A compliance director for the failed finance firm Collateral UK Limited took the stand to explain the difficulties the company had when dealing with the Financial Conduct Authority. “There didn’t seem to be a proper handover process when it moved from one caseworker to the next” was one complaint the jury heard.
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. Edited by Daniel Cloake.
Gary Kershaw, group compliance director to Simply Biz Group, takes the stand
Kershaw explained that “Simply Biz was a compliance support provider that looked at FCA regulated firms, helped them to navigate the regulatory system …”
Stuart Biggs, the barrister representing the FCA asked if SimplyBiz were involved in Collaterals application to be authorised in March 2016.
Kershaw: “My involvement in the group was to oversee all areas of the compliance team. I became involved as we realised the application became more complex. We currently deal with 30-40 applications a month …“
Biggs showed the court a letter from the FCA, dated 29th January 2018, parts of it said:
“The first priority matter I wish to raise is the registered status of Collateral (UK) Limited
(CUKL)…”
You can read the full letter here.
The letter continued to state that the register had been changed from Regal Pawnbroker Limited to Collateral UK limited.
Kershaw received a copy of this e-mail from the defendants, and responded by saying:
“This represents a very serious turn of events… More importantly, the fact that it hasn’t been mentioned in any previous discussions to date”
“I believe it’s imperative that we heed the instructions immediately”
Kershaw explained to the jury that “we were under the understanding that the application was for Collateral (UK) Limited. […as…] a firm that was previously regulated under the Consumer Credit Act. There was some confusion over the complexity of the legislation, but I believe my understanding was that they were a peer to peer lender.”
“The interim permissions that they had were not the same as the name on the application being made. … our understanding was that they held interim permission.”
Colin Aylott KC, defence barrister for Peter Currie, then asked Mr Kershaw some questions.
In December 2015 it is said that that’s when “the work really commences … with the application being drafted.” The court is told the application was submitted in March 2016.
In March 2016 “you’re involved there right up through until January 2018 and throughout that time there were moments, occasions when you met with Mr Currie?“
Kershaw: “Yes“.
Aylott: “… telephone conversations and lots of email traffic as well.“
“Would it be fair to describe him as someone who was pretty driven and quite hard-working?“
Kershaw: “Yes, absolutely.“
Aylott: “He was quite passionate wasn’t he, to get this business up and running, he was desperate to make a success of this business wasn’t he? … That was reflected in the amount of work he did on this, would you agree?“
Kershaw: “Yes. I think that’s [represented] in the fact that he also engaged with solicitors in the process as well.“
Aylott: “[would you say that you are] the market leader in this field of expertise?“
Kershaw: “Yes.“
Aylott: “And [the solicitor] Mr Richard Tall who was a partner in a firm called DWF … did you form an impression of the quality of advice? … did he strike you as a good professional, someone who’s an expert in his field?“
Kershaw described DWF as a “reputable law firm” but “I don’t want to comment in any way …”
Aylott then asked Kershaw about his dealings with the FCA.
Kershaw: “Because of the complexity of this particular … application … we were passed from pillar to post throughout the process. … There didn’t seem to be a proper handover process when it moved from one caseworker to the next, we were starting again through[out] the process.“
“… we didn’t get the clarification that we needed on some of those instances.”
Aylott asked if they were often kept waiting for a reply from the FCA.
Kershaw: “That’s the nature of dealing with the FCA yeah.”
Aylott: … “Mr Currie though was pretty engaged and wasn’t trying to drag his feet…?”
Kershaw agreed and said Mr Currie did “act pretty quickly, [when] correspondence was received.“
Aylott: “There was a meeting wasn’t there where this whole issue of what permissions the company had or didn’t have [was discussed] issues raised as to what the interim permission entitled the firm to do?“
Kershaw: “I don’t recall those specifically …“
The court was shown an e-mail “the FCA have openly admitted in previous cases that they don’t fully understand P2P … and very much rely on outside legal opinion, and I know at one time they had five different legal firms on retainer.“
It was claimed that the regulation of peer-to-peer lending was ‘thrust on the regulator’.
“Not all of the clients we were acting for were as complex as this one but on the marketplace there were some other businesses with more complex models” said Kershaw.
