William Day was instructed by the Financial Conduct Authority in two applications for directions under section 382 of the Financial Services and Markets Act 2000 (‘FSMA’) to distribute sums recovered from enforcement in respect of unauthorised financial services activity.
The first application (‘Synergy’) related to an unlawful landbanking scheme, which constituted a collective investment scheme under FSMA. Its promoter, Mr Exall, settled the proceedings on terms that the land would be sold and the proceeds would be paid to the FCA.
The second application (‘24HR Trading’) related to unauthorised arrangements and advisory activity in respect of forex investments, where the FCA obtained a restitution order against 24 HR Trading’s director, Mr Maricar. The applications were unrelated but heard together for efficiency.
The Court accepted the FCA’s submissions that, in circumstances where the recoveries were a small percentage of total losses, a ‘rough and ready’ approach to distribution was appropriate, having regard to the information reasonably available to the FCA from its enforcement action.
The Court approved the FCA’s proposed per capita distribution in Synergy in light of limited available records as to extent of losses. In 24HR Trading, in light of the spread of losses across nearly 1,400 investors from over £50,000 to 10p, the Court approved a proposed pro rata distribution with a threshold that participating investors must have suffered in excess of £500 loss.