An FCA case worker, in his first afternoon in the witness box, has confirmed that the FCA was given ‘access’ to the Collateral platform in October 2016, and had been given a copy of the company’s loan book.
Concerned were raised that there appeared to be links between borrower companies and the Curries themselves.
Collateral (UK) Limited was a finance company which facilitated investments crowdfunded by members of the public. The firm and two related companies entered administration in April 2018.
The two defendants, Andrew Currie, 57, and Peter Currie, 59, both deny two charges under the Fraud Act 2006 and one charge under the Proceeds of Crime Act 2002 in this criminal prosecution brought by the Financial Conduct Authority.
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Contemporaneous reporting by Alex Varley-Winter who tweets @avwinter
William Walsh, a lawyer within the Enforcement and Market Oversight Division of the FCA, entered the witness box.
Stuart Biggs, the barrister representing the FCA, began by telling the court: “I have to be clear, this deals with your evidence about the regulatory regime, and also about what was done by some of your predecessors working on this file. … we’ve produced some graphics in an attempt to summarise a lot of what you say in your [40 page] witness statement.“
The court was shown a graphic explaining what an ‘authorised person’ is in relation to the ‘Regulated Activities Order 2001’.
The factors that govern what a collective investment scheme is were discussed. The jury were shown this graphic:
Walsh told the court that “operating a Collective Investment Scheme is a regulated activity”, which has “a very broad definition” where a collection of people “invest in something, anything, which could produce profits or an income.”
Biggs added – “Money is collected together from different investors.”
The Court was shown a graphic about “Electronic Lending Systems” and the relevant law, shorthanded throughout this trial as ‘Article 36H’.
Then Walsh discussed what “Peer2Peer” meant, he said that prior to the 2008 global financial crash “lending would have been done via banks“. But “Peer2Peer is a means of cutting through that by allowing the people who have money, to lend direct to the people who want to borrow it.”
Walsh explained: “Collateral is the operator of the platform, and the operator of the ‘Article 36H’ activity. The operator is responsible for collecting in the repayment of loans and redistributing to the people who have lent them.”
Walsh explained that the law is “designed to [enable] individuals and very small entities” to carry out Peer2Peer activity, and “to exclude companies.”
Biggs explained ‘peer2peer’ in the simplest terms: “Where one person provides another with credit. The agreement goes to one person providing the borrower with credit. But there may be multiple people doing that.”
An additional rule was said to be that: “the credit has to be less than £25,000 – or – the borrower doesn’t enter into the agreement for the purposes of a business.“
Walsh explained that the objective behind that rule is “excluding business loans”.
Biggs: “If something falls within Article 36H could it be a Collective Investment Scheme?“
Walsh: “In normal circumstances it would fall within the meaning of a Collective Investment Scheme. … When the 36H Article was introduced a 2nd article was also inserted … [but] it’s overwhelmingly likely that a Peer2Peer lending operation would constitute a Collective Investment Scheme.”
Biggs asked for a definition of ‘accepting deposits’.
Walsh: ‘where a sum of money is paid on terms that it will be repaid. In very simple terms deposits, accepting deposits, is what banks do. That’s how accepting deposits is defined under the Article.’
Walsh explained that “prior to April 2014 the Government made a decision to transfer responsibility from the [Office of Fair Trading] to the FCA, which we took over responsibility for under the Financial Services and Markets Act.”
The FCA’s Interim Permissions register was created “in order for that to work in practice” – “Interim Permission was a fairly significant undertaking. The number of firms that were transferring, approximately, was several tens of thousands … and therefore it wasn’t feasible for the FCA to satisfy itself that they were meeting the standard that the FCA might expect.”
