A Central Bank sanction blocking an investment fund manager from working in regulated financial services has been struck down after a judge found there were “a series of significant and serious errors” in the bank’s investigation.
In a judgment published on Friday, High Court president David Barniville was strongly critical of the Central Bank’s investigation into the manager, finding that his right to natural justice and fair procedures were breached by the bank’s inquiry.
The manager, a former chief executive of an investment fund management firm, was restricted from working in the sector from February 2022 after the Central Bank investigation made several serious findings against him. These included a conclusion that he had been untruthful and misleading in his dealings with the Central Bank.
Following the investigation, the Central Bank concluded that a failure to issue a prohibition notice against the manager “would amount to a failure to prevent serious damage to the financial system”.
READ MORE
The prohibition notice had the effect of blocking the manager from carrying out certain senior roles at regulated financial services institutions in the State. These roles, which are set out in legislation, are known as “controlled functions”.
The manager strenuously denied the allegations against him, and disputed the conclusions of the investigation, which had commenced in 2019.
The bank, as required under law, sought to have the prohibition notice confirmed by the High Court.
In his judgment, Judge Barniville found the bank made “a series of significant and serious errors” during the investigation process, and in making its conclusions. The judge refused the application to confirm the notice.
Throughout the judgment, the judge underlined the seriousness of the allegations, and the “enormously serious” consequences of the bank’s findings for the manager, “in terms of his credibility, reputation, good name and livelihood”.
Given the seriousness of the allegations, the judge said it was “unfathomable” that there was no oral hearing during the investigation. With various facts in dispute, the judge said the manager should have been given the opportunity to contextualise and explain material at an oral hearing.
The judge noted that the manager was not interviewed by the Central Bank official leading the investigation. The investigator also did not interview any people who the manager identified as being in a position to provide evidence relevant to the investigation, the judge noted.
The judge also noted that the investigator failed to provide evidence from Central Bank officials who were allegedly misled by representations made by the manager in a July 2018 meeting.
In September 2021, the manager met a Central Bank official tasked with considering the information gathered by the investigator, but this did not remedy the lack of an oral hearing, the judge said. Rather, the meeting acted as a box ticking exercise, the judge held.
“In my view, it was incomprehensible that no question was asked of the [manager] at the meeting… including in relation to the allegation that he was not candid and truthful in his dealings with the Central Bank,” the judge said.
The judge said that this meeting seemed to him “a belated attempt to rectify the absence of fair procedures at the investigation stage”.
“To my mind, it was an entirely empty and ultimately futile exercise and did nothing to remedy the serious breaches of fair procedures at the investigation stage but rather compounded those prior breaches,” the judge said.
The Central Bank’s findings that the manager had been untruthful and misleading were made without him being afforded the opportunity to give evidence on oath in respect of those matters, the judge said.
The judge said that given the seriousness of the allegations made against him, the manager should have been afforded “far more extensive” procedural protection than was allowed to him by the bank during the process.
On Friday, the judge made final orders in the case, refusing the Central Bank’s application to confirm the prohibition notice, and setting the notice aside.
The judge declined to remit the matter to the Central Bank, and made an order for the manager’s legal costs.
The hearing of the case was held in private following an application by lawyers for the manager, who submitted that a hearing in public would have caused damage to his reputation, good name and ability to earn a livelihood.
