The Employment Appeal Tribunal ("EAT") has given a rare judgment relating to whether an approved person was "fit and proper" within the meaning of the FCA handbook. This judgment is a reminder of the strategic considerations which arise when an employer has to ask its approved persons, senior managers or certification function role holders ("Regulated Persons") to give evidence in litigation.
Fit and proper
The FCA considers that a Regulated Person's honesty and integrity are key factors as to whether he or she is fit and proper to hold a regulated position. The FCA handbook explains what matters should be taken into account when assessing honesty and integrity, including whether a person has been criticised by a court or tribunal.
Radia v Jefferies International Limited
Mr Radia was an approved person. He gave evidence in his employment tribunal claim against his employer. He alleged disability discrimination. The tribunal decided that his evidence lacked credibility and was evasive, untruthful and misleading. The judgment did not say that his evidence was intentionally "dishonest".
Following the findings by the tribunal about Mr Radia's evidence, his employer began a disciplinary hearing. The allegation was that Mr Radia had acted "dishonestly" by giving untruthful or misleading evidence. Mr Radia was dismissed because his employer decided that his evidence before the tribunal had been dishonest, which was not compatible with him being fit and proper.
Mr Radia subsequently brought an unfair dismissal claim against his employer. Mr Radia was found (by another tribunal) to have been fairly dismissed by his employer. Mr Radia appealed to the EAT. The EAT upheld the decision that it was reasonable for the employer to dismiss Mr Radia on the basis of the (original) tribunal's findings about his credibility. The employer was not required to have carried out any additional investigation to show that Mr Radia had intentionally been dishonest. The findings about his credibility were sufficient by themselves to have torpedoed Mr Radia's honesty and integrity.
(Mr Radia actually succeeded on his appeal. But the main points set out above relating to fitness and propriety still stand.)
The take away points
The facts of this case were unusual. But stepping back, there are two take away points.
This case suggests that the standard of being fit and proper is breached by a person making statements, in any formal setting, that fall short of being credible, even where this cannot necessarily be shown as being as a result of dishonesty.
This case also touches on an important strategic consideration for financial services sector employers and their management. Quite often, an employer will have to ask its Regulated Persons (or employees who might hope to one day become Regulated Persons) to give evidence before a tribunal. Those personnel may be reluctant to do so, fearing an adverse finding by a tribunal about his/her credibility which could be career-limiting/ending (…in a worst case scenario – I must stress!).
This is not a groundless fear. The FCA/PRA do pick up on these judgments (I can vouch for this) when determining applications for prospective approved persons/senior managers.
So what should employers do to instil confidence in their witnesses? It all boils down to being prepared. When a witness knows that his/her evidence is grounded in the facts and is consistent with the paperwork, there is little to fear. Even the best cross-examination cannot dent the honesty and integrity of a well-prepared and confident witness.