The Financial Services Authority (FSA) has obtained a bankruptcy order against Mr Samuel Nathan Kahn (“Mr Kahn”) who controlled the affairs of Chesteroak Limited (“Chesteroak”) and Bingen Investments Limited (“Bingen”), two UK based companies that helped boiler rooms illegally sell shares to investors.
In October 2007, Mr Kahn admitted liability for claims totalling up to £3.7m made by the FSA on behalf of about 800 UK investors, but disputed the amount. Mr Kahn then placed himself into an Individual Voluntary Arrangement (“IVA”) to try to defeat the FSA’s claim. As a result, the FSA applied for Mr Kahn’s bankruptcy so a claim for the full amount he owed to investors could be made against his estate.
Jonathan Phelan, Head of Retail Enforcement at the FSA said:
“We will use every power available to us under the law, including freezing assets and making people bankrupt, against any UK company or person who helps boiler rooms steal money from investors. The bankruptcy order will ensure that Mr Kahn’s affairs are investigated which could mean that investors get some of their money back.
“Investors should always check that the firm they are dealing with is authorised so they have access to the complaints and compensation schemes if things go wrong.”
The bankruptcy order follows the liquidations of Chesteroak and Bingen in September 2007 after the FSA alleged that they were dealing in shares or arranging deals in shares without authorisation. In January 2007, the FSA obtained interim injunctions against both companies and Mr Kahn freezing their assets and other assets under their control. Chesteroak and Bingen were also stopped from continuing their involvement in assisting boiler room activities.
Chesteroak and Bingen were not authorised by the FSA so investors cannot make a complaint to the Financial Ombudsman Service or claim compensation from the Financial Services Compensation Scheme.
Further information for investors will be posted on the FSA’s consumer website www.moneymadeclear.fsa.gov.uk as and when it becomes available.
Background
- More information on the interim injunctions obtained against Chesteroak, Bingen and Mr Kahn by the FSA in January 2007 and the winding-up orders made against Chesteroak and Bingen in September 2007 is available from the FSA website.
- Boiler rooms are not authorised by the FSA. They act illegally by promoting and selling shares in the UK that may be overpriced, restricted for onward sale and/or have little or no real value. The boiler rooms then often vanish, leaving the investor out of pocket. Boiler rooms are mainly based outside the UK and therefore the FSA is usually unable to take direct action to shut them down.
- The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
- The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.
