SRA Update
Boiler room scams
SRA Update Issue 8 – May 2009
High pressure sales methods
A recent Court of Appeal case is a warning of the risks of associating with investment schemes.
The Court of Appeal held that Fox Hayes LLP, a n Financial Services Authority-authorised law firm, had not taken reasonable steps to prevent a boiler room scam and that its approval of promotional material had contributed to a $21 million fraud on 670 UK investors. The court increased the fine imposed by the Financial Services and Markets Tribunal on Fox Hayes from £146,000 to £954,770.
Boiler room scams are so called because of high pressure techniques used to persuade people to buy shares which are usually worthless. Boiler room operators are not authorised by the Financial Services Authority. They are not acting legally. They often use other entities to approve their promotional literature to add credibility to their scheme.
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Don't risk involvement
A scheme doesn't have to be proved to have been a fraud for a solicitor's involvement to cause regulatory concern.
The Solicitors Disciplinary Tribunal has often made it clear that solicitors must not add credibility to dubious financial schemes. Involvement in such scams will very likely infringe the basic requirement of integrity in rule 1 of the Solicitors' Code of Conduct.
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