18 June 2004

This statement provides additional information to that given in our (the FSA’s) previous statements made in February, March and May 2004 (links attached). We continue to be mindful of the concerns that have been expressed by members of the KF Concept and this latest statement responds to typical enquiries being made of us, so far as we are legally able at this time.

Continuing investigation

We have been making further enquiries into the business activities of Kevin Foster, the KF Concept and other individuals involved, which have included requiring Mr Foster:

  • to disclose the whereabouts of the funds that he has invested on behalf of the KF Concept scheme with other entities and schemes;
  • to state the identity and location of the people who know the whereabouts of those funds; and
  • to provide an explanation of how those schemes operate to make profits sufficient to pay the expected returns.

Mr Foster has not yet provided the required information.

Interim restraint and freezing orders

As we have explained in previous statements, we have obtained two orders from the High Court in respect of Mr Foster, Mr McNab and Mrs Foster (the defendants), namely a restraint order and a freezing order. The purpose of the restraint order is to prohibit the defendants from carrying out further activities that we allege are contrary to the Financial Services & Markets Act 2000 (the Act). Breaches of the kind alleged are criminal offences under the Act (as opposed to breaches of our rules or regulations which only apply to firms or products we authorise).

The freezing order is to preserve assets that are under the control of the three defendants with a view to eventual distribution, depending on the outcome of our legal proceedings. We do not hold the assets that are subject to the order.

We have not sought to obtain any monies to cover our costs incurred in the proceedings or in pursuing the investigation from the frozen assets (or from any other external source). Any diminution of the frozen assets will have been as permitted by the Court order, i.e. for the defendants' ordinary living expenses and legal fees. As a matter of course, we reserve our right to apply to the High Court for recovery of our costs in this matter. However, please note that we would not generally seek to recover our costs in this type of case where that would be detrimental to the interests of the investors. Any decision of this type must clearly await the outcome of the proceedings and, if we obtain the orders sought, we will take into account the likely effect on any distribution to investors.

Who can apply to remove the restraint and/or freezing orders?

Application can be made by any of the following, either jointly or alone:

  • the FSA;
  • any of the defendants; or
  • any other party prejudiced by the order, eg investors in the KF Concept.

We do not presently consider that we should apply to remove the orders based on the evidence in our possession.

None of the defendants has so far exercised their individual right to apply to have the orders removed. On the contrary, each of them consented to the continuation of the orders at the last High Court hearing in March when they were represented by Leading Counsel and a solicitor.

In the event that a person, who is not a party to the proceedings we have brought, such as an investor in the KF Concept, believes he is adversely affected by the interim restraint and/or freezing orders, he has a right, similar to that of the defendants, to apply to the Court to set aside or vary those orders. In that case, he would need to persuade the Court that either or both the orders should not remain in place or that he should be treated differently from other investors (who are currently being treated on an equal basis). It is strongly recommended that any person considering such a route should take independent legal advice on whether this course of action would be appropriate, particularly given the potential costs and complexities involved.

Access to evidence

If an application is made either by the defendants or investors to remove or vary the interim restraint and/or freezing orders, we are likely to oppose it on present evidence. However, we would normally be required to serve upon the applicant the evidence on which we rely in opposition, which the applicant would have an opportunity to challenge in Court. In the absence of such an application we are limited by the Act in the information we can disclose.

If, however, each of the defendants is willing to consent to disclosure of the affidavits the FSA has put in evidence, then we are content for these to be disclosed to investors.

Mr Foster's ability to repay investors

On 31 March 2004 we served a statutory demand on Kevin Foster. This required him to establish that there is a reasonable prospect that he will be able to pay, on their due dates, the debts which we allege have been incurred by him personally or by reason of his conduct or involvement with the carrying on of business by the KF Concept scheme. Without the consent of Mr Foster we are presently unable to disclose details in that statutory demand.

On 19 April 2004 Kevin Foster exercised his right to apply to the Medway County Court to have this statutory demand set aside on the grounds that he is solvent and that he disputes the alleged debt.

The matter was transferred to the High Court at our request. Whilst the High Court has set a date for hearing Mr Foster's application to set aside the statutory demand, on 29 June 2004, that is not expected to be the final hearing of this matter. We and Mr Foster are likely to file further evidence with the Court before a determination of the position.

If the Court agrees to set aside the statutory demand, we will review the position in the light of the Court ruling, including any additional remarks by the Judge, and other matters such as the evidence then to hand. Please note that a ruling in favour of Mr Foster regarding this application would not, of itself, cause the removal of the restraint and freezing orders against him, Mrs Foster and Mr McNab.

If the Court does not agree to set aside the statutory demand, and if Mr Foster fails to establish his ability to pay the debts due as described above, we are likely to petition for his bankruptcy. This would be the most appropriate means for an independent person (a qualified insolvency practitioner) to gather in assets, calculate liabilities, establish bona fides of creditor claims and ensure a fair distribution of monies to his creditors.

At the present time we are unable to comment further or disclose detailed information on the hearing on 29 June or any evidence filed. That hearing will not be held in open court, which means that only the interested parties (Mr Foster and the FSA) and their representatives may attend in ordinary circumstances. This means that investors in the KF Concept would not normally be able to attend.

Further information

Once there has been a final hearing of these proceedings in open court, it is expected that more information may become available to be made public. 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.

More Statements: