FSA ups stakes in Fox Hayes negligence fight

The Financial Services Authority (FSA) is seeking permission to appeal a tribunal verdict that overturned an earlier FSA ruling on Leeds firm Fox Hayes.

In 2006 the FSA found Fox Hayes guilty of negligence in relation to work it did on financial promotions for unregulated overseas companies and imposed a penalty of £150,000.

Last year the Financial Services and Markets Tribunal cleared Fox Hayes of negligence (The Lawyer, 15 October 2007) and reduced the fine to £70,000. Earlier this year the tribunal revised its decision on the penalty, stating it should in fact be £146,000.

The FSA is seeking to appeal these decisions, the first time it has attempted to take such action, because it feels Fox Hayes made specific errors in interpreting the rules governing financial promotions.

In a statement the City watchdog said: "The FSA has made the application because it believes that errors of law have been made, particularly in interpreting the relevant regulatory rules, and that the penalty imposed does not properly reflect the misconduct."

The FSA's initial ruling related to advice Fox Hayes gave between February 2003 and June 2004 on 20 financial promotions that subsequently attracted investments from UK citizens. The regulator felt the promotions were not clear or fair and could have misled investors.

Fox Hayes' former managing partner Robert Manning resigned from the firm on the final day of the tribunal hearing last June after it emerged that he received "secret" commissions totalling $518,149 (£254,300) from a number of the clients that made the promotions.

Fox Hayes declined to comment.