She held controlled function 10 between 3 August 2006 and 7 October 2011. She was fined under s66 Financial Services and Markets Act 2000 (as amended), which deals with the ’s disciplinary powers, and under APER Statement of Principle 6, which states that an approved person performing an accountable significant-influence function must exercise due skill, care and diligence in managing the business of the firm for which he is responsible in his or her accountable function. Catalyst, for its part, transgressed against principle 1 (a firm must conduct its business with integrity) and principle 7 (a firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading). APER is the Code of Practice for Approved Persons.

Catalyst was the primary distributor of ARM bonds (structured products issued by a Luxembourg entity, ARM) in the UK between 2007 and 2009. The underlying assets of such bonds were senior life settlements purchased in the United States. Catalyst promoted and distributed ARM bonds to investment intermediaries and independent financial advisers in the UK, who in turn promoted and sold them to private investors. Ms Moran turned a blind eye to licensing problems.

Although the , at para 2.3, states this in the vaguest (and least grammatical) way possible, commenting that ARM thought that it needed a licence from the , (Annex B 1.1d) Catalyst states that, in its own eyes, “the position under Luxembourg law is unresolved as to whether ARM actually required a licence – if so this was only because the , it is not even ARM’s regulator – at 4.8 it states baldly: “ARM is not regulated.”) What powers does the states that every firm in Catalyst’s position is obliged under APER principles 1 and 7 (conducting business with integrity and meeting the information needs of clients) to point out anything that might be bad or unfavourable to investors about the bond-issuer’s regulatory position. In this case the ‘regulatory position’ – a phrase it repeats over and over – was that ARM did not have a licence from the to comment on this, but had received no reply 24 hours later.

Catalyst clearly transgressed against APER principle 1 (“a firm must conduct its business with integrity”) by failing to point out the fact that ARM thought that it was staring liquidation in the face, something that ARM told it as soon as it had formed the opinion itself on 19 November 2007. Much later, on 20 November 2009, Catalyst knew that ARM would not issue any more bonds, at least until it had a licence, but also said nothing. Because of this and its secrecy about the aforementioned opinion it transgressed against principle 7 (paying due regard to the information needs of clients and passing information to them in a clear, fair and not misleading way) throughout the period of the censure.

Catalyst sent letters to independent financial advisers in December 2009 and to investors in March 2010. These were, indeed, misleading about ARM’s predicament. They intimated that the Luxembourg firm’s application for a licence was voluntary and steered clear of any mention of liquidation.

THE IRISH ESCAPE-HATCH THAT NEVER OPENED

There were also plans afoot from early 2010 for ARM to relocate to Ireland. Here it would not need clearance from the regulator to operate, although regulatory approval would have been necessary for the prospectus and other odds and ends. A shell company was set up for this purpose but the crossover from Luxembourg never happened. In the letter to investors of March 2010 (para 4.31) Catalyst told investors that a move to Ireland would be ‘advantageous’ if it could not be ‘regulated in Luxembourg.’ The ) to write to investors regarding and its predecessor-body have struggled with the definition of ‘recklessness’, a word that often justifies a fine. In the final notice the regulator often states that Catalyst’s continuing promotion of bonds throughout the long crisis showed “a reckless disregard for the interests of investors.” Its decision whether a firm acts recklessly (Annex A 3.8) rests on “giving consideration to factors such as whether the person has given no apparent consideration to the consequences of the behaviour that constitutes the breach.” Expressing itself differently, it states at Annex B 1.6b: “Catalyst acted recklessly in closing its mind to the risks to investors when sending the letter.” It imposes even heavier penalties if it thinks that the behaviour it is punishing was deliberate.

A GENEROUS PENALTY...IN PRINCIPLE

The award of penalties, in view of Catalyst’s inability to pay, are largely academic. The ’s decision to banish Roberts and Wilkins from exercising ‘functions of significant influence’, in Wilkins’ case under s56 FSMA. It stated that Roberts breached statement of principle 1 (integrity) and 6 (due skill, care and diligence) and fined him £450,000, while saying that Wilkins breached APER statement 6 and fining him £100,000. Roberts and Wilkins have referred their cases to the Upper Tribunal, which will reconsider the case and may uphold, vary or cancel the ’s decision.