Unit 2.2 Activity
1
News Report
Activity: Case 1
Read the below case study and answer the questions in the comments boxes.
Case 1: ‘FSA prohibition of Andrew Greystoke and
£400,000 fine on him and Atlantic Law LLP for aiding multi-million pound boiler
room share scam’(FSA:2010).
The Financial
Services and Markets Tribunal has upheld a Financial Services Authority (FSA)
decision permanently banning Andrew Greystoke from working in any capacity in
financial services and fining him and Atlantic Law LLP (Atlantic Law), an
FSA-regulated law firm of which he is senior partner, a total of £400,000.
Greystoke
recklessly signed off Atlantic Law’s approval of 50 UK investment
advertisements, between December 2005 and March 2007, issued by four
unregulated Spanish stockbroking firms. He did so without taking reasonable
steps to ensure that the advertisements were clear, fair and not misleading and
despite having reason to doubt that the Spanish firms would deal with UK
consumers in an honest and reliable way.
Greystoke accepted
before the Tribunal that these Spanish firms were boiler room share scam
operators. Greystoke approved their advertisements despite seeing consumer
complaints and press articles clearly warning of their activities and despite
negative previous experience of acting for other Spanish boiler room clients.
The advertisements
offered free research reports on respectable listed companies. As Greystoke
knew, the FSA had previously published warnings that this technique was
commonly used by boiler rooms to obtain UK consumer telephone contact details.
The advertisements approved by Greystoke were misleading because their true
purpose, which the Tribunal found to have been “blindingly obvious” to
Greystoke, was not to offer the free reports, but to sell shares, whose value
he knew to be at least doubtful.
In fact, the
Spanish companies subjected UK consumers who requested the reports, which
Greystoke knew to be of poor quality, to pressurised selling of high-risk
illiquid shares in unlisted small companies. UK consumers who complained to the
Spanish companies were subjected to threats and blackmail.
One hundred and
thirty UK consumers have complained to the FSA that they invested a total of
over £3 million. The FSA believes that they will have lost much, if not all, of
their investment and that many victims will not have complained with the result
that, as the Tribunal found, the true loss caused by the advertisements
approved by Greystoke was likely to be substantially more than £3 million.
Margaret Cole, FSA
director of enforcement and financial crime, said:
"Atlantic Law
and Andrew Greystoke acted recklessly, without integrity and with a complete
disregard of the risks to consumers. The Tribunal’s decision supports our view
that firms and individuals that assist boiler room operators should be brought
to task. This has been a hard-fought case into which the FSA has put
significant time and resources. It will send a strong message of deterrence to
other firms and individuals that may be tempted to turn a blind eye to the
legitimacy of their clients in exchange for fees or commission."
