Napoli v R.

Acceptance of deposits may be carried on by way of business even where only a small number of large deposits is proved. Relevant evidence includes the commercial form of the arrangements, the use of corporate accounts, the expectation of returns, representations to prospective depositors, and the wider documentary and interview evidence.

Under Article 2(1) of the Financial Services and Markets Act (Carrying on Regulated Activities by way of Business) Order 2001, both the absence of a day-to-day holding out and acceptance only on particular occasions are required for the exclusion to apply. The prosecution need disprove only one condition, but must still prove that the activity was carried on by way of business.

Napoli v R. concerned an appeal against a conviction at Southwark Crown Court for carrying on an unauthorised regulated activity, contrary to sections 19 and 23 of the Financial Services and Markets Act 2000.

The appellant accepted two substantial deposits through his American corporation during the relevant period, but denied that he had accepted deposits by way of business. He relied on Article 2(1) of the Financial Services and Markets Act (Carrying on Regulated Activities by way of Business) Order 2001, contending that he neither held himself out as accepting deposits day to day nor accepted them other than on particular occasions.

After the trial judge rejected a submission of no case to answer, the sole issue on appeal was whether the evidence was capable of supporting the contrary conclusions required for conviction.

1. Appeal dismissed. The judge was entitled to reject the submission of no case to answer.

2. There was evidence from which a properly directed jury could find that the appellant accepted, or purported to accept, deposits by way of business. The two deposits were substantial, were made under detailed commercial agreements, entered corporate accounts, and were intended to produce returns. Further evidence showed dealings with prospective depositors, draft and specimen agreements, and the appellant’s own descriptions of his financial activities as a business.

3. The exclusion in Article 2(1) of the Financial Services and Markets Act (Carrying on Regulated Activities by way of Business) Order 2001 required both conditions to be satisfied: no holding out as accepting deposits day to day, and acceptance only on particular occasions. The prosecution therefore had to prove beyond reasonable doubt that at least one condition was absent. It remained necessary to prove the separate element that the deposits were accepted by way of business.

4. The evidence, assessed cumulatively rather than document by document, was capable of showing that the appellant held himself out as willing to accept deposits day to day. His dealings with prospective investors, the two completed deposits, the draft arrangements and his interview answers could support that conclusion.

5. There was also evidence capable of showing that deposits were not accepted only on particular occasions. Under Article 2(2), the jury could consider the frequency of the occasions and their distinguishing characteristics. The two large deposits, the appellant’s apparent readiness to receive substantial sums, and the close similarity of the agreements could support that finding.

• Court of Appeal (Criminal Division): dismissed the appeal against conviction in Napoli v R., [2012] EWCA Crim 1129.

• Southwark Crown Court: on 30 June 2010, convicted the appellant of unauthorised regulated activity contrary to sections 19 and 23 of the Financial Services and Markets Act 2000.