Sodha v Financial Services Authority [2002] UKFSM FSM033 (16 May 2006)

DECISION

Introduction

1. On 4^th February 2005 Vrajlal Laxmidas Sodha ("Mr Sodha") applied under
section 40 of the Financial Services and Markets Act 2000 ("the Act") for Part
IV permission as a sole trader to carry on the regulated activities of advising
on and/or arranging mortgages and general insurance products ("the
Application").

2. Mr Sodha completed a Sole Trader Application Pack in which he stated that
he wished to apply for permission profile 9 which relates to a retail
intermediary advising on and/or arranging mortgage and general insurance
products but does not include advising on and/or arranging packaged products
nor handling or controlling client money.

3. On 27 October 2005, the Respondent ("the Authority") issued a Decision
Notice refusing the Application pursuant to section 52(9) of the Act.

4. The reasons for the refusal of the application, as set out in the Decision
Notice, were that the Authority was not of the view that Mr Sodha satisfies,
and will continue to satisfy, the threshold conditions set out in Schedule 6 to
the Act ("the Threshold Conditions") as he has not demonstrated to the FSA
that he:

(1) has adequate resources (Threshold Condition 4: adequate resources),
having regard to all the circumstances, including that Mr Sodha proposes to
carry on business by himself, as there are not appropriate human resources
which will effectively oversee the relevant systems and controls at all times;
and

(2) is a fit and proper person (Threshold Condition 5: suitability) having
regard to all the circumstances, including that Mr Sodha proposes to carry on
business by himself, as he has not shown that he:

(i) will conduct the business with integrity and in compliance with
proper standards; and

(ii) will have competent and prudent management or will conduct
affairs with the exercise of due skill, care and diligence.

The Reference

5. On 28 November 2005 Mr Sodha referred that decision to the Tribunal
pursuant to section 55(1) of the Act.

6. The relevant Threshold Conditions are:

Threshold Condition 4(1) which provides that:

"The resources of the person concerned must, in the opinion of the Authority,
be adequate in relation to the regulated activities that he seeks to carry on, or
carries on." (Paragraph 4, Schedule 6 to the Act).

Threshold Condition 5 which provides that:

"The person concerned must satisfy the Authority that he is a fit and proper
person having regard to all the circumstances, including -

(a) his connection with any person;

(b) the nature of any regulated activity that he carries on or seeks to
carry on; and

The Respondent has issued guidance in its handbook (COND) as to its
approach to and application of the Threshold Conditions.

COND 1.3.2(1)G:

The Authority will consider whether a firm satisfies,
and will continue to satisfy, the threshold conditions in
the context of the size, nature, scale and complexity of
the business which the firm will carry on if the applica-
tion is granted.

In relation to threshold condition 4 and 5, the Authority
will consider whether a firm is ready, willing and
organised to comply, on a continuing basis, with the
requirements and standards under the regulatory system
which will apply to the firm if it is granted Part IV
permission.

COND 1.3.2(2)G:

(COND 2.4.2G(2))

The Authority will interpret the term "adequate" as
meaning sufficient in terms of quantity, quality and
availability, and "resources" as including all financial
resources, non financial resources and means of
managing its resources.

When assessing threshold condition 4, the Authority
may have regard to any person appearing to it to be, or
likely to be, in a relevant relationship with the firm,

(COND 2.4.3G(1))

which might pose a risk to the firm's satisfaction of the
threshold conditions. Examples of such a person
include a firm's directors or partners.

(COND 2.5.3G(1)&(2)) The emphasis of Threshold Condition 5 is on the

suitability of the firm itself. The suitability of each
person who performs a controlled function will be
assessed by the Authority under the approved persons
regime. In certain circumstances however, the
Authority may consider that the firm is not suitable
because of doubts over the individual or collective
suitability of persons connected with the firm.

(COND 2.5.3G(2))

The Authority may have regard to any person appearing
to it be or likely to be in a relevant relationship with the
firm as permitted by section 49 of the Act.

The Authority will have regard to all relevant matters,
including whether the firm will conduct its business
with integrity and compliance with proper standards,
have a competent and prudent management and can
demonstrate that it will conduct its affairs with the
exercise of due skill, care and diligence.