Aylott: “They [the FCA] are seeking outside advice, right? … to assist them in the interpretation of that market?“
Kershaw agreed.
Aylott: “Do you remember the area of debate between you and Mr Tall and what that was related to?“
Kershaw: “Whether the firm was classified as a Peer 2 Peer lender. … It was my belief that it didn’t satisfy Article 36H“
Aylott: “Richard Tall expressed as well that it wasn’t a 36H company?”
Kershaw: “That might have been one of the areas that we did agree on then, yeah.“
Mr Kershaw was referred to an e-mail from Peter Currie: “I’m concerned we’ve set the business up as a P2P platform, and most of the investors believe that their lending is via a Peer2Peer platform.”
Kershaw: “Common sense would say that you can be a Peer2Peer without operating an electronic platform connecting lenders with borrowers …
“…we didn’t deal with a lot of firms at the interim permissions stage. Firms generally only came to us once they had their interim permissions.”
The court was shown an e-mail from Kershaw: “it’s possible to satisfy a broad definition of Peer2Peer lending without satisfying Article 36H, we do have a small number of firms that have gone down this route although none of them have yet been authorised.”
Kershaw, commenting on this email said: “We had a number of firms which [fell] under the broadest definition of peer2peer lending,, some were trying to do it [e.g. link up lenders and borrowers without Article 36H eg. operating an electronic platform]; I’m still not aware of any that actually got approved [by the FCA] on that basis.“
Another email from Peter Currie: “Hi Gary, the problem with the term Peer2Peer is that some of the platforms (including ourselves) that use the term are not actually peer to peer. They are P2B, B2B etc and are just a conduit to bringing lenders and borrowers and buyers and sellers together. Do you think I should reply to Howard’s email?”
Aylott: “He wasn’t saying, ‘let’s bat on anyway’ …he properly tried to engage with what was going on and tried to find a solution. Looking to you and looking to Tall to try to provide him with the advice, would you agree?“
Kershaw: “Yes, I agree.“
Aylott: “Mr Currie then seeks your opinion and Mr Talls opinion.“
An e-mail from Richard Tall dated 28th December 2016 said: “… normally if you don’t have a P2P [permission] you have a UCIS [unauthorised collective investment scheme]. That is not the case, and I have been through the cases on my own handy UCIS guide, and while there are common features, the lenders do not participate in the agreements. There are a couple of [examples] which I have held back in case of any further retort on this.
“I think that’s about it at the moment, can you let me know your views … or have I smoked too much crack over Christmas?”
The court was read another e-mail from Kershaw:
“I was down at the FCA last week … they had been first to bring in some more expert people as they were were struggling to get a satisfactory stage on a lot of applications of this nature.”
Colin Aylott KC commented on FCA staff turnover and the fact that Mr Howard Dodd, the FCA’s Collateral caseworker, had left.
…. “We’ve just been looking at this issue of peer to peer, what it amounts to, in late 2016. … 2017, and how this was still rolling on.”
Mr Currie sent an e-mail at 09.03 in the morning on 5th May 2017. “P2P or not P2P keeps coming back. I don’t think we said we didn’t require permissions for running an electronic platform…“
Tall had replied: “Peter yes, will do, I think we need to go back trenchantly.”
Aylott asked what the general response was if a query came back from the FCA case handlers.
Mr Kershaw: “The majority of the time we would have a conference call, [or] we would do it through a line of emails.“
Aylott: “We know from documents in this case there was a meeting on 26th May [2017], I’m going to look at what happens in the run up to that meeting.”
On 4th May 2017 one e-mail said:
“I’ve recently looked at your website online and you appear to have numerous references to carrying out Peer2Peer activities.”
Kershaw’s opinion was as follows: “The use of the term P2P is generic rather than specific, the use of the term does not necessarily imply that a party is authorised under Article 36H.
“There’s nothing misleading in the use of the term Peer2Peer“
The FCA said: “we wouldn’t expect a firm to promote a regulated activity unless it’s doing it as this is misleading the customer.”
His Honour Judge Griffith concluded the hearing by saying “Thank you very much Mr Kershaw, you’ve finished.“
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.
The trial continues.
Case details:
Court 12 Southwark Crown Court
Before His Honour Judge Griffith
25th April 2023 – Afternoon session
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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