Seeking Investment Advice? Only Authorised Practitioners Can Be Trusted

When seeking investment advice, it is vital to only use the services of authorised practitioners who are highly qualified and regulated by law. As a High Court case showed, it is otherwise all too easy to fall into a fraudster’s clutches.

A woman was introduced by an acquaintance to a man who held himself out as an investment specialist. She quickly placed her full confidence in him and entrusted him with £2.1 million, effectively her entire fortune. Less than half of the money was in the event returned to her. She subsequently launched proceedings with a view to recovering her loss.

Upholding her claim, the Court noted that the man was currently in prison, having been convicted of involvement in a fraudulent tax evasion scheme. He was not a regulated investment adviser and undertook none of the checks that would be expected of a respectable financial professional. Due to her lack of financial sophistication, however, she was not put on her guard.

The Court found that the man had deceived her and breached the general prohibition contained in the Financial Services and Markets Act 2000 (FSMA) on the giving of financial advice by unauthorised persons. He also breached the fiduciary duty he owed her.

He and an offshore company, through which he operated and which was at the time entirely his creature, were also liable for breaching the FSMA prohibition by managing, or purporting to manage, her assets. The company also breached the trusts on which it held those assets. The Court made various orders that were designed to assist her in the recovery of her money.