In determining whether a firm will satisfy and continue
to satisfy, threshold condition 5, in respect of
conducting its business with integrity and in compliance
with proper standards, the Authority will have regard to
relevant matters including whether the firm has been
open and co-operative in all its dealings with the
Authority ... and is ready willing and organised to
comply with the requirements and standards under the
regulatory system and other legal, regulatory and
professional obligations; the relevant requirements and
standards will depend on the circumstances of each
case, including the regulated activities which the firm is
seeking permission to carry on.

(COND 2.5.4G)

(COND 2.5.6G)

Section 64 permits the Authority to produce a Code of Practice to assist in
determining whether an approved person's conduct complies with a statement
of principle. This has been done in APER.

APER: Statement of Principle 4 provides:

"An approved person must deal with the FSA and with other regulators in an
open and cooperative way and must disclose appropriately any information of
which the FSA would reasonably expect notice."

The proceedings before the Tribunal

9. The Tribunal must be satisfied that the Applicant will satisfy, and continue to
satisfy, the Threshold Conditions in relation to the regulated activities for
which he would have permission if his application was granted: section 40 (1)
and (2) FSMA.

10. On hearing the reference the Tribunal (i) may consider any evidence relating
to the subject matter of the reference whether or not it was available to the
Respondent at the time it made its decision: section 133 (3) Financial Services
and Markets Act 2000 ("FSMA") and (ii) must determine what if any is the
appropriate action for the Authority to take in relation to the matter referred to
it: section 133 (4) FSMA.

11. The onus is on the Applicant to satisfy the Tribunal that he satisfies the
Threshold Conditions¹.

12. Evidence may be admitted by the Tribunal whether or not it would be
admissible in a court of law and whether it was available to the Authority
when taking its action: Rule 19 (3) of the Financial Services and Markets
Tribunal Rules 2001.

13. Evidence was given by the Authority to the effect that the Applicant had been
the subject of previous complaints from customers certain of which had been
upheld by the institutions with which the Applicant had previously been
associated namely Barclays Life Assurance Company Limited ("Barclays")
and St James's Place ("SJP"). Mr Sodha accepted that the complaints had
been made; he did not accept that all complaints had been correctly upheld at
Barclays but did not seek to adduce any evidence to the effect that they were
incorrectly decided. He accepted the complaints upheld whilst he was at SJP
(save in relation to one complaint, that relating to Mrs P, which is referred to
below). Albeit that complaints had been upheld the Tribunal, in assessing the
weight to be attached to the complaints, has taken into account that the
substantive decisions in relation to the complaints of Barclays Life and SJP are
hearsay, it has not had access to the material available to Barclays Life and
SJP or seen fully reasoned determinations as to the reasons for upholding the
complaints and the Tribunal has taken into account any matters put forward by
Mr Sodha in relation to the complaints.

14. The Tribunal heard evidence from two witnesses on behalf of the Authority,
namely Mr Andrew Cope, a Manager in the Authorisations Department
within the Regulatory Transactions Division, and Mr Michael Lord, the head

¹ Ridings GB & Ors v The Financial Services Authority, 8 February 2005 unreported, R (on the
application of Olsen) v Maidstone Crown Court, The Times 21 May 1992 distinguishing on its facts
David Thomas v FSA, unreported 22 September 2004.

of the Mortgage and Credit Unions Department within the small firms division
of the Authority. Mr Sodha did not challenge the evidence of either of these
witness albeit he had three questions to put to Mr Cope. In addition, Mr
Sodha, who did not serve a witness statement, but did serve a short response to
the Authorities' Statement of Case, gave evidence and was cross examined by
counsel for the Authority. He did however produce numerous testimonials
from various clients expressing their appreciation of the services which he had
provided to them. We also heard evidence from Mr Malcolm Starr, the
managing director, of the Davies Warren Partnership Ltd ("Davies Warren"), a
compliance consultant called on behalf of Mr Sodha.

The Background

15. Between 1982 to 1992 Mr Sodha was a representative of Barclays Life and
between 1992 and June 2004 was a tied agent of SJP. According he has
over 20 years experience in financial services much of that spent dealing with
mortgages and ancillary products.

