A Comsure workshop “JFSC – Under the Court’s Microscope” – The Workshop Content – The workshop is intended to expand on the Royal Court’s judgment and compare this current case to cases brought by others which have been unsuccessful. The workshop will also provide discussion in respect of Mr Leslie-Smith’s other allegations against the Commission and opine on how the Royal Court may have dealt with those matters if required to do so.
This additional information will provide members of the industry with a useful insight into the investigation processes of the Commission and provide food for thought on many matters concerning regulatory measures.
In short, the workshop will tell you all of that which the judgment did not.
Read Blakeley legals briefing paper below
WHY THE JFSC SURRENDED: LESLIE SMITH v JERSEY FINANCIAL SERVICES COMMISSION
In December 2010 the Royal Court of Jersey heard an appeal brought by Advocate Blakeley on behalf of his client, Mr Leslie-Smith, against the JFSC in respect of a decision made by the Commission. Earlier this year the Court published its judgment allowing the appeal. The action is the first and only successful appeal against the JFSC.
What the Case was about
Mr Leslie-Smith was an employee and director of a local insurance company, Oracle Financial Services Limited (‘Oracle’). Oracle was a registered entity under the Financial Services (Jersey) Law 1998 and Mr Leslie-Smith was a ‘principle person’ employed by Oracle.
As part of Mr Leslie-Smith’s employment terms he was entitled to an annual bonus depending on the value of insurance policies he sold in each financial year. His bonus was calculated by reference to data contained on Oracle’s computer system which logged to whom the policies were sold along with the date of the sale. The information also contained details of the monetary commission to be received by Oracle and the date on which the policies of insurance came ‘on risk’.
Just prior to calculating Mr Leslie-Smith’s commission, the managing director of Oracle noticed that the date for a particular policy of insurance had moved from the previous financial year into the current financial year. This created a suspicion that Mr Leslie-Smith had moved the date so that the policy would be double counted with the effect that he would be paid commission twice. Further discrepancies were discovered of a similar nature which further increased suspicion.
Both the managing director of Oracle and Mr Leslie-Smith (separately) contacted the Commission regarding these matters and the Commission commenced an investigation. At the same time, Oracle suspended Mr Leslie-Smith from his employment and soon after dismissed him from employment.
The Commission – by its Enforcement Section – carried out numerous enquiries in conjunction with interviewing Mr Leslie-Smith under caution. Ultimately, the matter was referred to the Board of Commissioners who decided that a Direction should be issued to Mr Leslie-Smith which had the effect of limiting the scope of his employment in the financial services industry in Jersey. The Board of Commissioners also decided to issue a Public Notice publicising the Direction issued.
The Further Proceedings
While the Commission’s investigations were underway the States of Jersey Police was also investigating possible criminal offences against Mr Leslie-Smith in respect of fraud. Ultimately Mr Leslie-Smith was charged with 9 counts comprising fraud and attempted fraud and was indicted for a trial by jury. As a result of the pending trial the Commission delayed issuing the Public Notice for fear that it may prejudice Mr Leslie-Smith’s right to a fair criminal trial (in that publicity may adversely effect potential jurors).
Advocate Blakeley represented Mr Leslie-Smith during the week long criminal trial. At the conclusion of that trial the jury acquitted Mr Leslie-Smith on all counts.
Following that verdict the Board of Commissioners reconsidered its original direction and eventually decided to change the wording which explained the reasons for the Direction. The effect was that the Commission changed findings of ‘dishonesty’ and ‘lack of integrity’ to findings of ‘incompetence’. It still considered however that it was appropriate to issue a Public Notice setting out the Direction.
Not content with the Commission’s continued stance, Mr Leslie-Smith instructed Advocate Blakeley to appeal the decision back to the Board of Commissioners. As a result of that appeal process the Commission once again amended the reasons for the Direction by limiting them to a reduced number of specified instances. Nonetheless, the Direction remained as did the Commission’s decision to issue a Public Notice.
The Appeal Process
Once all appeal procedures had been exhausted in respect of submissions to the Commission Mr Leslie-Smith was only left with the option of appealing the decision to the Royal Court. Such appeal was duly lodged.
The Appeal alleged that the JFSC had been biased in its decision making process; had been unfair, irrational and disproportionate. It set out at least 14 complaints against the Commission ranging from the way in which the Commission investigated the matter to its alleged confused reasoning process. The Commission contested the appeal on the basis it had acted fairly and proportionately.
On the first morning of the Appeal Advocate Blakeley set out his client’s contentions listing all the complaints against the JFSC’s decision/investigation process. After hearing these matters the Court stated that it was ‘troubled’ by what it heard in respect of two matters in particular: first, it was concerned that it appeared the Commission’s written evidence (in affidavit) was totally contradictory to the written reasons for the Direction and that secondly, it appeared the sanction imposed (i.e. the Direction) had remained the same throughout the process which seemed odd since the Commission had originally alleged dishonesty and lack of integrity against Mr Leslie-Smith but had later changed that to ‘incompetence’.
When the JFSC was invited to make its submissions it first attempted to stay the appeal so that no further submissions would he heard by the court; the Royal Court rejected the Commission’s application and ruled that the Appeal should continue. The JFSC then immediately announced it was conceding the appeal on two grounds (the two grounds specifically mentioned by the court) and would no longer defend its position.
Accordingly, Mr Leslie-Smith won the appeal and the Direction issued by the Commission along with its decision to issue a Public Notice was quashed by the Royal Court and the Commission ordered to pay Mr Leslie-Smith’s legal costs.
Discussion
This Appeal was the first ever successful appeal against a decision by the JFSC to issue a Direction against a Principle Person. It demonstrated that the Court was prepared to step and make sure that the Commission acts fairly toward those people it regulates. In this case it was very obvious that the Court was concerned by what it had heard during the court process and made that clear to the Commission’s lawyers.
In particular the court agreed that it could not be right for the Commission to allege publicly on the one hand that a person had been ‘incompetent’ while on the other hand swear by affidavit that the Commission considered that same person to be dishonest and be lacking in integrity. The two allegations were very different. Given that they were very different it was also very hard to see how the same sanction would be appropriate in both sets of circumstances.
By conceding the appeal the Commission may have thought that the matter may have been kept private. However, the Royal Court was clear that the matter was of importance and therefore took the unusual step of issuing a judgment.
The concession by the Commission did however prevent the Royal Court from making findings against the Commission in respect of the other allegations made by Mr Leslie-Smith against the Commission. As the Commission’s lawyer had not argued those points the court could not make findings in that regard.
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