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Audax Management Limited and Mr Edward Martin Kelly Determination Notice

Standard Procedure - Determination Notice under section 3 of the Pensions Act 1995 and section 96(2)(d) of the Pensions Act 2004

The Pensions Regulator case ref: C59291233/3

Introduction

  1. By a Request dated 1 April 2020 (the Request) the case team (the Case Team) of the Pensions Regulator (TPR) asked the Determinations Panel (the Panel) of TPR, to consider the issues in a Warning Notice dated 17 February 2020.

  2. The Warning Notice asked the Panel to determine whether to make an order under section 3(1)(c) of the Pensions Act 1995 (PA 95) to prohibit Audax Management Limited (Audax) and Mr Edward Martin Kelly (Mr Kelly) from acting as a trustee of trust schemes in general.

  3. The power to prohibit a person under section 3(1) PA 95 is a reserved function under paragraph 4 of Schedule 2 to the Pensions Act 2004 (PA 04) and can therefore only be exercised by the Panel.

Determination

  1. The Panel determined to prohibit Audax and Mr Kelly from acting as a trustee of trust schemes in general as the Panel is satisfied that neither Mr Kelly nor Audax is fit and proper to be a trustee of trust schemes.

  2. Unless otherwise indicated, in this determination, the reference to ‘Audax' is taken to include the corporate trustee and Mr Kelly as a director.

  3. The reasons for the Panel’s decision are set out below. Where the Panel reaches findings of fact, it does so on the balance of probabilities.

Directly affected parties

  1. The following are the parties identified by the Case Team, and agreed by the Panel, as being directly affected by the regulatory action sought in the Warning Notice:

i) Mr Kelly; and
ii) Audax.

  1. The Warning Notice allegations arise from Audax’s involvement with the Audax Pension Trust Scheme (the Scheme) as the sole trustee company. Where reference is made to the acts or omissions of Audax or Mr Kelly it is, unless otherwise stated, in respect of their roles in relation to the Scheme. 

The Scheme

  1. The Scheme was established on 8 October 2014 and is a defined contribution occupational pension scheme with no active members. On 31 March 2018, the Scheme had 38 deferred members and the value of the assets was £1,198,902.14.

  2. TPR understands that the Scheme has not been wound up (nor steps taken to commence wind up) despite a trigger for wind-up having been crystallised following the dissolution of its principal employer, Refined By Limited (RBL). RBL is listed as the “principal company” or the “principal employer” and was dissolved on 27 February 2018.

The Trustee - Audax

  1. Audax was incorporated on 1 September 2014 and is the current sole trustee of the Scheme and has been since its establishment. The company is active, and its directors are Mr Kelly, appointed on 11 July 2016, and Mr Houston Robertson (Mr Robertson) appointed on 22 September 2016. Mr Kelly is also a director of Curzon Capital Holdings incorporated in November 2016 alongside two other directors, Lawrence Crockford (Mr Crockford) and Paul Francis Dugan (Mr Dugan). Mr Kelly is also a co-director of a further company with Mr Crockford.

  2. No action has been brought before the Panel in relation to Mr Robertson.

Scheme employer

  1. The principal employer was dissolved in February 2018 and no new employers joined the Scheme. Under clause 4.4(b)(ii) of the Scheme’s Trust Deed and Rules, the trustee may deem the “Principal Company” (principal employer) to have withdrawn from the Scheme where the Principal Company has ceased to carry on business (save for purposes of reconstruction and the liabilities continue in the new entity), and under clause 11.1(a)(iv) that the Scheme will terminate “when and if” that happens. Furthermore, clause 11.1(b) states “when the Scheme terminates, the Trustee will commence procedures to wind-up the Scheme in accordance with clause 11 on such date as the Trustee shall determine”.

Scheme administrator

  1. The Scheme’s first administrator is listed in TPR’s records as Masons Pension Administration Ltd (Masons). In correspondence sent to Scheme members, Masons stated that it “took over administration” of the Scheme “in May 2016”. Masons was also the Scheme’s administrator for the purposes of section 270 of the Finance Act 2004 (FA 04) and the Scheme’s registration with HMRC.

  2. In February 2017 Masons wrote to all trustees of the schemes for which it was administrator to inform them of its de-registration by HMRC. On 10 October 2017 Masons was dissolved by the Companies House Registrar.

  3. The Warning Notice states that no replacement scheme administrator has been appointed despite the statutory requirement under FA 04 for all schemes to have a “section 270 Administrator” who is considered fit and proper by the HMRC. The Warning Notice also states that neither was a “Scheme Administrator” appointed as permitted by clause 7.2 of the Scheme’s Trust Deed and Rules.

Scheme Investments

  1. According to the Warning Notice, Mr Kelly advised the Scheme’s investments as at 31 December 2016 to be as follows:

    Holding Value % of scheme assets
    Ganita Wealth Fund £729,000 64%
    B[L]PF1 Ltd £277,000 24%
    Lawthority Ltd £100,000 9%
    Cash £33,000 3%
    Total £1,139,000 100%
  1. In November 2017 Mr Kelly stated (amongst other things) that the Scheme had assets of:

“£1,272k invested as follows:

Ganita Wealth Fund (listed) £672k
Alternative £387k
Specific investments at the request of one member £213k”

  1. The Scheme’s assets were stated to be £1,198,902.14 as at 31 March 2018.

Ganita Wealth

  1. Ganita Wealth Ltd (GWL) is a Wealth Management Company registered in the UK with the FCA (number 597259) and manages funds invested in Ganita Wealth Fund Ltd (GWF) – an investment company based in the British Virgin Islands.

Lawthority

  1. The current value of investments in Lawthority is unknown. Its directors include Andrew Colin Neal (Mr Neal). A Certificate and Conditions document obtained by the Case Team only accounts for £10,000 of investment in Lawthority, rather than £100,000 as suggested in the table provided by Mr Kelly.

BLPF1

  1. The Warning Notice states that limited information is available on this investment. However, email correspondence between Mr Neal (of Lawthority) and Fairhurst Accountants in which various investments, including in BLPF1 Ltd, are discussed states that “provisions will be required to write these down to Nil”.

Investment Advisers

  1. Whilst it is not clear when they were appointed, in or around April/May 2017 the Scheme’s ‘Investment Adviser’ and ‘Investment Manager’ GWF and Met Facilities LLP respectively terminated their services with the Scheme.

I. Background to regulatory action

  1. The proposed regulatory action follows concerns from the Case Team that neither Audax nor Mr Kelly is fit and proper to act as trustee of trustschemes. The principal argument raised by the Case Team is that Audaxand Mr Kelly lack the necessary competence and capability, asdemonstrated by the following events:

HMRC Notification

  1. HMRC notified Audax on 27 January 2017 that the Scheme’s registration would be withdrawn with effect from 17 March 2017. HMRC issued the notification further to section 157 FA 04 which permits HMRC to withdraw registration from schemes where the appointed section 270 Administrator is “not fit and proper”. HMRC is required to notify the scheme if that is the case. If a scheme is de-registered it loses the valuable tax benefits provided by a registered pension scheme such as income tax and capital gains tax relief.

