Cees Schrauwers (Chairman of the GFSC) v David John Merrien (2016) (Court of Appeal, Guernsey Judgment No 498 2016)

Summary

This is a Court of Appeal of Guernsey judgment (2016) in an appeal by the Chairman of the GFSC against a Royal Court decision that had set aside a GBP 200,000 financial penalty imposed on David John Merrien, a former insurance intermediary director, and remitted it to the GFSC for reconsideration. The case turns on how the GFSC must apply Section 11D(2) of the Financial Services Commission (Bailiwick of Guernsey) Law 1987 when deciding whether to impose, and at what level, a financial penalty on a licensee, former licensee or relevant officer.

• Exhaustive list: The Court of Appeal confirmed that the factors listed in Section 11D(2) of the FSC Law are an exhaustive list of matters the GFSC may take into account when deciding whether to impose a penalty and its amount; there is no general catch-all power to consider other matters.
• Ability to pay: The GFSC must consider, among the listed factors, the potential financial consequences to the person concerned and third parties (including whether the person can pay the penalty within a reasonable period), and must give clear reasoning where another factor (such as seriousness) is said to justify a penalty that risks insolvency.
• Consistency and proportionality: Where multiple persons are dealt with in the same enforcement matter, the GFSC must explain its reasoning clearly enough to avoid unexplained disparity between penalties imposed on different subjects of the same case.
• Outcome: The appeal was determined by confirming these points of statutory construction; the actual decision on the appropriate level of financial penalty for the respondent (and consequential changes to the related public statement) was remitted back to the GFSC for reconsideration, without specific directions beyond respecting the statutory cap and the factors in Section 11D(2).

The judgment does not itself create new filing or notification obligations for industry; it is a precedent clarifying how the GFSC must exercise its statutory penalty powers under Section 11D of the FSC Law in enforcement cases against licensees, former licensees and relevant officers, including insurance intermediaries and investment business licensees regulated under the IMII Law and POI Law.

Key obligations

• When deciding whether to impose a financial penalty under Section 11D of the FSC Law and its amount, the GFSC must take into consideration all of the factors listed in Section 11D(2), and only those factors, insofar as they exist.
• The GFSC must have proper regard to the potential financial consequences to the person concerned and their ability to pay the financial penalty within a reasonable period of time, providing clear reasoning if imposing a penalty that could cause insolvency.
• Where penalties are imposed on multiple persons arising from the same matter, the GFSC must explain its reasoning sufficiently to avoid unexplained disparity between the penalties imposed on each person.

Applies to

licensees, former licensees, relevant officers, insurance intermediaries, investment business licensees regulated under the POI Law