July 26, 2010
The Financial Services Authority (FSA) has secured £3.717 million in compensation for investors in an unauthorised collective investment scheme operated by Upton & Co. Accountants Limited.
A High Court ruling confirmed the immediate distribution of £3.717 million to investors on a pro rata basis. Upton has also agreed to make further monthly payments of £10,000 which will be returned to investors in due course.
The Wakefield based firm, which has never been authorised by the FSA, operated a collective investment scheme known as the “Currency Plan” promising investors high rates of return. The money was to be used to invest in foreign exchange markets. However, limited foreign exchange trading occurred and very little was ever returned in cash.
Darren Upton, a member of the Association of Chartered Certified Accountants, owned and controlled the firm.
Margaret Cole, director of Enforcement and Financial Crime, described the outcome as “fantastic”, saying: “It is so rare for victims of unauthorised businesses to get any money back because normally the money is misappropriated and victims of unauthorised firms are not protected by the Financial Services Compensation Scheme.
“But as we intervened early in the scheme’s life cycle we were able to recover a large proportion of the original amount invested. Normally the amount recovered - if any - is often just a few pence in the pound so securing this amount is a real coup.”
In February 2009 the FSA commenced an investigation into Upton and soon realised that the firm was carrying out unauthorised business. A month later, the FSA secured a High Court injunction to stop the activity and freeze the firm’s assets.
In March 2010 the FSA reached an agreement with Upton for the firm to pay compensation of £3.6 million immediately and a further £840,000 in monthly instalments.
Margaret Cole continued: “Operating a collective investment scheme is a serious business involving the management of a number of investments and requiring FSA authorisation. Upton had no business running one of these schemes and the firm risked millions of pounds of investors’ money - something you’d expect a firm of accountants to know better.”
A collective investment scheme enables a group of investors to pool their assets with a view to sharing the profits. Participants do not have day to day control over the management of the assets, something that is carried out by an FSA authorised operator. Upton was performing that function without approval.