  2. The Case Team contacted Audax on 2 February 2017, in response to which Mr Kelly confirmed that Audax had received the notification from HMRC and said that the employer’s intention was to “transfer all members and assets” to a different pension scheme, Ganita Wealth Pension Scheme (GWPS), and would need another three months to formally wind up the Scheme. Mr Kelly asked TPR to “agree to this timetable”.

  3. In its letter of 2 February 2017, the Case Team also highlighted the impending master trust authorisation regime under the Pension Schemes Act 2017 (PSA 2017) which would introduce a prohibition on operating a master trust scheme without authorisation and suggested that Audax might wish to obtain legal advice. The response from Mr Kelly “confirmed” that the Scheme was not a master trust and never claimed to be one.

  4. The Case Team issued a statutory notice dated 16 February 2017 pursuant to section 72 PA 04 requesting further information about the Scheme. The response by Audax was considered unsatisfactory and a further request was issued. This elicited some of the information requested, including provision of a (non-compliant) Chair’s Statement.

  5. Audax’s response to the Case Team’s enquiries raised concerns regarding the Trustee’s knowledge and understanding. The Case Team subsequently learned that there had been a telephone conversation between HMRC and Mr Muschamp of the Scheme employer, on 17 February 2017, in which HMRC confirmed that the appointment of a new section 270 Administrator that HMRC considered ‘fit and proper’ would allow the Scheme to continue. Alternatively, assets and members could be transferred to a new scheme.

  6. HMRC had also stated it was up to Audax how to proceed. HMRC confirmed the deadline for making an appeal against the Scheme’s deregistration was 17 March 2017 and that if an appeal was made the “clock” would effectively be stopped. HMRC stated that it was prepared to work with the employer to secure the transfer of the Scheme to a compliant scheme administrator.

  7. Further requests for information were made by the Case Team and further responses provided by Mr Kelly, on 11 April 2017 and 13 April 2017, in which he stated that the current administrator (Masons) had lodged an appeal against de-registration, that talks were ongoing with HMRC to appoint a new section 270 Administrator and in the light of that, Audax would not be pursuing the option of transferring members and assets out of the Scheme. No new members had been accepted into or transferred out of the Scheme.

  8. By letter dated 21 November 2017, Mr Kelly provided further information to the Case Team (the November Letter). The letter explained that Mr Robin Glaze had been appointed to assist with discussions with HMRC and to provide “general assistance” to the Scheme (including in liaising with TPR) given “it had not yet been possible” to appoint a new scheme administrator. (The Case Team states that it has never been contacted by Mr Glaze in respect of the Scheme.) The letter re-iterated that Audax was in “discussions” with HMRC, adding that a new administrator had been ‘identified’ but not yet appointed because Audax was “waiting for clearance for the appointment from HMRC”, that “no formal decision had been made to wind up the Scheme” and that the Scheme was not accepting new members. Further, the letter reiterated his assertion that the Scheme was not a master trust scheme for the purposes of the Pension Schemes Act 2017. He asserted that this view was based on “previous advice”.

  9. On 22 January 2018 HMRC confirmed to the Case Team that an appeal against the Scheme’s de-registration had been lodged which had the effect of stopping the clock on the de-registration process.

  10. In May 2018 Mr Kelly contacted Dalriada with a view to appointing it to the Scheme. Having noted the involvement of HMRC and TPR in the Scheme files, on 24 August 2018 Dalriada contacted the Case Team expressing concern about the Scheme and its potential use as part of a pension “scam” based on material found online. Dalriada requested to speak with the Case Team before “moving things forward” with the Scheme. The Case Team responded that there were statutory restrictions on what information the Case Team could provide, adding that it could offer no opinion or advice on whether Dalriada should become involved with the Scheme.

  11. On 12 July 2018 HMRC informed the Case Team that it had no evidence that any members had been transferred out of the Scheme.

  12. Between 6 September 2018 and 20 December 2018, the Case Team was approached repeatedly by Mr Kelly about appointing Dalriada to the Scheme. The Case Team reiterated that “Unfortunately at this stage TPR is unable to provide any further information to you. You will need to undertake your own due diligence and obtain advice in relation to the potential appointment of an independent trustee to the scheme.”

  13. In a further communication on 20 December 2018 Mr Kelly explained that he had “inherited unknown issues” when appointed to the Scheme; that there were “no administrators, no Investment Managers (previously Ganita Wealth) no bank account and no Sponsoring Employer”; that he had contacted Dalriada following a referral and saw “no other way forward other than for them [Dalriada] to step in and accept the engagement in order to wind up Audax [Pension Trust] and transfer members funds to another platform of their choosing. I therefore, urgently call upon you, to assist me, to try and bring the Audax [Pension Trust] issues to a successful resolution.”

  14. On 10 April 2019 HMRC confirmed to the Case Team that there had been “no mention of a potential new scheme administrator since [April 2017] as the current trustee was looking to wind the scheme up and move members to other schemes”. HMRC’s email also confirmed that the Scheme had not yet been de-registered and the appeal against deregistration had yet to be determined.

  15. On 20 May 2019 Mr Kelly stated that “we have been unable to appoint another administrator due to no one wanting to take on this scheme”. The Case Team responded to Mr Kelly on 20 May 2019 asking which administrators the Trustee had approached and the reasons given as to why they would not take on the appointment. The Case Team further explained to Mr Kelly that it is the trustee’s responsibility to manage day-to-day operations such as transfer requests if no administrator is appointed. The Case Team requested an explanation of what advice Audax had taken to ensure it was continuing to comply with day-to-day scheme operations, such as acceding to transfer requests.

  16. Mr Kelly’s response on 22 May 2019 included the following query: “Can you please just confirm that what you are saying, is that it is legal and I am entitled, to act as administrator as well as Trustee, in the absence of an administrator?” This query came despite the fact the Case Team understood that Mr Kelly had been “awaiting definitive legal advice” as far back as 21 December 2017 and had stated on 11 May 2018 that he had “been advised it’s not possible to provide accurate valuations without an [administrator]”.

  17. Mr Kelly further explained he would not be able to answer the questions posed by the Case Team in the email sent on 20 May 2019 by the deadline as he was away until 5 June 2019. On 23 May 2019, the Case Team repeated the request for the following information to be provided by Mr Kelly by an extended deadline of 10 June 2019:

    (i) A list of which administrators he had contacted together with supporting written evidence such as correspondence with those entities detailing the reasons they provided for not wanting to be appointed to the Scheme; and

    (ii) Written evidence of any advice taken to ensure he was continuing to comply with day-to-day operations such as transfer requests.
  1. No response was received by 10 June 2019. As a result, a statutory notice under section 72 was issued to Audax by the Case Team on 19 June 2019 with a deadline of 26 June 2019 to respond. The statutory notice requested the same information as before.