Biggs: “That would include pawnbroking?“
Walsh: “Yes … As I understand it in order to provide consumer consumer credit you had to have a license from the OFT.“
Biggs: “As far as the FCA was concerned it hadn’t been able to review all of these providers immediately. It took some time?“
Walsh: “Right. The FCA authorises financial firms with criteria that they needed to meet. … the FCA embarked on the process of considering each firm that wanted an authorisation. … but given the number of firms involved it took some time, several years.“
However, the FCA wanted to ensure a “smooth transition“. Walsh explained: “Every firm that had an OFT license before 2014 and notified the FCA that they wanted to continue doing certain activities, was granted interim permission.”
“What the interim permission did was to provide them with the legal right to continue to conduct consumer credit activities, without breaching the law.”
Biggs: “If you were a consumer and you wanted to see whether a firm had authorisation or interim permission, what could you do?”
Walsh confirmed that the FCA was legally obliged to maintain a register of authorised firms, which is “on the internet“, so the consumer is able “to check that they are in fact authorised to conduct financial services“.
Walsh said that the interim permissions regime was separate. “The FCA produced a separate register … it would provide you with certain details about that firm, including that it held interim permission. … You’d get a result for that firm, whether it was interim permission or full authorisation. … There was notice to firms by email as to the requirement for them to apply for interim permission and notification that they’d been granted interim permission. … They then had access to the C.C.I.[Consumer Credit Interim] system.’
The C.C.I. system was “a sort-of backend system that managed the interim permission register.”
Biggs asked if Walsh could introduce a document which was shown to the court. It is available for download here.
It’s a “C.C.I. system user guide.” – a guide to firms that had registered for interim permission, and provided them with information on how to use the C.C.I system.
Biggs: “… Are these effectively screen shots? … they can change certain details on the register and this guide shows them how?”
Walsh: “Yes.“
The court was shown a screenshot from the FCA website – ‘interim permission consumer credit.’ “The scan we’re going to look at, if you look under significant changes, … you need to tell us if there are significant changes in a firm.”
“You could amend … firm name, address, name and telephone number …”
Walsh confirmed they could ‘change the firm name’ on the interim register.
Biggs asked “if you could transfer interim permission from one firm to another?”
Walsh: “No.”
Biggs: “Was there anything in the guide that would suggest that?”
Walsh: “Not as far as I’m aware, no.”
Biggs then asked Walsh about client money.
Walsh confirmed “the importance of ensuring that client monies are properly handled by the firm [&] how firms must treat that money …the firm holds the client money on trust for its clients [and] it has to hold it in designated bank accounts. … the bank is aware that it’s held on trust, the firm has to conduct regular [checks] on its internal bank records with the bank’s records. … if there’s any discrepancy, it has to be put right immediately. … the money in client bank accounts should only be client money.“
The court was shown an e-mail dated 8th April 2016, from the FCA to Peter Currie. It concluded “We’ve received a large number of applications so it may be a while before a case officer is assigned.”
In response to this e-mail a business plan is sent.
It was introduced as: “there’s then a business plan which has got track changes in it, it’s obviously an evolving thing and it says at the beginning, ‘background, the business has been in operation for 18 months and it’s a peer to peer lender’ ‘up until this point the business has come under the governance … of the OFT’“
The legal advice received by the firm is also sent to the FCA.
Biggs said that “Collateral at this stage are, in their own words, seeking reassurance “that our perception of our operations and the regulator’s views align.”
On 11th October 2016, Howard Dodds at the FCA replied and asked about ‘prefunded loans’:
“On the website there is mention of “prefunded” loans, how does this work in practice and how are these transferred to lenders? Where does the prefunding come from?”
The following day another e-mail was sent.
Stuart Biggs asked Walsh whether the e-mail featured “a series of different concerns about different aspects of the website“.
Walsh: “yes, yes“
The court was told that a ‘financial promotion’ is a communication that “invites people to take part“. Section 21 “requires that any financial promotion is either issued by an authorised person or approved by an authorised person.“
Collateral replied to Howard Dodds – “ Collateral raised a total of £65,000 from four investors and they’ve all received their money back.”
The court was shown an e-mail from 27th October 2016 where Peter Currie wrote to the FCA and said that all the “requested changes” had been made.
