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Investment Schemes – An Update

10th January, 2017

You may recall that we released an article entitled Investment Schemes: A Further Warning to Law Firms in November. This is an emerging area and we believe all law firms advising on investment schemes now need to review the risks and ensure they comply as changes emerge.

The article addressed the further warning notice released by the Solicitors Regulation Authority (SRA) in relation to fraudulent investment schemes and can be accessed by clicking here.

It appears identifying and combating fraudulent investment schemes has become a focus of the SRA. There have been three cases brought before the Solicitors Disciplinary Tribunal (SDT) involving schemes where investors have lost considerable sums of money and six solicitors have been sanctioned for involvement in questionable investment schemes. Sanctions have ranged from strike off to a fine (one fine being £40,000) along with costs orders.

In addition, the level of reports made to the SRA involving investment schemes has substantially increased; six reports between October 2016 and December 2016 compared to eighteen reports made in the eighteen months previous.

The risks associated with being involved in such schemes are not limited to an individual’s professional capacity; a solicitor has been jailed for eight years for fraud and money laundering. The solicitor had been used to give credibility to a fraudulent investment scheme. Firms and individual solicitors need to ensure they review their client base and we can offer structured support to help.

The SRA has published a report on solicitors and investment fraud. SRA Chief Executive, Paul Philip stated:

“We have warned the profession in the past and taken action to stamp out law firm involvement in fraudulent schemes… We are aware that some solicitors believe that they can act in relation to these schemes as long as they limit their involvement. But where there are warning signs, they will be at risk of serious misconduct and often of dishonesty”.

If you deal with investment schemes and you are unsure if you are limiting your risk appropriately, contact our Professional Practices department immediately. Do not accept instructions which you are unsure of until you have taken expert advice as managing your risk could end up saving your practising certificate and help maintain professional reputation.

 

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