  2. Mr Kelly responded on 27 June 2019 by email stating that “I am just updating you as to the current situation with Audax [Pension Trust]. I am currently in talks with and corresponding with Deloitte’s in Belfast and between us, we may have finally found a resolution to solving Audax’s issues. Once we have agreed on and finalised the best way forward, I will revert to you in relation to same. I trust this is to your satisfaction”.

  3. The Case Team responded on the same day, explaining that the response did not comply with the section 72 statutory notice (and therefore constituted a breach of that provision). An extension of time to respond by 28 June 2019 was given. Mr Kelly responded on 28 June 2019 explaining that Dalriada was the only ‘administrator’ that had been approached. No evidence of other administrators having been approached and/or declining to take on the Scheme was provided.

  4. On 17 October 2019 the Case Team received an email from a senior manager at Deloitte LLP stating: “We have undertaken an initial meeting with the Trustee, who is seeking to put a plan in place to ensure the proper stewardship of scheme funds and management of member benefits”. The email asked whether TPR would be supportive of Deloitte undertaking “this engagement in a governance role”, whether there were any reasons not to proceed with the engagement and whether TPR would be agreeable to a meeting or call to “agree the actions required for the Scheme”. The Case Team’s response the same day stated that they were not able to “provide clearance, sanction or approval of appointments to Occupational Pension Schemes”.

Outcome of the de-registration process

  1. As at the time the Case Team issued the Warning Notice in February 2020 the outcome of the appeal lodged against de-registration of the Scheme was still not known.

Member concerns

  1. The Warning Notice details complaints received from eight scheme members between March 2017 and September 2019, four of which are set out in some detail. A key concern was that transfer requests had been declined by Audax, who had alleged that the requests could not be actioned as the Scheme did not have an administrator.

  2. The first member had transferred £12,000 from Phoenix Life to the Scheme in 2015 having found the Scheme through the internet. This member did not receive any paperwork specific to his funds from the Scheme following the transfer but did receive some booklets with general information regarding the Scheme. His concerns were heightened when he (repeatedly) tried to inform the Scheme of his change of address but got no response. He had used the number obtained from the Scheme’s website and an email address that is also registered with TPR “info@audaxpension.com” to no avail. The Case Team contacted the member on 31 May 2019 to see if the concerns had been resolved but received no response.

  3. A second member contacted TPR on 26 July 2017 expressing concerns after having transferred his pension savings from another scheme. He had joined the Scheme as he had reached an age when he was entitled to a tax free lump sum of 25% of his savings (Lump Sum) and his financial adviser put him in touch with a different financial adviser called Paul Dugan (Mr Dugan) who had come to his home and completed paperwork to transfer his funds to the Scheme. The member received confirmation from his private pension provider that they had transferred the funds to the Scheme, but he did not receive any paperwork from the Scheme or the Trustee.

  4. On 16 April 2018 this member provided the Case Team with documents and correspondence showing that the member joined the Scheme following a transfer request, signed by him on 11 August 2016 and sent to the transferring scheme by Masons on 16 November 2016, in which he transferred £92,782 in pension savings to the Scheme.

  5. When this member requested the Lump Sum amount, he received a letter from Mr Kelly on 24 May 2017, which stated that “HMRC decided for whatever reason and nothing to do with our pension fund that our recently appointed Pension administrator, Richard Bohan of Masons Administration was no longer qualified to act in that capacity”. Mr Kelly also claimed that he was unable to “commit to a payment date until [he] was certain that payment could be made” and was trying to “appoint another trustee as signatory whilst he waits for HMRC to approve a new pension administrator to the Pension Fund”.

  6. Mr Kelly wrote to this member on 13 July 2017 stating that his pension savings in the Scheme were invested in the “Ganita Wealth Fund” and its value was then £96,600 but that this was “an indicative valuation and not actuary based”. Mr Kelly said the “fund will be valued at the end of June with valuations being available towards the end of July at which point you will be contacted again”. The member made further enquiries regarding his savings and having not received a response by 26 July 2017 the member contacted TPR. When the Case Team spoke to the member on 3 April 2018 the member had received a valuation of his pension savings in the Scheme in July 2017 and finally received a Lump Sum payment out from the Scheme in August 2017.

  7. In November 2017 this member decided to request a transfer out from the Scheme of his remaining funds to an alternative pension scheme. Mr Kelly responded to this transfer request by email on 22 November 2017 stating that the Scheme was “without an administrator and therefore it is not possible to effect a transfer however we are very close to appointing one vis-à-vis who will be able to transfer your pension”. Mr Kelly also stated that the member’s “funds are safe and being looked after by Ganita Wealth, the investment management of Audax [Pension Trust]”. On 12 June 2019 the Case Team contacted the member who confirmed that the transfer he had requested had still not taken place. He also stated that he had been contacting Mr Kelly every few weeks to find out about the transfer and Mr Kelly had told him that it was “tied up with HMRC” and “an administrator was still not in place”.

  8. A third Scheme member contacted TPR in September 2017 to state that he was concerned about the whereabouts of his Scheme funds and with the fact that the Scheme’s administrator had been struck off by the Registrar of Companies. His attempts to transfer his pension fund out of the Scheme had not been successful. This member transferred his two private pensions worth £13,939.76 to the Scheme in September 2015 following a “pension review”. He received a confirmation certificate from Gallium Fund Solutions (the Scheme’s first administrator) and then “everything went quiet”.

  9. This member’s attempts to contact the Scheme especially after he had noted Masons had been dissolved by the Registrar of Companies in July 2017, were also unsuccessful. This member supplied the Case Team with copies of correspondence he had with the Pensions Advisory Service and Mr Kelly. In correspondence dated 22 November 2017 Mr Kelly claimed that Audax was having difficulty processing transfers due to the lack of an administrator, but that he was trying to work with HMRC to arrange a transfer of all members and their assets to an alternative scheme. In December 2017 Mr Kelly confirmed that the member’s pension savings in the Scheme totalled £13,827.07 and that the transfer out to another scheme could proceed but that a 1% transfer fee would be applied reducing the value of the transfer to £13,688.80.

  10. Following exchanges between the member and Mr Kelly in which Mr Kelly claimed Audax was trying to appoint an administrator, on 22 December 2017 the member indicated that he was prepared to remain with the Scheme to allow Audax to appoint a new administrator so long as that was achieved within a reasonable period.