On 15th November 2017 another e-mail is sent from the FCA:
“As a matter of some urgency we now need to discuss the firm’s activities”
The jury were shown a record of a conference call from 18th November 2017. It was held between the FCA and members of the Collateral team.
Dodds is reported as having said that “legal advice suggests the firm is not P2P can the firm clarify … can you describe what you’re doing … are you then taking deposits on the platform?“
Richard Tall, Collateral’s lawyer, answered “no“.
It was recorded that the FCA were “concerned that the website still references P2P two weeks after [they said] it was not P2P… is this correct?“
Tall: “We do have to review financial promotions.“
It was said the FCA were concerned that “the firm was promoted as P2P’”. They discussed carrying out “a legal review of the business model” and were concerned that “the figures presented are confusing .. do you operate a secondary market?“
Biggs explained that the 25th November 2016 was set as a “deadline for providing clarity.”
After returning from the lunch break Colin Aylott KC, the barrister representing Peter Currie, challenged the order of the emails.
Aylott sought to establish that each email was on a different subject, raising “three separate issues’ adding “there’d been a three-month-delay from the FCA”
[and then] “Richard Tall’s advice is delivered then in May 2017, we have the meeting between the FCA and Collateral.“
Aylott asked Walsh “do you know why there’s this big gap between December and May?’ And a change of case handler from Mr Dodds?“
Walsh: “I seem to recall it was normal staff turnover.“
Aylott asked “whether in fact there was an internal debate within the FCA about the issue of permissions.“
Walsh: “There wasn’t a debate there was clarity.“
Aylott asked about the authorisations division: “In relation to that issue we’ve seen that the case worker allocated to the case is the frontline worker. … Behind that individual there are how many individuals?”
Walsh: “It’s not really possible to say, obviously the case officer will tend to have a manager.“
Aylott asked who at the FCA had responsibility for an application?
Walsh: “Generally speaking the case officer is responsible for it.“
The court was shown an internal FCA e-mail from 24th January 2017.
Aylott emphasised the line: “it is not clear what it is, but to me the website looks like some form of regulated activity.”
Walsh: “the FCA’s view was that it’s going to be a collective investment scheme. … the point was that if you wanted to be a peer to peer lender, you needed to comply with the requirements of Article No. 36H.“
Aylott turned to another email:
Aylott: “This is really what I’m getting at, this is the internal debate within the FCA“
Walsh: “I’m not sure, there were diverging opinions from a number of different quarters …“
Responding to a question from a jury member Walsh said:
Walsh: “I can’t answer the specific gaps in the timeline, what I can say is that the authorisations department was extremely busy at the time, this was a new area of regulation and part of the process of authorisation [was to] understand what the regulatory responsibilities were …“
HHJ Griffith asked if there is usually a difference between being P2P and a Collective Investment Scheme — “the two go together don’t they?”
Walsh clarified that “in order to be compliant you have to be within the terms” and “P2P is not a defined term but it generally relates to” collective investments.
Walsh further clarified: “Interim permission will persist until the final authorisation application is determined. The interim permission is something that’s specifically created to carry on business, as they are carrying out regulated activity, via the FCA. … Some form of regulated activity, whatever that may be.” He gave an example of “providing any form of credit”.
Walsh was then asked why a case officer might be moved off a case.
Walsh: “I don’t know the reasons the case officer moved on” as he came in later in the authorisation process. In general terms, though “there were an awful lot of applications at that time.” … In response to a question about ‘continuity’ “I think it would have been better, but I can’t say as to why the case officer would have changed.”
