10 September 2004

This statement provides updated information about the hearing of Mr Foster's application to set aside the FSA's statutory demand on 7 September 2004 at the High Court in London. Our (the FSA’s) previous statements were made in February, March, May, June and July 2004 (links attached).

Mr Foster's application to set aside the statutory demand served by the FSA

Our statements of 18 June and 16 July 2004 explained that the FSA had served a statutory demand upon Mr Foster on 31 March 2004 requiring him to establish that he has a reasonable prospect of paying his debts arising from the operation of KF Concept as they fall due. On 19 April 2004 Mr Foster applied to have the statutory demand set aside on the basis that he was solvent and that he disputed the alleged debt.

The substantive hearing of this application was due to be heard on 7 September 2004, almost 5 months after Mr Foster made his application.

The hearing was held in open court so that members of the public could observe the proceedings. This was something that the FSA welcomed because the members of the KF Concept would be able to hear evidence which we have obtained regarding the activities of Mr Foster and the basis upon which we had made the statutory demand.

Mr Foster's application to have the hearing adjourned

At the hearing, Mr Foster applied to have the hearing of his application to set aside the statutory demand adjourned for a period of 21 days. That application was rejected.

Mr Foster's withdrawal of his application to set aside the Statutory Demand

Having failed to get the matter adjourned Mr Foster then withdrew his application to set aside the statutory demand. No reasons for this withdrawal were given by Mr Foster, but the effect of this withdrawal was that there was no detailed examination by the Court of Mr Foster’s activities or of the use which he had made of monies entrusted to him by members in the KF Concept.

Mr Foster's application, and last minute withdrawal of it without hearing, has resulted in approximately 5 months of delay. This delay has, no doubt, added to the frustration felt by members of the KF Concept.

The Court ordered Mr Foster to pay the costs incurred by the FSA as a result of his application. In the interests of preserving the assets ultimately available for members of the KF Concept, the FSA volunteered not to enforce the costs order without a further order of the Court.

The evidence before the Court

The evidence before the Court included three Affidavits sworn by Mr Foster, of which the most significant was one sworn by him on 15 April 2004. The evidence also included three Affidavits sworn by Peter Willsher, a Manager in the Enforcement Division of the FSA. All of the Affidavits had been read by the Judge and were referred to during the course of the hearing.

Confidentiality / Access to Evidence

During the hearing the FSA outlined to the Court their concern that, due to the restrictions in the Act, the members of the KF Concept did not have all the evidence before them in order to understand the basis of the FSA's action. The FSA also expressed concern that members of the KF Concept were being misled by Mr Foster and some of his associates. Despite the FSA requesting on a number of occasions that Mr Foster give consent to the disclosure of the evidence to the members of KF Concept, to date, Mr Foster has failed to do so.

Given the circumstances of the hearing the FSA is of the view that the material relied upon in Court is now in the public domain. The FSA is considering how best to make that material available to members of the KF Concept.

The next stage

Mr Foster has 21 days in which to establish to the satisfaction of the FSA that there is a reasonable prospect that he will be able to pay his debts in connection with the KF Concept. If he is unable to do so, and in the absence of compelling reasons to adopt a different course of action, it is likely that the FSA will decide to present a petition for Mr Foster's bankruptcy. A bankruptcy order would involve the appointment of a trustee-in-bankruptcy to take charge of Mr Foster's estate to deal with the unwinding of the KF Concept and the distribution of assets to creditors who prove their claims.

CMAG

Shortly before the hearing we were contacted by Saunders & Co, solicitors acting for a recently formed organisation called the Concept Members Action Group (“CMAG”).

We are currently holding discussions with Saunders & Co and with legal representatives of Mr Foster. We will take account of any representations made by CMAG and Mr Foster as well as Mr Foster's response to the statutory demand, should he choose to make one, before deciding upon and commencing our next course of action.

At the hearing it was suggested by counsel for Mr Foster that members of the KF Concept may assert that Mr Foster does not owe them any money or that they may be prepared to give up their rights to repayment from Mr Foster. We would urge members of the KF Concept to ensure that they take independent legal advice before agreeing to any such arrangement as regards their rights.

We are also ready to receive any separate representations in writing from members of the KF Concept or their legal representatives.

Interim restraint and freezing orders

Please note that the proceedings commenced in the High Court in February 2004 continue and the Court order of 16 March 2004 remain in force.

Further information

We will continue to issue statements on this matter on our website from time to time, so far as we are legally able and it is proper to do so.

Other statements regarding KF Concept

See the List of KF Concept statements for all the statements we have issued on this subject.

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