Unauthorised firm breaches general prohibition by giving investment advice

Written by Ciara Davies

The FCA has published a press release announcing the High Court decision that 24HR Trading Academy (24HR Trading), an unauthorised company, had breached the general prohibition in section 19 of the Financial Services and Markets Act 2000 (FSMA) and the financial promotions restriction in section 21 FSMA.

24HR Trading entered into contracts with its customers under which it provided “Signals”, which were messages sent via Whatsapp containing details of transactions in contracts for difference (CFDs) relating to currencies and commodities. 24HR Trading sent the details of transactions in CFDs that it thought would be advantageous for its customers to enter into. It also referred clients to two FX trading platforms and offered them inducements to open accounts with those platforms.

The High Court found that 24HR Trading had breached the general prohibition by carrying out the following regulated activities:

• Advising on investments. The Court held that even if the recipients of the Whatsapp message “Signals” were aware that they should apply independent judgment as to whether a particular transaction was advisable, each individual “Signal” was still advice in the sense of being a recommendation to effect a transaction.
• Making arrangements with a view to transactions in investments. The Court found that by encouraging consumers to open trading accounts on which they could place their CFD trades, 24 HR Trading had made arrangements with a view to consumers acquiring investments.

Referring consumers to the trading platforms to open an account also constituted financial promotion under section 21 FSMA.