The Court of Appeal has awarded victory to the Financial Services Authority (FSA) in a case against solicitors Fox Hayes regarding the approval of financial promotions on behalf of others. The FSA was appealing a decision of the Financial Services and Markets Tribunal which overturned an FSA decision notice fining the Leeds-based firm £150,000 for approving financial promotions from unauthorised overseas companies.

Fox Hayes used its FSA-regulated status to approve 34 share promotions for five unauthorised companies in Spain and South Africa in 2003 and 2004. The companies were able to illegally sell shares to 670 UK investors for about US $21 million. The FSA claimed that Fox Hayes was in breach of financial promotions rules and had failed to use due skill, care and diligence (a breach of Principle 2). However, the Tribunal found that the firm had attempted to protect investors' money and partly blamed the regulator for not giving clear guidance and advice and also failing to give clear warnings about overseas "boiler rooms" that pressurise UK investors into buying US-listed shares. The Tribunal decreased the fine to £146,000 but the Court of Appeal raised it to £954,770, including £454,770 in commissions received personally by Fox Hayes' senior partner. The Court of Appeal judges declined to rule on whether the FSA was also to blame.

Lord Justice Longmore said that Fox Hayes' misconduct was "serious" and that it had failed "to take reasonable steps to ensure that the promotions by the overseas companies were clear and not misleading." The Court's view differed from the Tribunal regarding the promotional letters sent by the boiler rooms, which offered free research reports to investors in return for their consent to be contacted about other share promotions. The Tribunal had taken these offers at face value and did not see them as financial promotions, but the Court looked behind the offer at the ulterior motive and thus deemed them a financial promotion.

Margaret Cole, the FSA's director of enforcement, said the decision supported the FSA's view that "firms that assist boiler room operators should be brought to task for their role in perpetrating boiler room fraud and share scams." She added, "We hope this will send a strong message of deterrence to other firms and individuals that may turn a blind eye to the legitimacy of their clients in exchange for fees or commission."