Solicitors face a big penalty for misusing their regulatory authorisation in service of 'boiler room' operations.
The Financial Services Authority (FSA) has claimed victory in its legal battle with Leeds solicitors Fox Hayes.
According to the regulator, the firm used its FSA authorisation to approve promotional material from so-called "boiler room" companies. These fraudsters operate by cold-calling members of the public and attempting to use hard-sell techniques to push worthless shares.
In a previous ruling, the Financial Services and Markets Tribunal fined the firm £146,000. The FSA then appealed and this penalty has now been revised upwards to £954,770.
In total, the FSA claims that around $21 million was defrauded from investors by the boiler rooms, due to Fox Hayes' abuse of its authorisation.
Delivering his judgement, Lord Justice Longmore said: "In my view, the misconduct which this case revealed was serious. There was a failure (on Fox Hayes's part) to take reasonable steps to ensure that the promotions by the overseas companies were clear and not misleading. There was also serious doubt that the overseas companies would deal with UK investors in an honest and reliable way."
Margaret Cole at the FSA added: "This decision supports our view that firms that assist boiler room operators should be brought to task for their role in perpetrating boiler room fraud and share scams."