16. As noted above, on 4^th February 2005 Mr Sodha applied for permission as a
sole trader, seeking authorisation to act as a mortgage and general insurance
intermediary. He does not intend to recruit any other approved person to
work full time in the business albeit he indicated that he intended to retain
Davies Warren to advise on compliance. He would be assisted by a personal
assistant who had worked for National Westminster Bank PLC until it was
taken over by the Royal Bank of Scotland and the personal assistant would
be responsible for ensuring that all requisite forms were completed and
ensuring that letters were sent off. Originally he indicated that Mr Starr would
attend at his offices on quarterly visits to monitor compliance, but in the
course of an interview on 19^th October 2005 he stated that he would retain
Davies Warren to monitor compliance on a weekly basis. As the Tribunal
understand it, monitoring could take place either at Mr Sodha's offices or by a
remote internet connection to Mr Sodha's computer.

17. The Authority then embarked upon a lengthy enquiry process to determine
whether Mr Sodha should be authorised. On 19^th August 2005 it issued a
warning notice to the effect that it proposed to refuse the application. Mr
Sodha indicated that he would send written representations in relation to the
Warning Notice but eventually decided to make his representations orally. He
did so on 19^th October 2005 at a hearing before the Regulatory Decisions
Committee.

18. On 17^th October 2005 the Authority issued its Decision Notice to the effect
that it had decided to refuse the Application. As noted above these concerns
related to Threshold Conditions 4 (adequate resources) and Threshold
Condition 5 (fit and proper having regard to all circumstances). The key areas
of concern to the Authority were as follows:

18.1 The level of complaints made against the Applicant during the course
of his career;

18.2 The proportion of those complaints upheld by SJP and Barclays;

18.3 The nature of the complaints made, particularly those relating to
misselling;

18.4 The Applicant's disregard for proper procedures designed for the
protection of consumers;

18.5 The fact that Applicant's involvement with both firms resulted in final
written warnings being administered;

18.6 That the Applicant proposes to become a sole trader; and

18.7 The Applicant's failure to mention in his Application the final written
warning from St James's Place.

Past Complaints.

Barclays

19. Whilst at Barclays Mr Sodha received 22 complaints over a 10 year period, all
of which were upheld and 7 of which resulted in compensation being paid.
Amongst the complaints relating to Mr Sodha's time at Barclays a client
complained that he had requested that his policy be increased but instead was
sold a new plan, the terms of policies were misrepresented, Mr Sodha paid
clients' monies into his bank account and held onto it for a period of three
months, and gave bad advice on a mortgage. It also appears that the rate of
complaints increased towards the end of Mr Sodha's time with Barclays, 15
(out of 22) being made in 1990 and 1991. In the end Barclays issued Mr
Sodha with a final warning letter; amongst the matters of concern listed were
his conduct in relation to mortgage business, lack of attention to pension
business resulting in a client losing tax relief, and the leaving of clients'
monies in Mr Sodha's own bank account.

20. In the course of his cross examination of Mr Cope Mr Sodha sought to suggest
for the first time that he had been unaware that he had been the subject of 22
complaints at Barclays until he saw the terms of the Barclays reference dated
26^th February 1992 during the course of his application. We do not accept that
Mr Sodha could have been unaware that 22 complaints had been against him
whilst at Barclays. We note that a copy of the reference was contained in the
papers supplied to Mr Sodha with the Warning Notice. The reference was also
referred to in the briefing note to the Regulatory Decisions Committee.
Accordingly we find it surprising that Mr Sodha did not indicate to the
Authority earlier in the course of the consideration of his Application that he

had been unaware that the number of complaints made against him totalled 22,
if such was the case.

During his 12 year period (ending in June 2004) with SJP Mr Sodha was the
subject of 55 complaints of which 17 were upheld. In the majority of the
cases where the complaints were upheld compensation was paid. Mr Sodha
receive a final written warning from SJP in October 1999 (by which time he
had been the subject of 22 complaints) due to the high level of complaints
made against him. In a number of instances compensation was paid to clients,
the amounts ranging from amount of £75 to £12,000.

Examples of complaints were set out in the Authority's Statement of Case and
skeleton. Mr Sodha produced no evidence to suggest that the description of the
complaints was wrong albeit we note that in his note commenting on the
Statement of Case he comments on certain of them.

22.1 In 2001, Mr Sodha advised a client to take out two pensions to support
her mortgage. However the retirement dates of these policies were
written past her mortgage redemption date. Mr Sodha also incorrectly
advised the client that the tax-free lump sum from her pension
would pay off her mortgage. SJP paid compensation of £11,000 as
a result of the complaint.

