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Finance firm chief barred for ‘serious incompetence’

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THE chief executive of a Jersey finance firm has been banned from the industry after acting with a ‘serious lack of integrity’ and ‘incompetence of the most serious kind’.

The Royal Court

In what has been described as a ‘landmark case’ for the financial regulator and the industry, the Royal Court rejected David Jonathan Francis’s appeal against the decision of the Jersey Financial Services Commission to publicly criticise his business activities and to bar him from practice.

Mr Francis was the subject of a JFSC public statement issued in 2013, which heavily criticised his actions while he was the chief executive and a major shareholder of Horizon Trustees (Jersey) Limited.

A judgment made by the Royal Court on 4 December concerning Mr Francis’s appeal against the JFSC has now been published.

A fresh statement released by the JFSC, which includes further detail on the case and was released in response to the judgment publication, says that during 2010 and 2011 Horizon, which is now in liquidation, misled customers it had advised to invest in a struggling UK media rights company.

It says that Horizon sent its customers investment statements showing valuations at original cost rather than market value and advised them that there was no ‘impairment’ with the assets.

The media company had, however, been suspended from the AIM stock exchange in London in January 2010 due to ‘financial uncertainty’.

In April 2010, a company, which Mr Francis claimed to ultimately own, bought the media organisation at a discounted price. Horizon was later appointed to administer the media company.

The statement says that this appointment was despite Horizon being ‘devoid of film or media experience’ and it creating ‘numerous conflicts of interest’.

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A New Zealand limited partnership was then set up through which investments purchased in the media company were sold on at a higher price. Nearly £3.5 million was ploughed into the media company, which had mounting debts, through the move.

Despite growing concerns about the health of the company, Mr Francis signed off financial statements in 2011 indicating that he was not aware of any circumstances which ‘undermined the value of the investment’.

In 2013, following an investigation, the JFSC concluded that Horizon had breached seven principles of its code of practice for trust and company businesses.

In conclusion, the statement says: ‘In all the circumstances, Mr Francis acted with a most serious lack of integrity and his displayed level of incompetence was of the most serious kind.’

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Last December the Royal Court upheld the JFSC’s decision to issue the public statement in 2013 and to bar Mr Francis from practice.

JFSC chairman Lord Eatwell said that his organisation was ‘pleased’ with the ruling.

‘The Royal Court accepted that the actions of the JFSC were justified and agreed with its finding that Mr Francis lacked integrity and was incompetent,’ he said. ‘As the judgment makes very clear, there is no place in our finance industry for those that lack integrity and fail to treat their clients fairly.

‘Helpfully, the Royal Court judgement identifies areas where the JFSC could improve its processes. All the changes suggested by the court will be adopted.’

The public statement adds that the public criticism of Mr Francis supports the JFSC’s objectives of ‘reducing risk to the public of financial loss’ as well as ‘protecting and enhancing the reputation and integrity of Jersey in commercial and financial matters’.

The JFSC will seek to recover its costs in the case. The court ruling was made in December last year, which is when the sanctions against Mr Francis took effect.

Ian Heath

By Ian Heath
author

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