Wilkins in light of the findings of the Tribunal,” it said.

The tribunal also found that contrary to the FCA’s decision, the men did take reasonable steps to keep Catalyst’s compliance officer informed of ARM’s licence position prior to 24 December 2009, the statement added.