FSA Action Halts Unlawful Deposit-taking and Investment Business

Mr Raj had used a fictitious trading name - Prudential Capital Management Inc (Pru-Capital) - and had placed a number of adverts in international publications such as EuroBusiness a business magazine available in the UK and Europe. The adverts claimed that Pru-Capital had assets worth US$400 million under management and offered clients a full range of investment and private banking services.

The FSAs action appears to have prevented any funds being invested with Mr Raj.

The Court Order was made by consent at a High Court hearing before Mr Justice Jacob on Wednesday 26 July 2000. At the hearing Mr Raj (through his solicitor) formally admitted that:

• Pru-Capital never existed;
• the business that he carried on from June 1998, in the name Pru-Capital, of offering to give investment advice, to arrange deals, to buy, sell and manage investments amounted to investment business in breach of s.3 of the FS Act;
• in contravention of s.47 of the FS Act, he had made statements, promises or forecasts that he knew to be misleading, false or deceptive and had dishonestly concealed material facts in order to induce investments;
  8 he had issued unapproved investment advertisements in breach of s.57 of the FS Act;
• he had held himself out to be a banker and/or held Pru-Capital out to be a bank, in contravention of s.69 of the Banking Act;
• in contravention of s.18 of the Banking Act, he had falsely indicated that he and/or Pru-Capital were authorised under the Banking Act, and/or he falsely indicated that such authorisation was not required;
• he had made misleading statements in order to induce persons to make deposits, in contravention of s.35 of the Banking Act.

Mr Raj did not attend the hearing at the Royal Courts of Justice in the Strand. However, through his solicitor both he and his company, Rivercourt Investments Ltd (Jersey), gave permanent undertakings to the Court that they would not in future breach those sections of the two Acts.

Mr Raj agreed to pay in excess of 50,000 towards the FSAs costs. The money is to be paid immediately.

Notes for editors

The relevant sections of the Financial Services Act 1986:
1. Section 3: no person shall conduct investment business in the UK unless he is an authorised or exempted person. Contravention of section 3 of the Act is a criminal offence.

2. Section 47(1)(a): any person who makes a statement, promise or forecast - which he knows to be misleading, false, or deceptive - for the purpose of inducing another person to enter into an investment agreement is guilty of a criminal offence.

3. Section 57: no person other than an authorised person shall issue or cause to be issued an investment advertisement in the UK unless its contents have been approved by an authorised person. Contravention of section 57 is a criminal offence.

   The relevant sections of the Banking Act 1987:

4. Section 3: provides that no person shall in the UK accept a deposit in the course of carrying on a deposit taking business unless authorised to do so by the FSA or unless otherwise exempt under the Act. Any person who contravenes this section is guilty of a criminal offence.

5. Section 18: s.18(1) provides that no person, other than an authorised institution, shall describe himself as an authorised institution or hold himself out so as to indicate or to be reasonably understood to indicate that he is an authorised person. S.18 (2) further provides that no person shall falsely state, or do anything which falsely indicates, that he is entitled although not an authorised institution to accept deposits. Contravention of s.18 is a criminal offence.

6. Section 35: creates the offence of fraudulent inducement to make a deposit where a person knowingly or recklessly makes a misleading, false or deceptive statement or conceals material facts to induce another person to make, or refrain from making, a deposit or to enter into an agreement for that purpose. Breach of s.35 is a criminal offence.

   The Financial Services Authority has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; the protection of consumers; and the reduction of financial crime.