The Financial Services and Markets Tribunal has given its opinion in Vukelic v Financial Services Authority [2009] UKFSM FSM067. The Tribunal supported the FSA's decision to make an order against a former director prohibiting him from performing any function in relation to any regulated activity carried on by any authorised or exempt person or exempt professional firm. The Tribunal found that the director was not fit and proper within Section 56 of the Financial Services and Markets Act (2000). The case concerned three financial reinsurance transactions which involved no real reinsurance risk and which were entered to disguise losses and/or misrepresent financial accounts. The director, Mr Vukelic, was responsibe for overseeing and structuring these transactions and knew that they could be used to mislead the clients' auditors. Two of the three client insurance companies collapsed. The Tribunal found that Mr Vukelic had (paras. 119 and 122):
"...turned a blind eye to what was obvious and failed to follow up obviously suspicious signs ... he chose not to exercise his power of veto to stop what should have been seen to be an obviously questionable deal from going ahead. ... We find that he must have appreciated that the deals would probably founder if they were fairly and fully described to auditors and others with a right to know. His conduct in relation to these transactions lacked integrity ... In terms of the consequences for creditors, investors and shareholders, it made little difference whether Mr Vukelic was dishonest or merely reckless"
Also of interest is the Tribunal's clear warning concerning regulatory compliance (para 123):
Anyone who promotes financial products on the basis that a clear potential for abuse is not their problem because primary responsibility for disclosure to auditors, regulators or others rests with the client, is, as we see it, acting unethically and can expect appropriate regulatory sanctions".
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