High Court backs up FSA enforcement effort against boiler room activities

Joanna Gray, University of Newcastle

Background

On 23 February the Chancery Division of the High Court made a winding-up order in respect of the Inertia Partnership LLP upon the application of FSA under s367 Financial Services and Markets Act 2000 (FSMA). The background to this petition and the Court’s reasoning in granting it provide an interesting example of how ingenious some offshore-based operators can be at sailing as close to the wind as possible to the perimeter of the scope of the core requirement in the FSMA 2000 that all those conducting regulated activities be authorised by FSA if not otherwise exempt. The case also highlights the pitfalls for both investors and users of the services of what are colloquially termed ‘boiler rooms’. The mischief of these operations and the reason they are the focus of regulatory concern and enforcement effort was summed up by the judge in this case in the following terms: