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Tribunal rejects FSA promotions rulings

The FSA has been forced into an embarrassing climbdown after the Financial Services and Markets Tribunal overturned most of its rulings against a firm for financial promot-ions failings.

The FSA fined solicitors Fox Hayes £150,000 in September 2006 for approving a number of financial promotions for unauthorised overseas companies. It claimed the firm had not taken reasonable steps to ensure the promotions were clear, fair and not mislead- ing and that it had reason to doubt the honesty of the overseas firms.

The FSA also claimed that the firm had not arranged for confirmation that the promotions complied with the rules to be carried out by an individual with appropriate expertise and that it had not conducted its business with due skill, care and diligence.

But last week, the FSMT ruled the FSA was wrong to reach these conclusions although the tribunal did state that Fox Hayes had reason to doubt the honesty of the overseas firm by mid-November 2003 but still continued to approve promotions until June 2004.

Taking into account these circumstances, the FSMT ordered the fine to be more than halved from £150,000 to £70,000.

Fox Hayes ran a service bringing potential investors into contact with unquoted overseas companies wanting to raise capital. It circulated promotions for these companies to a list of investors who were either established clients or had asked to be on the list. The FSA became involved after investors lost money and reported that undue pressure had been placed on them by certain companies.

Compliance consultant Adam Samuel says: “The FSA had a good case when it alle-ged that the solicitors should have stopped approving promotions when they became aware of problems with the promotions.

“It was perhaps unfortunate that the regulator also tried to allege a want of care in the first place. The rules do not and cannot prescribe precisely the research required when approving promotions relating to overseas businesses so it is fairly subjective.”


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