  11. The Case Team contacted the member again in March 2018 to get an update on his transfer request but were told Mr Kelly/Audax had not replied to any of his recent emails after he had registered an official complaint with The Pensions Ombudsman; and confirmed that transfer of the member’s assets to an alternative scheme had still not taken place.

  12. A fourth member of the Scheme contacted TPR via his financial adviser (the IFA) on 15 February 2018 stating that the member was having difficulty with receiving a correct valuation. He had made a request to transfer out his pension savings from the Scheme but was told by Mr Kelly that this was not possible until a new scheme administrator had been appointed. The IFA said he also had concerns about the recommendation to transfer the member’s pension funds of approximately £180,000 to the Scheme in September 2015. The IFA reported that the member said that he “received no paperwork” following the transfer. Furthermore, when the member turned 55 around September 2017, he had sought a Lump Sum payment from the Scheme but despite having “signed forms”, no such payment had taken place.

  13. This IFA later provided to the Case Team a bundle of correspondence in relation to the member from which the following was evidenced: firstly, that the value of the amount the member had transferred into the Scheme was £166,768; in less than a year, the value of the pension savings had dropped to £160,431.71. Secondly that between November 2017 and March 2018 Audax was repeatedly asked by another IFA (IFA2) for more information about the member’s pension valuation and the location of where the pension savings had been invested to no avail.

  14. TPR received a formal complaint about the Scheme directly from this fourth Scheme member on 18 January 2019 stating that “the repeated message I have received is that until a new administrator has been appointed I will not be able to gain access to my pension. Furthermore I have also been told, I cannot receive a valuation or any real reassurance the money is safe until this has been done”; and that Mr Kelly had stated that he was in talks with Dalriada “but both HMRC and the Pensions Regulator are holding up a final decision”.

  15. The complaint contained further correspondence between Audax and the two IFAs in which the following statements were made by Mr Kelly:

    (i) on 30 January 2018: that Scheme monies “currently sit in a bank account controlled by Ganita Wealth Limited;”

    (ii) on 5 March 2018: that collating the information requested was “difficult” as the Scheme currently had no administrator and was working with “HMRC and the Pensions Regulator to resolve the situation”;

    (iii) on 16 March 2018: that the “funds are currently held by Ganita Wealth” and that he was “waiting a current valuation”;

    (iv) on 9 May 2018: that he had been advised that only a “qualified administrator” can provide valuations or initiate transfers. He also went on to ask whether the IFA’s firm would act as administrator to the Scheme, to which one of the IFAs responded to say that scheme administration wasn’t a service they provided;

    (v) between 11 May 2018 and August 2018: that he is not qualified to provide valuations, that he was having trouble getting anyone to take up the post of administrator to the Scheme but “was in discussion with a prominent firm of [administrators] …and… are currently considering the engagement” and hoping “Neil Copeland in Dalriada” would take up the role;

    (vi) on 27 October 2018: that the member’s “pension fund is safe and it is in Ganita Wealth Fund”

  16. The Warning Notice states that there is no evidence to support or refute the assertion that the money invested in GWF could be returned as cash or paid out to members on the instructions of Audax.

  17. The exchanges between Audax, the Scheme member and the IFA continued until June 2019 and still no transfer had been made as requested by the member. Mr Kelly continued to give assurances that the money was “still there” and that he was trying to get Dalriada appointed.

  18. The correspondence also included correspondence between the IFA and GWF on 21 February 2018 stating that while GWF had been the investment advisers for the Scheme, this role had been “terminated” on 18 April 2017 and that GWF “held no remaining capital” in respect of the Scheme. This email also claimed that GWF “did not have visibility to members records”.

  19. Four further members of the Scheme contacted TPR, complaining about a lack of communication from Audax and/or transfer requests of pension savings.

  20. The Case Team is not aware of Audax’s other director, Mr Robertson, making any attempt to contact, respond or communicate with any of the members who contacted TPR. All correspondence by Audax appears to have been conducted through Mr Kelly.

PSA 2017 - Master Trust authorisation

  1. Mr Kelly had stated that the Scheme is not a master trust in an email to the Case Team dated 9 February 2017: “For clarity, we would like to confirm that we are not a master trust and to the best of my knowledge we have made no claim to be so.” The Case Team again wrote to Audax on 6 November 2017 explaining how the Scheme fulfilled the definition of a master trust to which Mr Kelly again responded on 21 November 2017 claiming that such conclusions reached by the Case Team are “different from advice we have previously received”. No detail beyond that statement has been provided and no response was received to a subsequent request from the Case Team in January 2018 to discuss the Scheme’s preparation for the advent of master trust authorisation.

Other matters

  1. In March 2016 a Chair’s Statement provided to TPR by Audax was not compliant in that it did not include a significant amount of the information that was required to be included in it by law.

  2. On 16 February 2017 and 28 June 2019, the Case Team requested information from Audax under section 72 PA 04. On both occasions a partial response was provided by Audax, once within the deadline and on the other occasion in breach of it. Neither statutory request was answered fully or to the satisfaction of the Case Team.

II. The Case Teams submission

Not Fit and Proper

  1. The Case Team submits that Audax and Mr Kelly are not “fit and proper” to act as trustees of trust schemes in general pursuant to section 3(1) PA95. The Case Team refers to TPR’s Statement on Prohibition Orders dated July 2016 (Prohibition Statement) and the criteria set out within it. The Case Team refers primarily to competence and capability, as well as, to some degree, integrity. Taking each in turn:

Lack of competence and capability

  1. The Case Team submits that Audax and Mr Kelly lack competence and capability in that Audax has shown a serious lack of the trustee knowledge and understanding required for the effective trusteeship of the Scheme contrary to sections 248 and 249 PA 04. In particular, the Case Team submits the following:

Failure to comply with various statutory and common law obligations

  1. Audax failed to comply with various statutory requirements, in its trusteeship of the Scheme as follows:

(i) Failure to appoint a section 270 Administrator

  1. Upon notification by HMRC on 27 January 2017 that the Scheme’s registration would be withdrawn with effect from 17 March 2017 Audax could have avoided de-registration by appointing a new section 270 Administrator timeously. Alternatively, the risk to members (including losing valuable tax benefits) arising from any de-registration could have been avoided by transferring members to a new pension scheme and winding the Scheme up. Despite Mr Kelly’s statements in February 2017 that one of these two options would be pursued, neither has happened. Audax failed to take appropriate steps to mitigate or remove the risks to scheme members should the conclusion of the HMRC action be to deregister the Scheme.

  2. Moreover, HMRC’s confirmation that the Scheme could continue if Audax appointed a new section 270 Administrator that met HMRC's fit and proper requirements did not provide an adequate excuse for the failure to do so timeously. There was no need to wait for “clearance” from HMRC or TPR which a competent trustee would have known.

  3. In addition to the requirement to appoint a section 270 Administrator, the Case Team points to paragraph 7.2 of the Scheme’s Trust Deed and Rules which entitles the Trustee to appoint “clerical and executive officers or staff” for the “proper administration and management of the Scheme”. The Case Team submits that this authorises the Trustee “to appoint such individuals or entities to complete trustee obligations such as storing, maintaining and safeguarding data about the pension scheme and to manage the day to day administration of the scheme such as responding to transfer requests”. The Warning Notice refers to this role as a “Scheme Administrator” as distinct from the section 270 FA 04 requirement. The Case Team submits that Audax lacked the competence and capability to distinguish between the two roles of a section 270 Administrator and a Scheme Administrator or to appoint either.

(ii) Failure to carry our transfer requests

  1. The Case Team states that Audax failed to familiarise itself with both the relevant legal obligations in respect of Cash Equivalent Transfer Value (CETV)s and the Scheme’s Trust Deed and Rules. Consequently, there was a failure by Audax to adhere to its transfer obligations. Under sections 93A, 94(1), 95(1),(1A), 98(1), 99(2) of the Pension Schemes Act 1993 and regulation 6 of the Occupational Pension Schemes (Transfer Values) Regulations 1996, if a member of the Scheme makes an application in writing to the Trustee for a CETV, the Trustee must within one month of the member's application provide the member with the value of their CETV so that the member knows how much of their savings fund could be transferred to another pension scheme.

  2. The Case Team highlights the fact that Audax had not only repeatedly failed to make lump sum payments requested by scheme members who had reached an age when they were entitled to a tax free lump sum of 25% of their savings, but also incorrectly informed members and stakeholders that such requests were not possible without an administrator. Furthermore, some of these Scheme members were told by Audax that TPR and HMRC were holding up the appointment of an administrator which the Case Team maintains was incorrect. The Case Team submits that these statements were born out of a lack of trustee knowledge and understanding.

(iii) Investment failures

  1. The Case Team raises concerns that Audax has shown a lack of effective oversight of the Scheme’s investments, including a concerning lack of clarity as to where exactly the Scheme’s investments are. For example, in the November Letter Mr Kelly listed some Scheme investments including: “specific investments for one member only made according to the instructions of that member and to a value of £213k”. No detail or further background was provided as to what those ‘specific investments’ for that particular member were nor any evidence provided that any advice was obtained in relation to it.

  2. At the time the investments were made, GWL was the Scheme’s “investment adviser”. It was also fund manager to the Scheme as Scheme funds (representing 64% of the Scheme’s investment) were invested in GWF, an investment fund owned and operated by GWL. This gave rise to concerns about a potential conflict of interest, not acknowledged or remedied by Audax. Audax also failed to secure the services of a properly qualified investment adviser after GWL and Met Facilities LLP ended their relationships with the Scheme. Furthermore, the Case Team submits that there was another potential conflict in Mr Kelly’s directorship of other companies with Mr Dugan and Mr Crockford, who recommended the Scheme to members, which was neither recognised nor declared.

  3. Moreover, it is argued that there has been a failure to comply with the Occupational Pension Schemes (Investment) Regulations 2005 (the Investment Regulations) pursuant to which, under regulation 7(2), all trustees and managers of schemes with fewer than 100 members must “have regard to the need for diversification of investments.” Despite this requirement, under the trusteeship of Audax, 64% of the Scheme’s assets were invested in a single investment fund owned and operated by GWL.

(iv) Requirement to obtain advice

  1. Audax failed to comply with the requirement in section 36 PA 95 to obtain and consider “proper advice,” which should be in writing, prior to making an investment. The Case Team submits there was no evidence that such advice had been acquired.

(v) Chair’s statement

  1. The Case Team submits that the March 2016 Chair’s Statement provided by Audax did not comply with a number of statutory requirements. For example, it did not contain a copy of the Scheme’s Statement of Investment Principles prepared in accordance with regulation 2A of the Investment Regulations nor did it state the level of charges and transaction costs applicable to the Scheme’s default arrangement during the year or the range of the levels of charges and transaction costs applicable to all other funds (not part of the default arrangements), as required under the Occupational Pension Schemes (Scheme Administration) Regulations 1996 (the Scheme Administration Regulations).

(vi) Non-compliance with section 72 PA 04

  1. The Case Team also submits that Audax failed to comply fully or properly with two section 72 notices TPR issued to get information about the Scheme, and only partially complied after the original deadline set in the statutory notices had passed, after further reminders and extensions to the original deadline had to be given.

(vii) Non-compliance with section 62 PA 04

  1. The Case Team expresses concerns that Audax failed to update the Scheme’s registrable information with TPR on the principal employer’s dissolution and on the de-registration of Masons as required by section 62 PA 04. The Case Team submits this is further evidence of Audax’s lack of competence and capability.

(viii) Scheme’s master trust status - PSA 2017

  1. The Case Team submits that the Scheme’s Trust Deed and Rules and the way the Scheme was marketed on its (now defunct) website, shows that it was set up and intended to be used as a master trust. The Scheme’s Trust Deed and Rules allow more than one employer to join the Scheme without any requirement that the prospective employer be in the same group. The Case Team considers the fact that it appears that no more than one employer has joined the Scheme in practice to be irrelevant.

  2. Mr Kelly, however, has stated that the Scheme is not a master trust. In response to Panel queries, dated 17 and 27 April 2020, the Case Team submits that the Scheme had “at least historically been operating as a master trust” and that “it was fair and reasonable that based on that, TPR would have concerns that the Scheme had been operating without authorisation, and would expect the Scheme to have taken steps to comply” with the Pension Schemes Act 2017 (the PSA 2017). The Case Team asserts further that the “Trustee’s unwillingness to engage” on the question of whether the Scheme is a master trust meant that “TPR was required to speculate as to the state of affairs”.

  3. In the Case Team’s view this demonstrates a lack of understanding of what constitutes a master trust as set out in the PSA 2017 and how the Scheme satisfied that definition. The Case Team alleges that this failure to understand meant that Audax failed to comply with various other statutory requirements applicable to the Scheme such as failing to ensure a minimum of 3 trustees were appointed to the Scheme pursuant to regulation 27(1) of the Scheme Administration Regulations and to ensure there was a majority of non-affiliated trustees pursuant to regulation 27(2) of the Scheme Administration Regulations. In the Case Team’s view, these failures evidence the “material” lack of competence and capability of Audax and Mr Kelly.

  4. The Case Team also states that Audax failed to notify TPR of a Triggering Event pursuant to section 22 of the PSA 2017 upon the dissolution of the principal employer. Under the PSA 2017 such an event is a notifiable event and the trustees of the scheme are required to indicate whether a resolution would be pursued, or the scheme wound up.

