In the latest twist in this longrunning saga, the Court of Appeal remitted the law firm, Fox Hayes’ case back to the Financial Services & Markets Tribunal to determine which partners would be liable to pay the penalty imposed and how much each would have to pay. The Tribunal’s criticisms of the FSA were over-turned.

The firm had approved a number of financial promotions for unauthorised overseas companies. The promotions took the form of letters approved by Fox Hayes and sent by overseas companies to private investors in the UK offering a free research report into a company in which the investor already held shares. Investors, by returning a form with their address and telephone number, agreed to be contacted about other investment opportunities, and the overseas company would then contact investors by telephone and persuade them to buy shares in OTC Bulletin Board companies.

The Court of Appeal held that the Tribunal should have concluded that the purpose of the promotion was disguised, and that in itself tended to show that there had been a contravention of the rules. The Court was satisfied that there was a ‘financial promotion’ and that, given the Tribunal’s finding that Fox Hayes knew that the whole purpose was to gain access to investors to invite them to buy OTC Bulletin Board shares, it followed that they did not take reasonable steps to ensure that the promotion was clear, fair and not misleading. It also followed that Fox Hayes had reason to doubt that the overseas companies would deal with their UK customers in an honest and reliable way. Their managing partner had received secret commissions from the overseas companies and the Tribunal had erred in considering the knowledge of the firm separately from that of its managing partner. Fox Hayes’ conduct was serious and reckless and an appropriate penalty would be £750,000, reduced to £500,000 to reflect the fact that the case was to some extent a test case.