22.2 In 2002, Mr Sodha advised a client to take out an investment bond.
The bond was recommended to increase net disposable income but
resulted in reducing income. SJP noted that there was no evidence to
support an attitude to risk as the client had no experience of equity
based investments. SJP paid compensation of £8,000.

22.3 In 2002, a client requested a review of a pension plan which was set up
to support his mortgage. Mr Sodha had advised that the tax free
lump sum would pay off the mortgage if the plan reached a speculative
growth rate of 12%; the use of that growth rate required prior approval
of SJP which Mr Sodha had not obtained. SJP found no evidence of the
client risk appetite or that he had any equity based investment
experience. Compensation was paid of £12,000 which was credited to
his personal pension plan. Mr Sodha commented that an estimated
growth rate of 12 per cent was acceptable to certain lenders. That
does not meet the point that SJP found no evidence of risk appetite or
equity experience.

22.4 In 2004, Mr Sodha advised clients to borrow against their home in
order to invest in a bond. The regular withdrawals from the investment
bond were to fund the mortgage. However the advice resulted in

reducing income. SJP paid compensation to cover the loss incurred
when the value of the bond depreciated. Mr Sodha commented that the
clients were aware of the type of investment and that in the event of the
bond going down the husband had a job and was receiving income

22.5 In 2004, a client was advised to take out life cover even though the
client had no dependants. There were no documented reasons why
cover was required and no evidence that alternatives were discussed.
Furthermore the plan was not affordable and the premiums were met
by withdrawals from an investment bond. Mr Sodha
commented that the plan was for the benefit of the client's
grandchildren - however that reason was not documented,

22.6 In 2004, Mr Sodha failed to document the risk appetite of a client. SJP
felt that the client did not have any experience in equity based
investments and also noted that the client had recently suffered the
bereavement of her husband. SJP paid £5000 in compensation.

22.7 In 2004, a client stated that she was eligible to join a group pension
scheme. SJP stated that Mr Sodha did not request a copy of scheme
booklet therefore there was no documentary evidence in her file that
she had an employer scheme. Mr Sodha had failed to collect relevant
details regarding the employer's pension scheme.

23. A common theme in the complaints made against Mr Sodha relates to the
state of the file relating to particular clients. The proper maintenance of the
"fact file" which records the personal circumstances of a client and the advice
given to him serves a number of purposes. First it serves as a discipline in
ensuring that correct advice is given; it also assists the adviser in meeting
clients' complaints as to the advice given. In many of the complaints it
appears that information as to the clients' circumstances and the nature of the
advice to the clients was not recorded on the file. That meant that Barclays or
SJP was in a difficult position in rebutting the complaint. One example of this
was the case of a Mrs P who complained that her application for a mortgage
had been inappropriately dealt with by Mr Sodha because he had advised her
to apply for a residential mortgage whereas she wished to let the property. Mr
Sodha gave evidence by way of a recording of a telephone conversation with
a Mr John Burley to the effect that Mrs P had not told him that the she wished
to "buy to let" but had told him she wished to live in the property. The
difficulty was that there was no Product Confirmation on the file which
recorded the reasons Mrs P had given to Mr Sodha as to why she wanted the
mortgage. In the course of the SJP inquiry into Mrs P's complaint Mr Sodha
agreed that the documentation was totally inadequate and that the "fact find"
did not explain why two insurance policies were to be taken out and whether
they were designed to assist in repayment of the mortgage.

24. As Mr Lord said in his witness statement a large number of the complaints
against Mr Sodha indicated that he had failed to write to private customers
setting out a clear explanation for his advice and, in particular , the basis on
which the products recommended were suitable for them. The issuing to
clients of "Suitability Letters" is a key customer protection requirement of the
FSA rules as set out in COB 5.3. Providing a Suitability Letter gives the
investor an opportunity to review the rationale for the recommended
transaction to ensure that his investment objectives, priorities and attitude to
risk have been accurately understood by the adviser. It also is a useful
discipline for the adviser as it is another opportunity to think the matter
through.

25. In the course of 1999 as part of his PIA Membership Committee's approval of
his individual membership application in 1999 a condition requiring increased
supervision by SJP of his practice was imposed. Despite being placed under
increased supervision by SJP the level of complaints remained high.

