This\nis the first of two key decisions expected this year on the\nresponsibility of \u201cprincipals\u201d for their \u201cappointed\nrepresentatives\u201d under the Financial Services and Markets Act 2000.<\/p>\n\n\n\n
This\nis a slightly odd arrangement which originates a long time ago and\nallows a business \u2013 the Principal \u2013 to appoint individuals or\ncompanies \u2013 Appointed Representatives \u2013 to sell financial\nproducts that require regulation. This was historically often done\nby, for example, insurance companies so that their tied brokers did\nnot need to be separately regulated, of course a customer could go to\na whole of market adviser who had to be regulated.\n<\/p>\n\n\n\n
Now,\nit may seem odd that an Appointed Representative does not need to be\nregulated, but they only obtain this exemption from being directly\nregulated because their Principal accepts responsibility for anything\ndone by them under their agreement.<\/p>\n\n\n\n
This\nis important because in Anderson v Sense, Sense are the Principal and\nthe 95 claimants were duped by Sense’s Appointed Representative \u2013\nMidas \u2013 into a Ponzi scheme.\n<\/p>\n\n\n\n
So\nfar, so good, as Midas were Appointed Representatives, the Claimants\nsay Sense are responsible (this is important as fraud tends to lead\nto insurance being avoided and Sense have the means to actually pay\ncompensation).<\/p>\n\n\n\n
Now\nthe court initially rejected the claim on the various grounds it was\nbrought and the Court of Appeal only considered section 39(3) \u2013 the\nstatutory basis \u2013 and vicarious liability for tort.\n<\/p>\n\n\n\n
The\nCourt of Appeal rejected the notion that once the Principal has\naccepted responsibility for a generic kind of work, defined by\nreference to those permissions the Principal has, then even if the\nAppointed Representative strays from the approved list, then as long\nas the work is within the permissions granted to the Appointed\nRepresentative then the Principal is liable. This was on various\nbasis but ultimately the interpretation of the provisions and the\nagreement between the Appointed Representative and Principal limited\nwhat the Appointed Representative could do to the terms of that\nagreement and therefore the Principal’s liability was limited to\nthose limits it imposed. So the Appointed Representative undertaking\nother business was not covered.<\/p>\n\n\n\n
The\nconcept if vicarious liability was also considered. However, the\nCourt of Appeal agreed with the trial judge that Midas was carrying\non its own business not that of Sense.<\/p>\n\n\n\n
One\nhelpful note is that Sense sought to overturn the (now moot) finding\nthat the Ponzi scheme was not a collective investment scheme. This\nwas clearly dismissed and upholds the trend that a CIS will be found\nwhen its low threshold is met \u2013 even when what is sold is not what\nis being done as in the case of this fraudulent Ponzi scheme.<\/p>\n\n\n\n
Whilst\nthis was unsuccessful, there is mention in it that a question was\nleft open with the Court of Appeal decided Frederick v Positive\nSolutions<\/em> \u2013 and\nthis similar case of a rogue\nAppointed Representative which has gone to the Supreme Court and\na judgment is awaited!<\/p>\n","protected":false},"excerpt":{"rendered":" This is the first of two key decisions expected this year on the responsibility of \u201cprincipals\u201d for their \u201cappointed representatives\u201d under the Financial Services and Markets Act 2000. This is a slightly odd arrangement which originates a long time ago and allows a business \u2013 the Principal \u2013 to appoint individuals or companies \u2013 Appointed […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-705","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/chrishegarty.com\/index.php?rest_route=\/wp\/v2\/posts\/705","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/chrishegarty.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/chrishegarty.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/chrishegarty.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/chrishegarty.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=705"}],"version-history":[{"count":0,"href":"https:\/\/chrishegarty.com\/index.php?rest_route=\/wp\/v2\/posts\/705\/revisions"}],"wp:attachment":[{"href":"https:\/\/chrishegarty.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=705"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/chrishegarty.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=705"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/chrishegarty.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=705"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}