Robert Cooper enters the witness box
Stuart Biggs, the barrister representing the FCA, began by asking if Mr Cooper “could you tell the jury please what your occupation is?“
He replied that he is a lead associate at the FCA “but back in 2015 I was a senior associate in authorisations.“
Biggs: “You started in 2015 … in October 2017 you were given the task of reviewing an application [from a company] called Collateral UK Limited. [The application had been received in] March 2016 and it had been reviewed by two previous case officers… the two of those had left the department in September, and you took over in October 2017?“
Cooper confirmed that was correct adding “we had a number of people coming in and out, we had a number of people [working on] Permissions … we were very focused on Peer2Peer applications when the firms started applying, on average we would be looking at five, six or seven at a time’”
Cooper told the court he had started out “more in a company caretaker role to look at what had been done previously … [because] we only had a handful [of staff] to deal with each [company].”
Cooper said that he went into the website from the customer’s perspective: “Until you experience it as a customer, you’re not going to be able to see how it’s promoted. If I’m asking to invest money in this particular platform … what does it look like?”
Cooper confirmed that the FCA had access to the Collateral platform: “It’s a means of seeing what’s happening from a customer [perspective]… we also had the loan book … It had a slightly unusual [business model] … also had an element of property development, you’re [trying] at the back of your mind to understand how are they underwriting these things, and you’re also trying to gauge the valuation of these loans. How many people are investing? Are they being repaid?”
Biggs directed Cooper to a document dated 23rd October 2016 described as “the document that you had available from Collateral“.
Biggs asked “did you look at the companies, the borrower companies? … so if we go back up to the top again, the three columns, is that the name, of the borrower if you understood it? We’re there some in particular that you noted [such as] Asset Cash?“
Cooper confirmed he had.
Biggs: “Had you also done some research in relation to Andrew and Peter Currie and the companies that they had connection to?“
Cooper confirmed he did: “I was putting names in Google and companies house, the one that I tried initially was Asset Cash, that was a company that seemed to have a lot of borrowing on the platform … Credit loans being over extended … I would look at the [associations] with companies that were dissolved I believe. Company numbers, names of companies, dates of incorporation, whether the company’s dissolved or still active. Whether either Peter or Andrew Currie was a director of those. I looked at other companies to see if anything else matched up”
Cooper said he was concerned to see: “when the company was dormant” explaining to the jury that “a dormant company is something that hasn’t been trading.”
In one case, Cooper checked a loan document “stating the loan was made before the launch of the P2P platform“.
Biggs in his questioning moves Robert Cooper forward to 23rd January 2018
Biggs asked about Asset Cash Limited … “as you’ve said, there are lots of loans right there to Asset Cash, Asset Cash, incorporated in November 2011 [and filing] dormant accounts. Asset Cash is listed as a borrower on the Collateral platform, there’s £11,250 secured … the loan has been renewed on three occasions.“
Cooper also said it appeared that there was a link between Peter Currie and Stewart Day, the director of Mederco.
Biggs: “There’s a reference to Stewart [Day] … but you explained before that you’re concerned with something to do with conflict of interest?“
Cooper: “The role of the platform is intermediary. People who want to lend money can lend it, and they can lend it to people who want to borrow. It – the platform – is an intermediary with this, it’s not the borrower and it’s not the lender. [so] When it appears that a member of staff … [is a] director or at least linked to [a borrower] … how can you be certain that the loan’s been valued appropriately, how can you be … comfortable that there’s been no undue influence? You just want to be comfortable that there isn’t.“
Cooper said the question for him is about ‘customer harm’: “when we are assessing a consumer gateway, we want to make sure that they are going to act … [but at his level] you refer the matter to somebody else. … not least trying to identify various issues with the interim permission … you go all the way up to the Director [in the FCA].”
And: “… if I’m escalating an issue I want to give them [details] … when was the firm incorporated, when did it come to us?… It was at that point I saw that it had been incorporated on 17th November 2014.”
Cooper: “I was quite familiar with consumer credit as a whole, I knew when the transition happened … how the interim permission worked… At some point in 2012 or 2013, HMT decided at some point that peer-to-peer should became a regulated activity … [so], first April hits, they had to obtain interim permission from the FCA on that date.“
Cooper explained how it worked: “Tell the FCA it’s going to be a peer-to-peer firm, it would be granted interim permission. … all the firms that kind of came over, appeared on the interim permission register, if it passes the tests, it’s authorised.”