26. An SJP internal memorandum dated 27^th September 1999 records that by
1995 Mr Sodha was the subject of a number of about 13 complaints many of
which related to mortgage business. SJP had increased the support to his
practice and as a result the rate of complaint reduced. However in 1999 the
number of complaints had started to rise again and in an effort to alleviate
SJP's concerns Mr Sodha had offered to cease carrying on mortgage business
for a few months and consider improving the administrative support of his
practice. He was also told that he would receive a written warning and that if
the level of complaints continued SJP would review whether to continue his
contract with them. On 25^th October 1999 Mr Sodha received a final written
warning in relation to his dealings with Mrs P. The letter recorded his
agreement not to work in the mortgage market over the following months.
After receiving that written warning Mr Sodha was the subject of a further 28
complaints of which 8 were upheld by SJP. Of these 4 related to mortgages.

27. On 9^th March 2001 Mr Sodha wrote to SJP agreeing not to accept new
mortgage business from a potential client "under any circumstances". By the
time he left SJP he had been the subject of 55 complaints.

28. The Authorities evidence was to the effect that Mr Sodha appeared to be the
subject of an unusually high number of complaints. Mr Lord (whose
evidence was not challenged) gave evidence to the effect that from his
experience as a specialist supervisor of IF As he would expect a complaint rate
of approximately one complaint per individual adviser per year. At SJP Mr
Sodha received 55 complaints over a 12 year period. Mr Lord also gave
evidence that in his experience the rate at which complaints are upheld is
about 1 in 10. In the case of Mr Sodha the uphold rate was nearer 1 in 3.
Accordingly during his period at SJP Mr Sodha's complaints record is
unusually high both in regard to the number of complaints made and the
number upheld. In relation to his 10 years with Barclays Mr Sodha's

complaints record (22 in 10 years) and uphold record (7 out of 22) was also
high. In giving his evidence Mr Cope took into account the fact that
complaints had increased in recent years due to mortgage endowment
complaints. Mr Sodha had not sold any endowment mortgages so the extra
scrutiny attracted by endowment mortgages cannot explain his higher
complaint rates. Mr Cope also gave evidence in response to a question from a
member of the Tribunal that he had compared the rate of complaints and
upholds between large network, large IF As and small directly authorised firms
and discovered that firms such as SJP would incur complaints at a lower than
average rate. We note that on occasion Barclays or SJP might have accepted a
complaint out of goodwill but we have no evidence to suggest that other p
roviders adopted a different policy to Barclays or SJP.

29. As we understood Mr Sodha's evidence he did not accept that all the
Barclays' complaints which were upheld were his responsibility as opposed to
that of Barclays but he did accept the SJP complaints which were upheld but
pointed out that in certain cases he had collected the necessary information
about a client but not documented it in a "fact find" or suitability letter.

Other matters

Failure to observe regulatory requirements..

30. Certain of the complaints indicated that Mr Sodha is inclined to disregard
regulatory requirements. Thus in the case of Mrs P referred to above, Mr
Sodha paid client monies into his own account. Albeit the amount of monies
was small - £175 - for an adviser to pay client monies into the adviser's own
account without being authorised to handle client funds is a serious matter.
We note that whilst at Barclays Mr Sodha had paid clients' monies into his
own bank account and held it for 3 months. That had been one of the reasons
he received a warning letter from Barclays. There is no suggestion of
dishonest motives on the part of Mr Sodha. In the case of Mrs P his
explanation was that he had paid the monies into his own account as that made
it easier to pay for the property valuation and ensure that there was no question
of the cheque not being met and the application being rejected. He said in the
course of his evidence he had paid client monies into his own bank account for
these reasons on a number of occasions. Albeit we accept Mr Sodha's
explanation he must have been aware of the requirement not to accept client
monies without authorisation due to his experience at Barclays, the gravity
with which a breach of the requirement was viewed, and despite that handled
client monies.

Complaint handling

31. A comment made by the Applicant before the Regulatory Decisions
Committee in respect of complaints handling is also noteworthy. The
Applicant said he would offer a "sweetener or compensate for a small amount"

to clients to keep them happy in the event of a mix up. That would not be in
keeping with a proper complaints handling process or necessarily consistent
with treating customers fairly. In relation to mortgage business the
consequences of a mistake might endure over a long period and, in the case of
private individuals, be a matter of some considerable importance.

