The Financial Conduct Authority v Samuel Anthony Exall & Anor
[2023] EWHC 1130 (Ch)
The Financial Conduct Authority v Bright Management Solution Limited & Ors
16 April 2024
[2024] EWHC 1200 (Ch)
High Court
The government's financial watchdog (FCA) caught a company running an illegal investment scheme. They got back some of the stolen money and a judge decided the fairest way to give it back to the victims was to share it out proportionally based on how much each person lost.
Key Facts
- •The Financial Conduct Authority (FCA) applied for an order under section 382(3) of the Financial Services and Markets Act 2000 (FISMA) to distribute funds recovered from an unauthorized investment scheme operated by Bright Management Solution Limited.
- •The scheme, allegedly a Ponzi scheme, involved approximately £1.3 million in deposits from investors.
- •Several defendants, including Bright and individual directors, were involved and judgments were obtained against them.
- •The FCA recovered £533,992.66 plus interest, and an additional £100,000 settlement.
- •The Second and Third Defendants were dissolved companies.
- •The FCA proposed a pro rata distribution to qualifying investors based on their net losses.
Legal Principles
The purpose of the order is to compensate those adversely affected by contraventions of the regulatory regime, focusing on consumer protection.
Section 382 FISMA and Case Law
In cases of shortfall, the court should do its best on a rough-and-ready basis.
Anderson, paragraphs 4-5; Paradigm, paragraphs 30(b)-(c)
The distribution method should be simple, fair to consumers, and consider expense.
Case Law
The court must be satisfied the FCA took reasonable steps to identify qualifying persons, their losses, and that the distribution method is fair.
Case Law
Applications are fact-sensitive.
Case Law
Priority should be given to those with out-of-pocket losses over expectation losses.
Paradigm, paragraphs 30(d) and 31
There should be finality, with permission to apply for late claims only exercised cautiously.
Case Law
Outcomes
The court dispensed with service on the dissolved Second and Third Defendants.
Serving them would involve cost and delay, and they have no interest in the distribution application.
The court approved the FCA's proposed pro rata distribution to qualifying investors.
The distribution is fair, prioritizes out-of-pocket losses, is simple, and consistent with previous cases. The FCA took reasonable steps to identify qualifying investors and their losses.