Bordeaux Services (Guernsey) Limited & Ors v GFSC (2016-05-11)

Summary

This is a Royal Court of Guernsey judgment (Deputy Bailiff McMahon, 11 May 2016) deciding appeals brought by Bordeaux Services (Guernsey) Limited and its former directors against enforcement sanctions imposed by the GFSC in July 2015. The sanctions arose from failings identified in Bordeaux's administration of the Arch Guernsey/Arch Cru investment fund structure between 2007 and 2009, including AML/CFT, compliance monitoring, record-keeping and senior management control weaknesses.

Bordeaux appealed only the £150,000 financial penalty imposed on it under the Financial Services Commission (Bailiwick of Guernsey) Law, 1987. The three individual directors (Radford, Tostevin and Meader) appealed only the prohibition orders made against them under the Protection of Investors Law, the Fiduciaries Law, the Banking Supervision Law, the IMII Law and the Insurance Business Law. Other sanctions (public statement, disapplication of an exemption, and individual financial penalties) were not challenged.

• Bordeaux's penalty appeal: Allowed; the £150,000 financial penalty is set aside and remitted to the GFSC to be re-fixed with full, rational reasoning.
• Prohibition orders under Banking Supervision, IMII and Insurance Business Laws: All three directors' appeals allowed; these prohibition orders are set aside (though the GFSC may consider fresh action under these Laws if warranted by the underlying findings).
• Radford and Meader under POI Law and Fiduciaries Law: Appeals dismissed; the five-year prohibition orders against them are confirmed.
• Tostevin under POI Law and Fiduciaries Law: Appeal allowed to the extent that the length of his prohibition order is set aside and remitted to the GFSC for re-consideration.
• Costs: Reserved, to be agreed by the parties or relisted for an interlocutory hearing.

The judgment is a case-specific court decision rather than a rule of general application, but it illustrates the Royal Court's expectations that GFSC enforcement decisions on financial penalties and prohibition orders be adequately reasoned, proportionate and consistent with the statutory criteria in the FSC Law and the relevant regulatory Laws.

Key obligations

• The GFSC must re-consider and re-fix the amount of Bordeaux's financial penalty, giving full reasoning for the level set.
• The GFSC must re-consider the length of the prohibition order made against Mr Tostevin under the POI Law and the Fiduciaries Law.
• The five-year prohibition orders against Mr Radford and Mr Meader under the POI Law and the Fiduciaries Law remain in force and must be complied with.

Applies to

fiduciary licensees, investment business licensees under the Protection of Investors Law, directors and controllers of licensees, persons subject to GFSC prohibition orders