Failure to reveal the final written warning from SJP in the Application form

32. Mr Sodha discussed the completion of the application form with Mr Malcolm
Starr. He answered question 1.11 of the application as to whether he had had
professional advice to fill in or assist in the application in the affirmative. In
completing the application questionnaire Mr Sodha ticked the "yes" box in
response to question 2.8 as to whether he had had any material written
complaints made against him by his client or former clients within the last 5
years and which he had accepted. In response to question 2.12 which provides
as follows:

Are you, or have you ever been, the subject of an investigation into
allegations of misconduct or malpractice in connection with any
business activity? This question covers internal investigation by an
authorised firm in addition to investigations by a regulatory body at
any time.

33. Mr Sodha ticked both boxes marked "yes" and "no", crossed out both ticks
and wrote in another box which he drew adjacent to the printed boxes on the
application form and wrote in the box "No". He then initialled the box. He
omitted to refer to the reprimand and final warning from SJP given on 25^thOctober 1999.

34. Mr Starr's evidence was that he could not recall seeing the completed
Application but that he could recall a discussion as to Mr Sodha's "difficulty"
with Barclays and on that basis his view had been that it should have been
answered in the affirmative not the negative. He did say that he was unaware
of the "difficulty" with SJP. Mr Sodha gave evidence to the effect that he had
not mentioned the SJP warning to Mr Starr but that Mr Starr had told him to
attach some supporting material to the Application in relation to the Barclays'
warning. He said he had intended to act in a similar fashion in relation to the
SJP warning. His explanation for his failure to do so was that he forgot to do
so at the time but that he had not intentionally set out to conceal the SJP
warning.

35. Mr Sodha was well aware of the importance of disclosure due to the advice of
Mr Starr in relation to the Barclays warning. The importance of completing
the Application form accurately was something that Mr Sodha must have been
aware of. The failure to disclose the SJP warning suggests a somewhat casual
attitude by Mr Sodha to the completion of the Application and gives some
cause to doubt whether he would be conscious, if authorised, of the need to

deal with the Authority in an open way as required by the APER Statement of
Principle 4.

Mr Sodha's Application

36. As a sole trader Mr Sodha would be the person responsible for managing his
business; he would choose choose the level of compliance support and training
which he requires; he would be responsible for dealing with clients' concerns
including how to fulfil their requirements and deal with their complaints.
Albeit that he was self employed at SJP, he was operating in an environment
with greater structure and where he was subject to the supervision and
sanction of others although Mr Sodha felt the actual level of compliance
support to be provided by Davies Warren would be greater than he had
experienced at SJP.

37. Mr Sodha sought to satisfy the Tribunal that he was fit to be authorised on the
basis that he was prepared to retain Davies Warren acting by Mr Starr to
ensure that he observed all applicable regulatory requirements. Davies
Warren would offer a service under which Mr Sodha's fact file could be
monitored remotely via the internet and would provide training facilities to Mr
Sodha. However Mr Starr accepted that he would not be able to monitor how
complaints were handled unless he was made aware of them. Originally
Davies Warren had discussed monitoring by quarterly visits. Mr Sodha in the
course of his interview with the Regulatory Decisions Committee had
suggested that he could arrange weekly monitoring from Davies Warren. He
had not, however, by the hearing actually discussed with Mr Starr whether
such close monitoring was possible. Mr Starr indicated that he could supply
such monitoring subject to agreeing terms with Mr Sodha during the course of
his evidence.

38. Mr Sodha also had retained the services of a person who had previously been
employed by the National Westminster Bank PLC but who was not authorised
herself. Her responsibility would be ensure that the forms and letters were all
properly written and files were properly maintained.

39. We note that even after Mr Sodha was placed under constant supervision at
SJP the level of complaints remained high due to the use of flawed procedures
and advice. Weekly monitoring is less supervision than constant supervision.
Monitoring is inherently something which occurs after the event and
dependent upon adequate records being maintained. There is no obligation on
Mr Sodha to continue a contract with Davies Warren.

40. The question for the Tribunal is whether Mr Sodha has satisfied the Tribunal
that he has satisfied the Threshold Conditions 4 and 5.

