17 December 2013

The Court of appeal has confirmed that 'helping out' a family member (or anyone else) who is engaged in criminal breaches of financial services legislation can lead to prosecution.

Kathleen Margaret O'Neil v Faye Gale [2013] EWCA Civ 1554 (6 December 2013) confirms both that FSMA breaches can give rise to criminal prosecutions for accessories (in this case the wife of the perpetrator of the main offence) and that ignorance of the law is no defence.

Mrs Gale appealed against the first instance judge's finding that she had aided and abetted her husband's commission of a criminal offence under sections 19 and 23 of FSMA.

Mr Gale ran a Ponzi scheme which involved 'risk-free' betting through Betfair. He offered generous dividends in excess of 15 per cent per annum, which were in fact financed using funds from new investments. The Claimant, Ms O'Neil, invested (and consequently lost) sums totalling around £300,000.

Mr Gale was bankrupt and was therefore unable to open either a bank account or an online account with Betfair. This is where Mrs Gale's involvement came in, as she agreed to open accounts in her name for Mr Gale to use.  Mrs Gale knew about Mr Gale's Ponzi scheme, knew that he was running it using the accounts and had heard him describe it to friends and family as 'risk-free'. She had not acted in bad faith and was not aware of the FSMA requirements, however, she had deliberately assisted her husband, knew about all of the elements which made up the offence committed by Mr Gale (the Ponzi scheme) and knew that Mr Gale was not regulated to carry out this sort of activity.

In the circumstances, the Court of Appeal held that the first instance judge was correct to say that, by opening account facilities for Mr Gale and allowing him to use them for his scheme Mrs Gale had aided Mr Gale's commission of a criminal offence.

Mrs Gale became a criminal despite no knowledge of the relevant law, not acting in bad faith and simply helping out her husband by opening a few accounts (no doubt under some influence from him). A reminder to be very wary.

Key contact

Paul Haggett

Paul Haggett Partner

  • General Counsel
  • DPO

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