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The head of a London-based investment bank has accused the UK watchdog of eroding freedom of expression after challenging its fine for failing to disclose regulatory penalties in Venezuela and the US.
Carlos Fuenmayor, the Venezuelan-born boss of emerging market debt trading specialist BancTrust, told the FT that the financial regulator was wrong to punish him for not disclosing actions by Caracas authorities as they were “politically motivated intimidation by the Maduro regime”.
The Financial Conduct Authority said Fuenmayor was “negligent” in failing to disclose a 2019 fine and suspension by the US Financial Industry Regulatory Authority, as well as the Venezuelan authority’s closure of his bank accounts, according to documents seen by the FT.
Fuenmayor has filed a lawsuit at London’s Upper Tribunal challenging the FCA’s plan to fine him £99,600, saying it would impinge on his freedom of expression and have “a chilling effect on the expression of lawful speech by those in the regulated community”.
The BancTrust boss said the watchdog initially planned to ban him and fine him more than £350,000 before he challenged it. The FCA said: “There are ongoing legal proceedings in this case. We are unable to comment further at this stage.”
In November 2019, Fuenmayor sponsored a UK event in support of human rights in Venezuela in opposition to its then president Nicolás Maduro, who was captured and detained by the US earlier this year.
Days after the event, Venezuela’s Unidad Nacional de Inteligencia Financiera froze the bank accounts of Fuenmayor’s companies in the country.
His lawyers filed a document to the tribunal explaining that because the UK government had not recognised the Maduro regime, he “does not have now, and has never had, any obligation to make any disclosure” to the FCA of “the reprisals suffered”.
They pointed out that hyperinflation meant the frozen accounts now had a value of “less than one US cent” and therefore the action had no material impact on him or BancTrust.
“I am concerned that the FCA’s position risks lending weight and credibility to measures imposed by an oppressive authoritarian regime against individuals who speak out in defence of democratic values and freedom of expression,” Fuenmayor told the FT.
The BancTrust boss has lived in the UK and become a British citizen since being appointed as its chief in 2018. He blamed the fact that he was still living in the US and the “poorly designed” FCA form for his failure to disclose the Finra investigation when he became CEO.
Fuenmayor eventually told the FCA in 2021 about the 15-month suspension and $20,000 penalty he was given by Finra in 2019, but he accepted in an interview with the UK watchdog that he should have disclosed this earlier, according to the FCA decision notice seen by the FT.
The BancTrust boss said the Finra penalty was for “a technical violation relating to registration requirements” in the US and did not restrict his ability to work after the suspension period ended, and that he had retaken exams.
His lawyers said: “A corrected disclosure made due to a misunderstanding of extraterritoriality falls very significantly short of the requisite standard required to establish negligence as a matter of English law.”
But the FCA said the fact that he was fined and suspended “indicates that Finra did not consider Fuenmayor’s breach was negligible”.
The FCA said in its decision notice that Fuenmayor’s failure to disclose the US and Venezuelan regulatory actions against him “failed to meet the standards expected of an individual in his position”. It said fining him would help protect consumers and “the integrity of the UK financial system”.
The watchdog also said the BancTrust boss was advised by his head of compliance in 2021 that he should disclose the action taken against him by Venezuelan authorities as well as the US penalty.
But he told his head of compliance he was not comfortable doing this “because it’s adding more fuel to a freaking political issue, which is not pertinent to our regulatory status”.
Two years later, the FCA spotted a newspaper story about the freezing of his Venezuelan accounts as part of “routine open-source checks”.
