| Link(s): | FCA fines Kristo Käärmann £350,000 for failing to notify the FCA of significant tax issues | FCA Final Notice 2024: Kristo Kaarmann |
Context
The FCA has fined Mr Kristo Käärmann, the CEO of Wise plc and senior manager of Wise Assets UK Ltd, £350,000 for breaching a senior manager conduct rule. Senior Management Regime Conduct Rule SC4 requires anyone holding a Senior Management Function (in this case, SMF1 Chief Executive and SMF3 Executive Director) to “disclose appropriately any information of which the [FCA] would reasonably expect notice”. Mr Käärmann would have been fined £500,000, but he agreed to resolve these matters and so qualified for a 30% discount.
Key points to note and next actions
- In 2020 Mr Käärmann was fined £365,651 by HMRC for failing to declare Capital Gains Tax on a share sale of $10m made in 2017.
- This created a tax liability of over £700,000 but which he failed to declare.
- Between February 2021 and September 2021, these matters, including the circumstances surrounding them, were relevant to the FCA’s assessment of Mr Käärmann’s fitness and propriety. Mr Käärmann failed to appropriately consider the significance of the tax issues and notify the FCA, despite being aware of them for over 7 months.
- On 22nd September 2021, HMRC added Mr Käärmann to the Defaulters List, having determined that his deliberate failure to declare the CGT on the Share Disposal had met the applicable threshold for publication.
- On 27th September 2021, the Authority became aware of the tax issues having been contacted by a journalist for comment. The FCA, therefore, became aware of this issue from a third party.
- Firms’ boards and most senior management must make that all Directors are completing a full fitness and propriety declaration on an annual basis (the equivalent of the Fitness and Propriety section of the FCA’s ‘Long Form A’) and that they understand their disclosure requirements if the answers to any of those questions change at any time.