A judge has slammed Fox Hayes and its former managing partner in a Court of Appeal victory for the Financial Services Authority (FSA).
The court overturned an earlier Financial Services and Markets Tribunal decision, which had in turn overturned an FSA decision that found Fox Hayes had been negligent when it gave advice in relation to 20 financial promotions in 2003 and 2004.
As reported on TheLawyer.com (15 October), the tribunal had cleared Fox Hayes of negligence after the FSA had fined the firm because it felt the promotions, which related to a number of unauthorised overseas companies, were not clear or fair and could have misled investors.
In addition to overturning the tribunal’s decision, the Appeal Court increased the fine the FSA can collect from Fox Hayes from £146,000 to £954,770, to take account of secret commissions its former managing partner Robert Manning received in relation to the promotions. Manning resigned from the firm in June 2007 on the last day of the tribunal hearing.
In their judgment Lord Justices Collins, Wilson and Longmore said: “It’s impossible to resist the conclusion that the promoters were using a small firm without any relevant expertise, and with a senior partner who was (to put it at its lowest) less than scrupulous and who had a substantial personal stake in the success of their efforts.”
The judges added that Fox Hayes was a medium-sized firm in Leeds without any expertise in international securities law, which the overseas companies exploited in getting their investment schemes signed off.
They said that the firm should have realised that its sign-off had given comfort to investors that the promoters were advised by a respectable firm.
The judges, who were unanimous in their decision, declined to rule on the lower court’s finding that the FSA was also to blame because of its inaction in the matter. They said that their decision on the FSA’s conduct would not have made a difference to the outcome of the appeal in respect of Fox Hayes.
Fox Hayes recently filed for administration after a downturn in its main property business (TheLawyer.com, 19 January).
The FSA was represented in court by Timothy Dutton QC & Richard Coleman of Fountain Court while Fox Hayes instructed Charles Hollander QC of Brick Court.
Fox Hayes, its administrators and Manning could not be reached for comment.