FSA Case Law

The FSA published a press release announcing it had secured interim injunctions and freezing orders at the High Court against nine firms, including St Clair Estates Ltd, OFG Investments Ltd, Option Land UK Ltd, and GIG Properties Ltd. The injunctions prohibit the firms from selling plots of land on a specific site at Winkleigh Airfield in Devon pending further investigation by the FSA. The FSA suspects the firms were running a land banking operation which amounted to an unauthorised collective investment scheme and has frozen approximately £850,000 that is believed to have come from customer investments in plots of land marketed by the firms. The FSA does not regulate land as an investment, but operating a collective investment scheme without being authorised or exempt is a breach of the general prohibition in section 19 of FSMA.

Mr Sidhu, a management consultant, has been found guilty at Southwark Crown Court of 22 counts of insider dealing. He has been sentenced to two years' imprisonment. The FSA brought the case against Mr Sidhu and announced in February 2011 that he had been charged. The offences were committed between 15 May 2009 and 22 August 2009.

Mr Ahuja, a former UBS client adviser has been banned and fined £150,000 by the FSA for failing to act with integrity, in breach of Principle 1 of the Statements of Principle and for not being a fit and proper person. Mr Ahuja has also been prohibited from performing any function in relation to any regulated activity in the financial services industry. Mr Ahuja was a client adviser within UBS' international wealth management business in London. Between 1 January 2006 and 30 January 2008 he used a pre-existing investment structure to enable a customer who was resident in India to invest in Indian securities through an investment fund incorporated in Mauritius. The customer ultimately invested over US$250 million in the fund. This was in breach of Indian law and in clear contravention of UBS guidelines. Subsequently, Mr Ahuja took steps to conceal the true nature of the customer's investment, by deliberately and repeatedly providing false and misleading information to the legal and compliance department of UB S. He also assisted in making unauthorised redemption payments out of the fund when he knew, among other things, that the redemptions were not properly authorised by the customer and were in breach of UBS compliance rules.

The Complaints Commissioner rejected a complaint brought against the FSA on 3 September 2011 regarding the findings of the FSA's Unfair Contract Terms Team. The commissioner was satisfied that the FSA had conducted an extensive investigation into whether the terms of an agreement between Firm A and Firm B were unfair and took a course of action which appeared appropriate and reasonable in all the circumstances.

In a second complaint on 12 September 2011 regarding the late submission of an administration fee imposed on Firm A for not waiving the fee. The complaint was rejected. In a third complaint about possibly contradictory or misleading statements on two FSA web-pages, the Commission upheld the complaint and required the FSA to apologise for failing to address all of the issues of the complainant and correcting the documents, to make an ex gratia payment of £50 to the complainant; to review the publication entitled "Bank accounts - Know your rights" and to make certain amendments.

In separate actions, the FSA issued final notices cancelling registration of a number of businesses as small payment institutions following the failure by Mr Mahmood to comply with regulatory requirements.

The FSA is consulting on proposed guidance relating to TLPIs. The FSA does not consider them appropriate for retail customers because among other reasons their product structures are complex and opaque; they carry high levels of risk and may be illiquid; and many are based offshore without recourse to the FSCS or FOS.

The FSA fined a compliance officer £14,000 and banned her from performing any significant influence function in regulated financial services for breaching Principle 6 of the FSA's Statements of Principle for Approved Persons. Although aware of investors' concerns and the resignation of the prime broker the FSA concluded that the compliance officer had not properly investigated the matter or acted on the information.

The FSA fined McInroy & Wood Limited a discretionary investment management firm £15,050 for breaching both Principle 10 of the FSA's Principles for Businesses and the FSA's client money rules contained in the Client Assets sourcebook.

The FSA fined John Folan £195,117 for insurance fraud and prohibited him from carrying on regulated financial services. Mr Folan was a director and adviser at Key Mortgage Associates and submitted at least 54 applications for life assurance and protection policies in his and other family members' names without their knowledge and in some cases with falsified signatures leading to the generation of substantial commission.

The FSA fined IFA plc, a wrap platform, £3.5 million for failures in relation to its protection of client money. The FSA found that the firm had not carried out any internal reconciliations between 2001 and 2010 with the result that clients were cross-funding other clients. The firm also failed to put in place adequate trust documentation.