(ix) Principal employer dissolution

  1. The Case Team also submits that on the dissolution of the principal employer in February 2018, Audax failed to act in accordance with the Scheme’s Trust Deed and Rules to wind up the Scheme. There is no evidence of a replacement principal employer or any other employer joining the Scheme. Had Audax and its director had the requisite trustee knowledge and understanding of the Scheme’s Trust Deed and Rules, they would have taken advice on what would be in the best interests of the Scheme and members in the circumstances, and/or taken the steps necessary to wind up the Scheme. Neither of these things happened, and the failure to do so points to Audax’s lack of competence and capability.

(x) Common law duties

  1. The Case Team further submits that Audax has failed to act prudently in its trusteeship of the Scheme as follows.

  2. Audax did not act in accordance with the common law duty “to conduct the business of the trust in the same manner that an ordinary prudent man of business would conduct his own business on behalf of those whom he felt morally bound to provide (and not merely as if he were acting for himself)[1]”. In particular, the Case Team argues that by investing 64% of the Scheme’s assets in a single investment vehicle, the trustee exposed “the scheme and members to excessive risk by placing reliance on the returns of this one particular investment”. A prudent trustee would have obtained appropriate legal advice which would have made it aware of the need for diversification in addition to the risks and conflicts arising from investing in funds apparently controlled by its own investment adviser.

  3. The Case Team states that it recommended that Audax seek appropriate professional advice on several occasions, to ensure it was complying with its various duties as trustee of the Scheme. Despite these recommendations, Audax failed to obtain appropriate advice, further demonstrating a lack of competence and capability.

  4. In the Case Team’s view, the fact that Mr Kelly failed to familiarise himself with the relevant Scheme documentation as required by section 248 PA 04 including the Scheme’s Trust Deed and Rules and the relevant legal obligations on Audax, led to the various failures referred to above. The absence of trustee knowledge and understanding was not addressed by the appointment of Mr Robin Glaze given that these failures continued despite the apparent involvement of, and reliance on, Mr Glaze.

Integrity

  1. In addition to its submissions on competence and capability, the Case Team submits that Mr Kelly lacks integrity. It is said that this is demonstrated by his inconsistent responses to scheme members, their representatives and TPR about why the Scheme remained without an administrator. He was also not straightforward about what Audax was doing about appointing a new administrator. The Case Team highlights the fact that despite claiming no administrators wanted to take on the Scheme, the section 72 responses showed that Audax had actually only approached one entity, Dalriada, and then only in 2019, two years after the notification of de-registration and the appeal were lodged.

  2. The Case Team submits that whilst earlier approaches had been made in 2017 to Mr Robin Glaze and the IFA acting on behalf of one of the Scheme members, neither of these was a scheme administrator.

  3. The Case Team submits further that, even though TPR does not have any remit to determine who pension schemes appoint as their administrators, Mr Kelly had told members that “both HMRC and TPR [were] holding up a final decision” by Audax on whether to appoint Dalriada Trustees Limited. The Case Team maintains that these statements were not true.

  4. Similarly, the Case Team raises concerns over the integrity of Mr Kelly in that he had initially claimed members and their assets would be transferred out of the Scheme but did nothing further in that respect. Mr Kelly then claimed, and continued to do so over two years, that Audax was seeking to appoint a new administrator, eventually seeking TPR and HMRC approval to do so, even though such approval was not required. Mr Kelly also claimed the lack of an administrator was the reason for Audax not adhering to requests from the Scheme’s members during that time.

Summary

  1. The Case Team submits that Audax and Mr Kelly’s lack of competence and capability, demonstrated by the many and cumulative failures described above, is so severe that prohibiting them from acting as trustee of trust schemes in general is justified. By Audax’s inaction the remaining members of the Scheme are exposed to risks, including transfer and lump sum requests not being processed, as well as the risk that the Scheme may ultimately be de-registered with the consequent tax implications for members and an increased possibility of member detriment.

  2. Added to the concerns regarding competence and capability it is also alleged that Mr Kelly lacked integrity in the way that he responded to member queries.
    100. Given the seriousness of the concerns and taking into account the nonexhaustive criteria for prohibition set out in TPR’s Prohibition Statement the Case Team submits that a prohibition order in respect of all schemes is warranted against Audax and Mr Kelly.

  3. The Warning Notice explains that prohibition is also justified in the wider regulatory context, and is in the interests of occupational pension schemes and their members generally given that:

    i) Only a prohibition will place Audax and Mr Kelly on the register of those prohibited from acting as a trustee, and thereby assist in raising awareness among trustees and members; and/or

    ii) Prohibition should protect and enhance public confidence in the integrity of the pensions industry and TPR’s oversight of it.

Representations

  1. No representations in response to the Warning Notice were received from the directly affected parties although in correspondence Mr Kelly demonstrated that he was aware that there was an “intention” to prohibit him.

The Law

  1. Section 3 PA 95 states as follows:

    “Prohibition orders

    (1) The Authority may by order prohibit a person from being a trusteeof-

    (a) a particular trust scheme,
    (b) a particular description of trust schemes, or
    (c) trust schemes in general,

    if they are satisfied that he is not a fit and proper person to be a trustee of the scheme or schemes to which the order relates.

    (2) Where a prohibition order is made under subsection (1) against a person in respect of one or more schemes of which he is a trustee, the order has the effect of removing him.
    ...
    (6) The Authority must prepare and publish a statement of the policies they intend to adopt in relation to the exercise of their powers under this section.”

  2. When the Panel refers to the question of whether the Trustee and Mr Kelly are “fit and proper” it is by way of shorthand for, and reference to, that section 3(1) test.

  3. The most recent statement published by TPR in accordance with section 3(6) was published in July 2016 (the Prohibition Statement). The Prohibition Statement contains the following guidance on the criteria for a ‘fit and proper person”:

    “When considering whether a person ought to be prohibited, we will investigate whether [they are] a ‘fit and proper person’ to be a trustee of a trust scheme by looking at all the relevant information.

    In particular, we will consider any information which concerns the [person’s]:

    • honesty
    • integrity
    • competence and capability
    • financial soundness

    When considering the above criteria, we may take account (where relevant) of:

    • any attempt to deceive
    • any misuse of trust funds
    • any breaches of trust or pensions law, particularly if these are significant, persistent, deliberate or contrary to legal advicereceived
    • whether a trustee’s professional charges constitute a breach of trust or demonstrate a lack of internal controls
    • criminal convictions, not limited to those involving dishonesty or deception, so including (for example) money laundering, violence or substance abuse

    This is not a comprehensive list of the factors we will look at when considering whether to prohibit, but it is indicative of what may be relevant. One of our statutory objectives under the Pensions Act 2004 (…) is to protect the benefits of members of occupational pension schemes, and we will take such actions as are necessary and proportionate to meet that objective.”

