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The UK's Financial Services and Markets Act 2000 provides only the framework for this part of the Financial Services Authority's powers. These will come into force later this year (the Treasury now says no later than November 2001).

The detail of how the FSA plans to use its enforcement powers are to be found in DRAFT annexed to its Consultation Paper 65 and the accompanying draft Enforcement Manual. See CP 65 paras 3.89 to 3.92. The relevant part of the Enforcement Manual is Chapter 10. I can see nothing (on a quick read through) which deals precisely with Ed Brewer's request, although the factors which the FSA takes into account before seeking a restitution order may be of interest. See also ENF 10.5.3 G and 10.6.6G (to use the FSA's citation system) on respectively the fact that the FSA will distribute recoveries on the basis ordered by the court and the meaning of an "appropriate person". Presumably courts will be astute not to permit double recovery. My instinct is that academic lawyers tend to underestimate the good sense of courts in not allowing individuals to accumulate recoveries.

All this can be found at the FSA's website - www.fsa.gov.uk. The Enforcement Manual will form a block in the new FSA Handbook.

We are currently awaiting a Policy Statement and the final form of the Enforcement Manual rules.

Lastly, on the terminology point: (Lionel Smith may be particularly interested) in Professor Gower's seminal early 1980s reports, which are the source of much modern UK financial services regulation, the term employed was "disgorgement." However, as Charles Mitchell notes, whether under the current Financial Services Act 1986 regime, or under the impending 2000 Act regime, the power (regardless of terminology) embraces both loss- based and gain-based claims.

Gerard McMeel
University of South Carolina

PS Ignore the nomenclature on this e-mail - I have not changed my name! I just can not persuade IT here that "Gerard" is a name.

PPS Lionel - please forward to the list if I cannot access it from my USC address.

On 27 Mar 01, at 9:25, Charles Mitchell wrote:

In response to Ed Brewer's question about the potential for double recovery by a securities regulator and a private individual affected by illegal securities dealings, the British Parliament has enacted a new Financial Services and Markets Act 2000, s 382 of which seems to cover this situation (the act is not yet in force). As I read this section, the Secretary of State or Financial Services Authority is obliged to turn over money recovered from infringers to 'qualifying persons', suggesting that the problem outlined by Ed Brewer may not arise. The section follows. We may note that the term 'Restitution Order' is used to cover both loss-based and gain-based orders, a further example of the loose use of the term 'restitution' by Parliamentary draftsman which was noted by Lionel Smith and Steve Hedley last year (or maybe this was Lionel's own example? - my memory fails me, I'm afraid).

Financial Services and Markets Act 2000 (c 8)

14 June 2000

CROSS-HEADING: Part XXV Injunctions and Restitution: Restitution orders

SECTION: 382 Restitution orders

DATE-IN-FORCE: To be appointed

TEXT:

(1) The court may, on the application of the Authority or the Secretary of State, make an order under subsection (2) if it is satisfied that a person has contravened a relevant requirement, or been knowingly concerned in the contravention of such a requirement, and--

(a) that profits have accrued to him as a result of the contravention; or

(b) that one or more persons have suffered loss or been otherwise adversely affected as a result of the contravention.

(2) The court may order the person concerned to pay to the Authority such sum as appears to the court to be just having regard--

(a) in a case within paragraph (a) of subsection (1), to the profits appearing to the court to have accrued;

(b) in a case within paragraph (b) of that subsection, to the extent of the loss or other adverse effect;

(c) in a case within both of those paragraphs, to the profits appearing to the court to have accrued and to the extent of the loss or other adverse effect.

(3) Any amount paid to the Authority in pursuance of an order under subsection (2) must be paid by it to such qualifying person or distributed by it among such qualifying persons as the court may direct.

(4) On an application under subsection (1) the court may require the person concerned to supply it with such accounts or other information as it may require for any one or more of the following purposes--

(a) establishing whether any and, if so, what profits have accrued to him as mentioned in paragraph (a) of that subsection;

(b) establishing whether any person or persons have suffered any loss or adverse effect as mentioned in paragraph (b) of that subsection and, if so, the extent of that loss or adverse effect; and

(c) determining how any amounts are to be paid or distributed under subsection (3).

(5) The court may require any accounts or other information supplied under subsection (4) to be verified in such manner as it may direct.

(6) The jurisdiction conferred by this section is exercisable by the High Court and the Court of Session.

(7) Nothing in this section affects the right of any person other than the Authority or the Secretary of State to bring proceedings in respect of the matters to which this section applies.

(8) "Qualifying person" means a person appearing to the court to be someone--

(a) to whom the profits mentioned in subsection (1)(a) are attributable; or

(b) who has suffered the loss or adverse effect mentioned in subsection (1)(b).

(9) "Relevant requirement"--

(a) in relation to an application by the Authority, means a requirement--

(i) which is imposed by or under this Act; or

(ii) which is imposed by or under any other Act and whose contravention constitutes an offence which the Authority has power to prosecute under this Act;

(b) in relation to an application by the Secretary of State, means a requirement which is imposed by or under this Act and whose contravention constitutes an offence which the Secretary of State has power to prosecute under this Act.

(10) In the application of subsection (9) to Scotland--

(a) in paragraph (a)(ii) for "which the Authority has power to prosecute under this Act" substitute "mentioned in paragraph (a) or (b) of section 402(1); and

(b) in paragraph (b) omit "which the Secretary of State has power to prosecute under this Act".

______________________________________________
Dr Charles Mitchell
Lecturer in Law
School of Law
King's College London
Strand
LONDON WC2R 2LS

tel: 020 7848 2290
fax: 020 7848 2465
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