The Financial Conduct Authority v Skinner & Ors (Rev 2)

A person is knowingly concerned in a statutory contravention if they are actually involved in it and know the facts constituting the contravention. For a breach of section 21 of the Financial Services and Markets Act 2000, knowledge that a communication was made in the course of business is sufficient. Knowledge that the communication lacked approval, or that an exemption did not apply, is unnecessary. Restitution under section 382 is discretionary but normally reflects investor loss, particularly where the conduct was deliberate and the defendant profited. A defendant’s lack of means does not prevent an order. The court may adjust the amount to reflect differing culpability. False or misleading investment projections and undisclosed litigation may justify restitution and declaratory relief.

The Financial Conduct Authority brought proceedings concerning the promotion of shares in Our Price Records Limited. It alleged breaches of sections 19 and 21 of the Financial Services and Markets Act 2000 and section 89 of the Financial Services Act 2012. The individual defendants disputed their knowledge and contended that they had relied on professional advisers.

The fourth to sixth defendants admitted the corporate contraventions and their knowing involvement in some of them, but disputed restitution. The principal issues were the meaning of knowing concern, the falsity of investment materials and promotional statements, the appropriate restitutionary sums, and whether declarations and injunctions should be granted.

The claim succeeded. The court made declarations and ordered restitution under section 382 of the Financial Services and Markets Act 2000.

1. Knowing concern. The concept had two elements: actual involvement in the contravention and knowledge of the facts on which it depended. Actual involvement included being the controlling mind or pulling the strings at directorial or managerial level. It was unnecessary to know that the facts amounted to a contravention.
2. Section 21. The prohibition in section 21(1) was structured as an absolute prohibition, subject to separate disapplications and exemptions. Accordingly, knowledge that communications had not been approved by an authorised person, or that an exemption under the Financial Promotion Order 2005 applied, was not required. Mr Skinner and Ms Ferreira knew that OPR was communicating investment invitations in the course of business. Both were therefore knowingly concerned. Mr Skinner also knew that the communications lacked approval. Ms Ferreira did not have actual knowledge or wilful-blindness knowledge of that fact.
3. Section 89. The investment memoranda contained projections which materially understated broker commissions and omitted substantial payments through Ted Lucy and TLMT. They were false or misleading, made to induce investment, and Mr Skinner was knowingly concerned. Statements that OPR had no outstanding litigation were also false because of the continuing trademark dispute with Palm Green.
4. Restitution. The section 382 discretion required a balancing of investor interests and culpability. Investor losses were ordinarily the starting point. Lack of means was irrelevant, although differing culpability could justify different awards. Mr Skinner was ordered to repay £3,619,352; Ms Ferreira 75% of the investor losses, £2,714,514; and Venor, Mr Mongelard and Mr Miller £1,207,050 jointly and severally.
5. Declarations and injunctions. Declarations were appropriate to publicise the contraventions and warn investors. Injunctions were unnecessary if equivalent undertakings were given.

First-instance decision of the High Court (Chancery Division). The judgment records an earlier interlocutory decision, FCA v Skinner and others [2019] EWHC 392 (Ch), refusing permission to withdraw admissions. That decision was not appealed.