Biggs: “The interim permission that you’ve seen that Collateral had …“
Cooper: “The interim permission didn’t have peer to peer lending, I believe it was consumer credit lending. If you wanted to do peer to peer lending, Collateral didn’t have that.“
Biggs: “You’d discovered that the date of incorporation of Collateral …”
Cooper: “It couldn’t have permission because it wasn’t regulated at the time. … 22 April 2014, it couldn’t have interim permission” adding “a firm in Collateral’s position … wouldn’t be allowed to trade until such point as the application been determined and authorised“.
Biggs asked if “you’ve got a log-in, the user name, [for example] to say can I change your address?”
Cooper said no: “It was only open to firms that can have interim permission. … [the main question on his mind-] how can this happen? Carlos had been around for longer than I had, he’d seen the on-boarding, he’d dealt with applications coming in. … I went to him and I asked him ‘what do you think might have happened here?’
“[Carlos then-] pulled up Collateral, from that it said that it had been previously, formerly, Regal Pawnbroker Limited. So we were just, ‘that was a separate company’ – that I believed at that point ceased to exist.“
“Every firm that had interim permission, they had a landing slot, they had a window in which they were allowed to apply. … It had to have applied by the end of March 2016. Regal Pawnbroker’s IP had lapsed, as far as we were concerned.“
The jury were shown an e-mail from 29th January 2018: It said “Dear Mr Currie, I’m introducing myself as the new case officer … I’ve reviewed your application, I’ve also engaged with the previous case officer … [acknowledging application for full authorisation in March 2016, however-] it’s clear that the firm hasn’t submitted all the documentation …“
On 31st January 2018 there is a phone call between the FCA and Collateral, regarding the firm’s application for authorisation. Andrew Hayward-Wills, the new case worker explained that the purpose of the call was that the firm didn’t have interim permission and wasn’t authorised by the FCA.
Cross examination begins
Andrew Currie’s lawyer, Mr Grunwald KC, took to his feet: “There may be further cross examination later on in the trial, you’ve given a lot of evidence and it’s not your fault but it’s not always the easiest to follow.” He confirmed that the FCA were “enabled” for “you to go into the company’s website, and whatever else, to see what you could?“
Cooper: “Yes. We would ask them for [that] during the application process, as close as you could get, we wanted to experience it as an investor“
Grunwald: “They provided you with a copy of the loan book, on 23rd October 2016, provided by the company to whoever was dealing with it in the FCA at that time?“
Cooper confirmed they had.
With Grunwald telling the court “I don’t think I’m going to be able to finish today” the trial adjourned.
The trial continues.
Both Curries deny two charges under the Fraud Act 2006 and one charge under the Proceeds of Crime Act 2002
The first count of fraud alleges they dishonestly made a false representation to investors and potential investors that the company Collateral UK Limited was authorised and regulated by the Financial Conduct Authority.
The second count of fraud claims the Curries abused their positions, in which they were expected to safeguard, and not act against, the financial interests of the company by transferring £275,000 from Collateral to Auri Developments Ltd.
The third charge relates to converting criminal property, suggesting the Curries converted credits to the total value of £372,299.52 to bank accounts owned by Andrew Currie, knowing or suspecting it to be proceeds of crime, namely fraud by misrepresentation.
Case details:
Courtroom 12 Southwark Crown Court
Before His Honour Judge Griffith
24th April 2023
Case number: T20220056
CURRIE Andrew
CURRIE Peter
The Financial Conduct Authority are represented by barrister Stuart Biggs, assisted by Thomas Coke-Smyth.
Peter Currie is represented by barrister Colin Aylott KC, assisted by Ashley Hendron.
Andrew Currie is represented by barrister Henry Grunwald OBE KC, assisted by Oliver Renton.
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