Partners who allowed their firm to act as go-between for an investment scheme have been fined at the Solicitors Disciplinary Tribunal.
Four partners at north west firm Thompson & Cooke Limited appeared before the tribunal last month after working for a Hong Kong-based rare earth metals trader for over a year.
Craig Emmerson Maher, a solicitor for 30 years, who was first contacted about working for the client, admitted the firm had breached Soilicitors Regulation Authority rules by authorising payments to a third party through the client account. Maher, who also admitted failing to run the business with proper governance, was fined £16,000.
There is no suggestion the firm was aware that the scheme was potentially a fraud risk, but Maher accepted the firm had 'unwittingly assisted in circumstances where there was a significant risk that a seller might be enabled to take improper advantage of naive members of the public'.
Compliance officer Peter Edward Holden was fined £5,000 after failing to do adequate checks or due diligence on a client and failing to prevent Maher’s misconduct.
Two other partners, Nigel John Ashworth and John Hadfield Maltby, were found to have played a minor role in the matter and were each reprimanded.
The tribunal heard that Maher was emailed by a Hong Kong businessman in June 2012 about working for the newly-incorporated metals trader. His job would involve receiving sale-contract proceeds into the client account and checking with a trustee the product was available in a bonded warehouse. It was agreed the firm would be paid 1% of the total revenue.
In November 2012, Maher was told by a third party they had fallen victim to a trading scam and warned he might be involved in something similar.
Despite this and general warnings from the Financial Services Authority, the firm continued to receive payments until September 2013, after which investors complained to the SRA and the firm that they might have been the victims of fraud and could not get hold of brokers who had sold them the metals.
The SRA said there was no evidence of any significant legal advice being provided to the investment firm during the relevant period, and investors paid money into the Thompson & Cooke client account when there was no good reason to do so.
By providing this client with a banking facility, Maher breached the requirement to maintain public trust in him and the profession.
Maher said he was motivated by the desire to bring in new business and the fees involved were relatively low. He had carried out checks he thought were necessary and had attempted to warn investors of the risk.
Evidence from clients, judges and colleagues attested that he was a ‘credit to the profession’ and he had showed genuine insight into what he had done, ensuring there was no risk of repetition.
The respondents were ordered to pay joint costs of £58,000.