  4. Sections 247, 248 and 249 PA 04 require every individual who is a trustee of an occupational pension scheme and corporate trustees of occupational pension schemes, in relation to each scheme they are trustee of, to be conversant with certain scheme documentation such as the Scheme Trust Deeds and Rules, and to have knowledge and understanding of the law relating to pensions and trusts.

  5. Section 36 PA 95 requires trustees to obtain and consider “proper advice” prior to the investment of scheme funds and requires such advice to be evidenced in writing.

  6. The Occupational Pension Schemes (Investment) Regulations 2005 regulation 7 provides that where a scheme has fewer than 100 members the trustees of the scheme and fund managers in exercising their powers of investment must have regard to the need for diversification of investments, in so far as appropriate to the circumstances of the scheme.

  7. Sections 94(2) and 95 Pension Schemes Act 1993 provide that members of a money purchase scheme can request a cash equivalent value (to be calculated according to prescribed methods and by reference to the date the application for the value was made). Members can also ask for that value to be converted or dealt with as prescribed in the legislation including transfer to a “different arrangement”.

  8. For the purposes of section 270 FA 04, the scheme administrator in relation to a pension scheme is the person who is, or persons who are, appointed in accordance with the rules of the pension scheme to be responsible for the discharge of the functions conferred or imposed on the scheme administrator of the pension scheme by and under the FA 04.

  9. Regulation 23 of the Occupational Pension Schemes (Scheme Administration) Regulations 1996 sets out what is required in the Chair’s statement: the trustees or managers of an occupational pension scheme must prepare a statement at the end of each scheme year, and that statement must include certain prescribed information in relation to (but not limited to) the scheme’s default arrangement, statement of investment principles, charges and transaction costs.

  10. Section 62 PA 04 provides that schemes must provide TPR with “registrable information”. Furthermore, any update or change to this information must also be notified to TPR. Registrable information is defined in section 60 and includes information about the trustees or managers of a scheme, and the scheme’s employers. Section 60 does not include the scheme’s administrator.

  11. Trustees also owe duties under common law. Trustees must act bona fide in the best interests of the members. A trustee must not, therefore, connive at or knowingly facilitate any act or conduct of another person which would involve a breach of trust or occasion loss or risk to the trust property. In a pensions context, this includes a duty to act in accordance with relevant pensions legislation.

  12. A trustee has a duty to promote the purpose for which the trust was created. In the pensions context, it is generally accepted that this will require the trustee to act in the best financial interests of the members of a scheme and not to prefer the interests of third parties to those of the members (and other beneficiaries) of the scheme.

  13. Section 100 PA 04 requires the Panel to have regard to the following matters when determining whether to exercise a regulatory function, and the Panel so had regard:

    “(a) the interests of the generality of the members of the scheme to which the exercise of the function relates, and

    (b) the interests of such persons as appear to the Regulator to be directly affected by the exercise.”

Decision

  1. The Panel determined to prohibit Audax and Mr Kelly from acting as trustee of trust schemes in general.

Reasons for decision

  1. In making its decision the Panel had regard to the matters listed in section 100 PA 04 and the objectives of TPR as set out in section 5 PA 04.

  2. The Panel also had regard to the Prohibition Statement and specifically the criteria TPR takes into account when considering whether a trustee is a “fit and proper person”. The Panel took account of the non-exhaustive list of factors listed in the statement.

  3. The Panel was satisfied that neither Mr Kelly nor Audax are fit and proper to act as trustees. In particular, the Panel was satisfied that both Mr Kelly and Audax lacked the necessary competence and capability to act as trustee of trust schemes in general. The Panel agreed that in some of his statements to TPR and Scheme members, Mr Kelly had also shown a lack of integrity.

Lack of competence and capability:

  1. The Panel was satisfied that the various breaches of law set out in the Warning Notice demonstrated a lack of competence and capability on the part of both Mr Kelly and Audax. In particular:

    (i) Failure to appoint a section 270 Administrator: Neither Audax nor Mr Kelly acted promptly following the notification of de- registration of the Scheme’s section 270 Administrator to obtain appropriate advice to minimise the risk to members or else to transfer Scheme members and assets to another pension scheme. Audax, through its trustee director, Mr Kelly, gave inconsistent and sometimes contradictory statements over the course of three years as to what Audax intended to do to safeguard the interests of members of the Scheme. Whilst it was clear that urgent and swift action was required to protect the Scheme and members’ assets, that did not happen. As at the date of referral to the Panel, the Scheme still does not have an administrator and remains at risk of de-registration by HMRC.

    (i) Breach of transfer requirements: The Panel was satisfied that there was a failure by the Trustee to comply with the various requests made by Scheme members who wanted to transfer out their pension funds to a different scheme and/or requested valuations of their pension funds held in the Scheme CETVs. This was contrary to the Pension Schemes Act 1993 and the Scheme’s Trust Deed and Rules in that no transfers out of the Scheme were ever carried out. Furthermore, Mr Kelly incorrectly stated that such CETVs could only be provided by the Scheme administrator whereas it is a trustee obligation to provide CETVs. The Panel was satisfied that these failures were due to a lack of competence and capability of Audax in not recognising the extent of its obligations as trustee of the Scheme.

    (ii) Breach of Investment Regulations: The Panel was satisfied that Mr Kelly and Audax failed to comply with the statutory requirements to diversify scheme investments. Not only were the funds not sufficiently diversified - 64% of the Scheme assets having been invested in a single investment fund (GWF) - they were also invested in a fund owned and operated by the Scheme’s investment adviser at the time, GWL. The Panel accepted there was a risk to members’ funds through the excessive reliance on returns from one investment vehicle and agreed that this evidenced a serious lack of competence and capability of Audax and Mr Kelly. Further, there was no evidence that the apparent conflict resulting from investing in a fund owned and operated by the Scheme’s investment adviser was recognised or adequately mitigated. The Case Team also alleged a failure by Mr Kelly to manage conflicts of interest in his connections with Mr Dugan and Mr Crockford. The Panel was not persuaded, on the evidence, that there was an actual conflict of interest and made no finding regarding that allegation.

    (iv) Breach of requirement to obtain advice: Audax apparently failed to take any or “proper advice” contrary to section 36 PA 95. On the evidence before it, the Panel was satisfied the Trustee failed to obtain advice prior to investing funds in GWF or prior to investing large sums (£213,000) on the instructions of a single member alone. The Panel considered there was a failure to put the generality of members’ interests at the forefront of Audax and Mr Kelly’s investment decisions in relation to the Scheme.

    (v) Failure to act on employer dissolution: The Panel was satisfied on the evidence that no steps were taken to wind up the Scheme in accordance with the Scheme’s Trust Deed and Rules following dissolution of the principal or sponsoring employer on 27 February 2018. The Panel considered that Mr Kelly’s inconsistent statements in this regard (in 2017 he indicated that members and assets would be transferred out and the Scheme would be wound up but he subsequently indicated a new Scheme administrator would be appointed) evidenced his severe lack of competence and capability. The Panel agreed there had been a failure by Mr Kelly and therefore Audax, to familiarise himself with the Scheme’s Trust Deed and Rules as required under sections 248 – 249 PA 95.

    (vi) Non-compliant Chair’s statement: Audax failed to produce a compliant Chair’s statement in that it failed to include a significant amount of the information that was required by law. The Panel concluded that this indicated that neither Audax nor Mr Kelly had the competence or capability to produce a compliant statement given their respective lack of trustee knowledge and understanding which they were required to have under sections 248 and 249 PA 04.

    (vi) Non-compliance with section 72 PA 04: The Panel also noted the failure to comply properly or at all with the statutory demands for information TPR made further to section 72 PA 04, fell short of the standard of behaviour expected of trustees of pension schemes.

    (vii) Non-compliance with section 62: The Panel accepted that there was a breach of section 62 in the failure to update registrable information about the “relevant employer” following the Scheme employer’s dissolution in February 2018. However, the Panel was not persuaded that there had been a breach of section 62 PA 04 as regards scheme administrator information as it had not been demonstrated to the Panel that scheme administrator information is registrable information within the requirements of section 62 PA 04.

    (ix) The PSA 2017: The Panel noted that despite insisting that the Scheme was not a master trust, alluding to advice obtained and that “further advice” would be obtained, Mr Kelly did not produce any evidence of such advice being obtained. Instead Mr Kelly/Audax failed to respond to further queries and requests from TPR. The Panel accepted that the failure to engage was perhaps due to Mr Kelly’s lack of competence and capability. However, the Panel did not consider the alleged breaches of the PSA 2017, and of other legislation applicable to master trusts, any further as there was sufficient other evidence on which to reach its decision.

    (x) Breaches of the common law: The Panel agreed that there was a lack of prudence shown by Audax and Mr Kelly in relation to the Scheme investments. The investment of 64% of scheme assets in a single investment vehicle, in circumstances that gave rise to a conflict of interest and without apparently taking investment, or any, advice did not demonstrate sufficient prudence. The failure to obtain other professional advice, even after being recommended to do so by the Case Team, suggests a lack of competence and capability. The Panel agreed that the engagement of Mr Glaze did not suffice.

Lack of integrity:

  1. In the Panel’s view, whether or not there was a conscious attempt to deceive scheme members, Mr Kelly had a reckless disregard as to the accuracy or correctness of the information he was providing to members in response to their urgent requests for CETVs or to transfer out of the Scheme. Consequently, the Panel considered that Mr Kelly lacked integrity within the meaning set out in Arch Financial Products LLP & Ors v FCA [2015] UKUT 0013 at [200] (in turn quoting part of an earlier judgment), that:

    “Even though a person might not have been dishonest, if they either lack an ethical compass, or their ethical compass to a material extent points them in the wrong direction, that person will lack integrity.”

    We agree. A lack of integrity does not necessarily equate to dishonesty. While a person who acts dishonestly is obviously also acting without integrity, a person may lack integrity without being dishonest. One example of a lack of integrity not involving dishonesty is recklessness as to the truth of statements made to others who will or may rely on them or wilful disregard of information contradicting the truth of such statements. Such behaviour was found to be evidence of a lack of integrity by the Tribunal in Vukelic at [119]:

Conclusion

  1. For all these reasons the Panel considered that Audax and Mr Kelly did not have sufficient trustee competence and capability to be considered ‘fit and proper’, and that Mr Kelly also lacked integrity. Their actions fell far short of the standards expected of persons with their responsibilities. The Panel considered the cumulative breaches of trust and pensions law over a number of years so serious as to warrant prohibition from both the Scheme and from trust schemes in general pursuant to section 3(1) PA 95.

  2. The Panel agreed with the Case Team’s assertion regarding the wider regulatory context and the importance of Mr Kelly and Audax’s names being added to the register of prohibited persons.

  3. The Panel determined that an order should be made in the following terms:

    “TPR hereby orders as follows:

    Edward Martin Kelly (date of birth April 1969) is hereby prohibited from acting as trustee of trust schemes in general.

    The order is made under section 3(1)(c) PA 95.

    By section 6 PA95, any person who purports to act as a trustee of a trust scheme whilst prohibited in relation to the scheme under section 3 is guilty of an offence and liable

    • on summary conviction to a fine not exceeding the statutory maximum, and
    • on conviction on indictment to a fine or imprisonment or both.”

    And

    “TPR hereby orders as follows:

    Audax Management Limited (company registration number 09197665) is hereby prohibited from acting as trustee of trust schemes in general.

    The order is made under section 3(1)(c) PA 95.

    By section 6 PA95, any person who purports to act as a trustee of a trust scheme whilst prohibited in relation to the scheme under section 3 is guilty of an offence and liable

    • on summary conviction to a fine not exceeding the statutory maximum, and
    • on conviction on indictment to a fine or imprisonment or both.”

  4.  Although the Panel has for convenience issued one Determination Notice in respect of Audax Management Limited and Mr Edward Martin Kelly, the Panel has reached a separate determination in respect of each of them.

  5. Appendix 1 to this Determination Notice contains important information about the rights to refer this decision to the Upper Tribunal.

 

Signed:
Chairman: Antony Townsend
Dated: 24 June 2020 
(Revised on 5 August 2020)

Appendix 1

Referral to the Tax and Chancery Chamber of the Upper Tribunal

You have the right to refer the matter to which this Determination Notice relates to the Tax and Chancery Chamber of the Upper Tribunal (the Tribunal). You have 28 days from the date this Determination Notice is sent to you to refer the matter to the Tribunal or such other period as specified in the Tribunal rules or as the Tribunal may allow. A reference to the Tribunal is made by way of a written notice signed by you and filed with a copy of this Determination Notice.

The Tribunal’s address is:

Upper Tribunal
(Tax and Chancery Chamber) Fifth Floor
Rolls Building 
Fetter Lane 
London 
EC4A 1NL

Tel: 020 7612 9730

The detailed procedures for making a reference to the Tribunal are contained in section 103 of PA 04 and the Tribunal Rules.

You should note that the Tribunal rules provide that at the same time as filing a reference notice with the Tribunal, you must send a copy of the reference notice to TPR. Any copy reference notice should be sent to:

Determinations Panel Support 
The Pensions Regulator 
Napier House
Trafalgar Place 
Brighton
BN1 4DW

Tel: 01273 811852

A copy of the form for making a reference, FTC3 ‘Reference Notice (Financial Services)’ can be found on the GOV.UK website.

Footnote

[1] Speight v Gaunt (1883) 22 ChD 739
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