Note by HM Treasury on the protection
See minutes of evidence Q 113
Lord Poole enquired about the protection
of the individual when disciplinary action is being taken. He
expressed concern that while the FSA and the firm might agree
on the most rapid course of action, the individual employee could
be disadvantaged as a result.
1. Where the FSA is proposing to take disciplinary
action against an employee who is an approved person, clause 51
of the draft Bill requires it to issue him with a warning notice.
This allows the individual concerned to make representations.
If a decision notice is subsequently issued he can then have the
matter reconsidered by the independent Tribunal established under
2. The employee has equivalent protection where
the FSA proposes, under Clause 47 of the Bill, to withdraw its
approval for the employment of a person where he is not considered
fit and proper to carry out the function in question. The process
of withdrawal is again subject to the employee's full right to
make representations to the FSA against the warning notice and,
if an adverse decision is nonetheless taken, to appeal to the
3. If such an appeal were unsuccessful and the
withdrawal of approval were confirmed by the Tribunal, we recognise
that this could be likely to lead to the dismissal of the employee.
Moreover, if the employee claimed unfair dismissal, the reason
for the dismissal would appear to be potentially fair because
continuing to employ him in a regulated function would result
in contravention of a duty or restriction imposed by or under
statute (see section 98(2)(d) of the Employment Rights Act 1996).
However it would still be necessary as a matter of general employment
law for the employer to show that they had followed fair procedures
and had acted reasonably in treating the reason as a sufficient
reason for dismissing the employee.
4. For example it would remain open to the employee
to argue, before the Employment Tribunal, that the dismissal was
unfair on the grounds that it had taken place prior to the outcome
of the hearing before the Tribunal established under the Bill,
or without making proper attempts to find suitable alternative
work (for example work not involving a regulated function) for
the employee within the firm.
5. In other circumstances the FSA may be proposing
to take action against the firm and not against the individual,
but nevertheless the reasons given in the warning notice issued
to the firm may identify an individual employee in prejudicial
terms. In those circumstances also the employee generally has
a right, under Clause 210, to be given a copy of the warning notice
and to make representations to the FSA. If the FSA nonetheless
comes to an adverse decision, then again if the reasons identified
in the decision notice identify the employee in prejudicial terms
he will have a right under Clause 211 of the Bill to have the
matter reconsidered by the Tribunal. The employee may use this
right to challenge the substance of the decision itself, or to
challenge any opinion expressed by the Authority in relation to
6. Criticism of an individual employee might,
if confirmed by the Tribunal established by the Bill, lead to
internal disciplinary action against him by his employer which
might ultimately include the sanction of dismissal. However, such
action would be subject to the usual avenues of recourse to the
Employment Tribunal, and it would remain open to the employee
to argue that, notwithstanding the criticism made of him, it was
not reasonable in all the circumstances for him to be dismissed.
The employee would be able to make a claim of unfair dismissal
to the Employment Tribunal where he has the necessary period of
qualifying service (currently two years, but soon to be reduced
to one year under the Fairness at Work Bill).
7. Finally there may be circumstances where
the employee is not mentioned in any notice issued by the FSA
but where the individual is nonetheless implicated in some way.
In particular it is possible that a case may be settled between
the firm and the FSA before the formal stage of the disciplinary
procedure is reached, and that action may be taken against the
employee by the employer, including dismissal. As already mentioned,
the Employment Tribunal would consider whether or not the employer
acted reasonably in treating the reason as a sufficient one for
dismissing the employee in accordance with the requirements of
12 April 1999