The Financial Services Authority (FSA) has applied for permission to appeal a decision which reduced the fine it levied on Leeds law firm Fox Hayes.


It is the first time the FSA has sought permission to appeal a decision of the Financial Services and Markets Tribunal.



The FSA originally fined Fox Hayes £150,000 for approving a number of financial promotions for unauthorised overseas companies - known as 'boiler rooms' - without taking reasonable steps to ensure the ?promotions were clear, fair and not misleading. The authority also argued that the firm had reason to doubt that the companies would deal with UK customers in an honest and reliable way.



Boiler rooms are typically unregulated overseas operations that target investors using high-pressure sales tactics to sell usually overpriced or worthless shares. More than £20 million passed through the firm's client account.



However, the tribunal reduced the penalty to £70,000 last October, finding that the firm did take reasonable steps, initially had no reason to doubt that the companies would deal with customers honestly and conducted its business with due skill, care and diligence.



But it deferred its final decision on the penalty pending further submissions on whether the $814,039 in commissions (£454,770 at the relevant exchange rate) received by the firm's then senior partner, Robert Manning, should be treated as profits of Fox Hayes for the purpose of determining the amount of the penalty. In February it decided they should, and upped the fine to £146,000.



The commissions, which the tribunal found were for arranging for Fox Hayes to undertake the work, were not revealed to the other partners until 18 months after the final promotion was approved.



The FSA said it made the application because it believes that 'errors of law have been made, particularly in interpreting the relevant regulatory rules and that the penalty imposed does not properly reflect the misconduct'.



Supporting the move, Adam Phillips, acting chairman of the Financial Services Consumer Panel, said: 'As an authorised firm, Fox Hayes should not have approved promotional letters with an ulterior motive of gaining people's contact details for boiler rooms.'



Fox Hayes managing partner Philip Drazen said the tribunal's judgment was 'an accurate reflection'. He also highlighted the first tribunal judgment recording that partner Malcolm Jones, who was involved in approving the promotions, was 'a competent, careful, honest and conscientious solicitor'.



Neil Rose