41. Having considered the matters set out above we are not satisfied that Mr
Sodha satisfied threshold Conditions 4 and 5. In particular we consider that

the matters described above show that Mr Sodha has an insufficient
appreciation of the need, and an insufficient determination to comply with
the requirements and standards of the regulatory system which will apply to
him. The evidence shows that he has manifested a consistent disregard of the
need to comply with requirements to maintain fact files or issue client advice
letters, is prepared to disregard a requirement if it is inconvenient such as the
requirement not to handle clients' monies, and will not adhere to a proper
system for handling complaints if it suits him. His failure to disclose the SJP
warning was consistent with a failure to appreciate the importance of the
purpose of regulation set up under FSMA. Accordingly we are not satisfied
that he has adequate non financial resources or is a fit and proper person to be
authorised in the light of the matters before the Tribunal.

42. In the circumstances the reference is dismissed. Our decision is unanimous.

TERENCE MOWSCHENSON QC

CHAIRMAN
RELEASED:

FIN 2005/0031



	REGULATED ACTIVITIES — Permission — Refusal of application — Threshold Conditions 4 and 5 — Numerous previous complaints — Failure to disclose previous warning — Whether Tribunal satisfied as to Applicant's suitability — No — Reference dismissed

	FINANCIAL SERVICES AND MARKETS

	VRAJLAL LAXMIDAS SODHA	Applicant

	- and -

	FINANCIAL SERVICES AUTHORIT	The Authority

	Tribunal: TERENCE MOWSCHENSON ANDREW J LUND W RUTHVEN GEMMELL WS

	Sitting in public in London on 16 May 2006 The Applicant in person Miss Sara George, for the Authority

	© CROWN COPYRIGHT 2006

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	United Kingdom Financial Services and Markets Tribunals Decisions
You are here: BAILII >> Databases >> United Kingdom Financial Services and Markets Tribunals Decisions >> Sodha v Financial Services Authority [2002] UKFSM FSM033 (16 May 2006) URL: http://www.bailii.org/uk/cases/UKFSM/2006/FSM033.html Cite as: [2002] UKFSM FSM33, [2002] UKFSM FSM033



	DECISION

	Introduction 1. On 4^th February 2005 Vrajlal Laxmidas Sodha ("Mr Sodha") applied under section 40 of the Financial Services and Markets Act 2000 ("the Act") for Part IV permission as a sole trader to carry on the regulated activities of advising on and/or arranging mortgages and general insurance products ("the Application"). 2. Mr Sodha completed a Sole Trader Application Pack in which he stated that he wished to apply for permission profile 9 which relates to a retail intermediary advising on and/or arranging mortgage and general insurance products but does not include advising on and/or arranging packaged products nor handling or controlling client money. 3. On 27 October 2005, the Respondent ("the Authority") issued a Decision Notice refusing the Application pursuant to section 52(9) of the Act. 4. The reasons for the refusal of the application, as set out in the Decision Notice, were that the Authority was not of the view that Mr Sodha satisfies, and will continue to satisfy, the threshold conditions set out in Schedule 6 to the Act ("the Threshold Conditions") as he has not demonstrated to the FSA that he: (1) has adequate resources (Threshold Condition 4: adequate resources), having regard to all the circumstances, including that Mr Sodha proposes to carry on business by himself, as there are not appropriate human resources which will effectively oversee the relevant systems and controls at all times; and (2) is a fit and proper person (Threshold Condition 5: suitability) having regard to all the circumstances, including that Mr Sodha proposes to carry on business by himself, as he has not shown that he: (i) will conduct the business with integrity and in compliance with proper standards; and (ii) will have competent and prudent management or will conduct affairs with the exercise of due skill, care and diligence. The Reference 5. On 28 November 2005 Mr Sodha referred that decision to the Tribunal pursuant to section 55(1) of the Act.

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	the matters described above show that Mr Sodha has an insufficient appreciation of the need, and an insufficient determination to comply with the requirements and standards of the regulatory system which will apply to him. The evidence shows that he has manifested a consistent disregard of the need to comply with requirements to maintain fact files or issue client advice letters, is prepared to disregard a requirement if it is inconvenient such as the requirement not to handle clients' monies, and will not adhere to a proper system for handling complaints if it suits him. His failure to disclose the SJP warning was consistent with a failure to appreciate the importance of the purpose of regulation set up under FSMA. Accordingly we are not satisfied that he has adequate non financial resources or is a fit and proper person to be authorised in the light of the matters before the Tribunal. 42. In the circumstances the reference is dismissed. Our decision is unanimous.

	TERENCE MOWSCHENSON QC CHAIRMAN RELEASED:

	FIN 2005/0031

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United Kingdom Financial Services and Markets Tribunals Decisions