Financial Services Authority (FSA) v Anderson & Ors

Under Financial Services and Markets Act 2000, a restitutionary just sum may reflect both investor losses and profits obtained through an unauthorised regulated activity. Losses may include outstanding contractual capital and interest, together with interest for the period from intervention to judgment. The assessment is not confined to a net loss after repayments. The court must consider investor protection, the gravity and culpability of the contravention, and the fairness of the order. Deposits from a contravener’s close relatives, within the exemption in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, cannot be included in the statutory loss assessment or distribution. In the circumstances, the appropriate just sums comprised the relevant losses, interest and profits, without reduction.

Lewison J had granted summary judgment declaring that the defendants had carried on the regulated activity of accepting deposits without authorisation or exemption, contrary to section 19(1) of the Financial Services and Markets Act 2000. He ordered that issues concerning remedial steps and restitution be determined at trial.

The claimant did not pursue an order under section 380(2). The trial concerned the assessment of losses, profits and the just sums payable under section 382(2), including the treatment of deposits made by close relatives and the appropriate interest period.

1. Assessment of losses. The losses and other adverse effects under section 382(2) were the outstanding capital and contractual interest due under open deposit contracts at the date of intervention. Repayments made before intervention were not deducted generally as a netting exercise. Interest at 6% per annum ran on the losses from 25 November 2008 to judgment. The court accepted the agreed or substantially agreed calculations, subject to the specific deductions and exclusions identified in the judgment.
2. Close relatives. On the proper construction of articles 3, 5 and 6 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, only close relatives of the person who contravened the relevant requirement were exempt. The exemption did not generally extend to relatives by marriage. Deposits from an exempt close relative were not deposits for the purposes of article 5, and their losses could not be included in the section 382 assessment or distributed under section 382(3).
3. Just sum. The court endorsed the approach in Financial Services Authority v Shepherd (22 May 2009). The statutory purpose includes protecting investors. The court must balance investors’ interests against the contravener’s culpability and consider all circumstances bearing on fairness. Disgorgement of profits is an additional protection and may be tempered where the contravention is technical or inadvertent. These contraventions were deliberate and continued for substantial periods, so no reduction was justified.
4. The just sums were the relevant losses and profits, with applicable interest: £12,735,771.04, €459,181.87 and $122,617.60 for Mr Anderson; £10,876,259.69, €664,763.65 and $328,440 for Mr Peacock; and £72,097,597.14, €3,375,709.07 and $22,292,893.47 for Mr Pruthi. No order was made under section 380(2). The parties were to address the precise order, consequential directions and costs.

First-instance determination following summary judgment by Lewison J on liability. The judgment itself does not state a citation for that earlier decision.