4VVV Ltd & Ors v Nicholas Spence & Ors
[2024] EWHC 2434 (Comm)
The Financial Conduct Authority v Robin Scott Forster & Ors
28 July 2023
[2023] EWHC 1973 (Ch)
High Court
Mr. Forster ran a fake investment company that promised big returns but actually used new people's money to pay old people. The judge said it was illegal and Mr. Forster has to pay back the money he made.
Key Facts
- •Mr. Forster operated an unauthorized collective investment scheme (CIS) through Qualia Care entities.
- •Units in the scheme were sold to investors through deception, with misleading statements about ownership and sustainability.
- •Investors were promised guaranteed high returns, funded primarily by new investor contributions (Ponzi scheme).
- •Mr. Forster, as the controlling mind of the Qualia entities, was knowingly involved in the deception.
- •The scheme used a 'lease model' where investors purchased overvalued leasehold interests in care home rooms.
- •The FCA sought restitution orders against Mr. Forster for personal enrichment from the scheme's unlawful activities.
Legal Principles
Definition of a Collective Investment Scheme (CIS)
Financial Services and Markets Act 2000 (FSMA), s. 235
General Prohibition on Unregulated Activities
FSMA, s. 19
Prohibition on Unauthorised Communication of Inducements
FSMA, s. 21
Offence of Making Misleading Statements
Financial Services Act 2012 (FSA 2012), s. 89
Offence of Creating Misleading Impressions
FSA 2012, s. 90
Knowingly Concerned in Contraventions
FSMA, s. 382
Legal Advice as a Defence to Knowing Concern
Case law (Scandex, Fradley, Avacade, Ferreira)
Outcomes
The Qualia investments constituted a CIS under FSMA s. 235.
The purpose and effect of the arrangements were to enable investors to participate in profits or income from the care homes, lacking day-to-day control over management.
The Investment Companies contravened FSMA ss. 19 and 21 and FSA 2012 ss. 89 and 90.
They operated an unauthorized CIS, made misleading statements about ownership and sustainability, and intended to induce investors.
Mr. Forster was knowingly concerned in the contraventions.
He was the controlling mind of the Investment Companies and FGL, actively involved in the scheme's operation and promotion, despite knowing or being reckless about the misleading nature of the information provided.
Mr. Forster was personally enriched as a result of the contraventions.
He received significant sums from the Qualia entities, which would not have been received but for the unlawful scheme.
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