The Financial Services Authority (“FSA”) yesterday highlighted that it is continuing to tackle the problem of unauthorised business and unauthorised individuals by taking action in two separate investigations.
One of the investigations is in its very early stages with the FSA reporting that it executed a search warrant yesterday, in Kent, in connection with an investigation into the provision of mortgage advice by a prohibited individual. No further details have at this time been released.
The second reported investigation relates to charges brought against Mr Gary Hexley, a former approved person who is currently subject to a prohibition order, made on 13th June 2011 pursuant to s. 56 of the Financial Services and Markets Act 2000 (“FSMA”). Mr Hexley has now been charged with 6 offences relating to providing investment advice without FSA authorisation, despite the prohibition order prohibiting him from performing any function in relation to any regulated activity and contrary to the general prohibition (s. 19 and s. 23 FSMA).
Mr Hexley and his business partner, John Cooper, have also been charged with 5 counts and 3 counts respectively of concealing a material fact contrary to s. 397 FSMA.
The specifics of the charges have not been disclosed as the proceedings are on-going. Messrs Hexley and Cooper have been bailed to attend Birmingham Magistrates’ Court on 26th October 2012 where the matter could be committed to the Crown Court.
Investigations into unauthorised business being carried out by unauthorised individuals are carried out by the Unauthorised Business Department of the FSA’s Enforcement and Financial Crime Division.
The general prohibition states that “no person may carry on a regulated activity in the United Kingdom, or purport to do so, unless he is an authorised or an exempt person”.
Regulated activities are listed within part 2 of the FSMA 2000 (Regulated Activities) Order 2001 (the “RAO”). There are a number of regulated activities, including (but not limited to):
- Accepting deposits (article 5 RAO);
- Dealing in investments as principal (article 14 RAO) or agent (article 21 RAO);
- Arranging (bringing about) deals in investments (article 25(1) RAO);
- Arranging (bringing about) regulated mortgage contracts (article 25A(1) RAO);
- Managing investments (article 37 RAO);
- Advising on investments (article 53 RAO); and
- Safeguarding and administering investments (article 40 RAO)
Specified investments are listed within part 3 of the RAO. There are a number of specified investments, including (but not limited to):
- Deposits (article 74 RAO);
- Contracts of insurance (article 74 RAO);
- Shares (article 76 RAO);
- Units in a collective investment scheme (article 81 RAO);
- Options (article 83 RAO);
- Futures (article 84 RAO); and
- Regulated mortgage contracts (article 88 RAO).
Carrying on a regulated activity in breach of the general prohibition is a criminal offence. If convicted of the charge brought against him in respect of the general prohibition, Mr Hexley could face up to 2 years imprisonment and/or a fine if tried in the Crown Court.
Concealing a material fact contrary to s. 397 FSMA carries a potential sentence of up to 7 years imprisonment and/or a fine.