damages for negligent investment advice
stockbroker giving negligent investment advice to repay to client loss suffered as result, offset against profits made from investment:
Dixon v. Jefferson Seal Ltd. (Royal Ct.),
1997 JLR 205appropriate system of monitoring investments in place when involves monitoring of price, market reports and general press, preparation of weekly valuation report and discussions with client—reasonable for stockbroker to rely on reports and information from market even if ultimately wrong:
Voisin v. Matheson Secs. (C.I.) Ltd. (Royal Ct.),
1999 JLR 177disagreement between experts—stockbroker not necessarily negligent merely because conduct fails to meet criteria of exacting body of professional opinion—disagreement between experts no bar to finding of negligence:
Dixon v. Jefferson Seal Ltd. (Royal Ct.),
1997 JLR 205investment professional owes fiduciary duty to client if fiduciary relationship exists under Jersey law, even if no duty arises under foreign law governing agreement—if client able to sue to recover loss suffered through fiduciary’s breach of duty, third party,
e.g. bank through which investment conducted, has no
locus standi:
Mayo Associates S.A. v. Cantrade Private Bank Switzerland (C.I.) Ltd. (C.A.),
1998 JLR 173no breach of duty of care to client if fails to ascertain interest rate operating in informal investment market of legal profession:
De Gruchy & Co. v. Quenault (Petty Debts Ct.),
1990 JLR 48stockbroker has duty to (a) ascertain client’s financial requirements (
e.g. earning income or capital growth, level of financial risk); (b) recommend suitable investments; (c) review client’s portfolio to ensure remains suitable; (d) analyse relevant market information; and (e) inform client of material developments—preferable that proper records kept of conversations with client:
Dixon v. Jefferson Seal Ltd. (Royal Ct.),
1997 JLR 205stockbroker has duty to exercise skill and care of reasonably competent and careful stockbroker—highest expertise unnecessary—not liable merely because loss results from investment advice, if judgment exercised with due care:
Dixon v. Jefferson Seal Ltd. (Royal Ct.),
1997 JLR 205 Voisin v. Matheson Secs. (C.I.) Ltd. (Royal Ct.),
1999 JLR 177
misleading statements and practices
agency agreement between investor and investment adviser to arrange purchase of investment and loan from overseas providers is “transaction” under Financial Services (Jersey) Law 1998, art. 26(2)—relief may be ordered if investor induced to enter transaction by adviser’s misleading statement contravening art. 30—“transaction” not restricted to agreements of purchase or loan:
Jersey Fin. Servs. Commn. v. Alternate Ins. Servs. Ltd. (Royal Ct.),
2007 JLR 95court has wide power to grant relief under Financial Services (Jersey) Law 1998, art. 26(2) to restore investor to position before entered transaction induced by investment adviser’s misleading statement contravening art. 30(1)(b)—not limited to strict rescission and relief possible against agent even if property passed to third parties—account to be taken of any benefit obtained by investor:
Jersey Fin. Servs. Commn. v. Alternate Ins. Servs. Ltd. (Royal Ct.),
2007 JLR 95investment adviser makes misleading statement “recklessly” under Financial Services (Jersey) Law 1998, art. 30(1)(b), if aware investment high risk and unreasonable in circumstances known to it to advise otherwise—subjective test appropriate as may be civil or criminal proceedings:
Jersey Fin. Servs. Commn. v. Alternate Ins. Servs. Ltd. (Royal Ct.),
2007 JLR 95investment adviser “reckless” under Financial Services (Jersey) Law 1998, art. 30(1)(b) even if misleading statement as to investment risk based on provider’s promotional material—marketing statements not substitute for independent, expert assessment of market:
Jersey Fin. Servs. Commn. v. Alternate Ins. Servs. Ltd. (Royal Ct.),
2007 JLR 95Jersey FSC may only bring proceedings on behalf of investors under Financial Services (Jersey) Law 1998, art. 26(2) if registered person contravenes art. 30(1)(b) by making misleading statement
recklessly (dishonestly or otherwise)—similar powers may be desirable in cases of negligence or failure to meet professional standards:
Jersey Fin. Servs. Commn. v. Alternate Ins. Servs. Ltd. (Royal Ct.),
2007 JLR 95relief may be ordered against investment adviser under Financial Services (Jersey) Law 1998, art. 26(2) to restore investor to position before entered transaction induced by adviser’s contravening art. 30(1)(b), if (a) investor entered transaction with adviser constituting financial service business; (b) induced into transaction by adviser’s statements; (c) statements misleading or false; (d) statements made recklessly (dishonestly or otherwise); and (e) for purpose of inducing, or reckless whether might induce, investor to enter transaction:
Jersey Fin. Servs. Commn. v. Alternate Ins. Servs. Ltd. (Royal Ct.),
2007 JLR 95no legally recognized doctrine of confidentiality protecting disclosure of identity of investors whether beneficiaries, clients, or customers:
Mayo Associates S.A. v. Cantrade Private Bank Switzerland (C.I.) Ltd. (C.A.),
1999 JLR 311fraudulent inducement to investors
fraudulent inducement to take part in arrangement with respect to property—elements of offence under Investors (Prevention of Fraud) (Jersey) Law 1967, art. 12(c)—no requirement that accused intended false statement to act as inducement—additional mental element not implied in statutory offence already specifying intention required:
Young v. Att. Gen. (C.A.),
1999 JLR 17fraudulent inducement to take part in arrangements under Investors (Prevention of Fraud) (Jersey) Law 1967, art. 12(
c) committed by act of inducement—offence then completed and no continuation merely because investor remains in scheme:
Att. Gen. v. Young (Royal Ct.),
1998 JLR 22fraudulent inducement to take part in arrangements with respect to property under Investors (Prevention of Fraud) (Jersey) Law 1967, art. 12(
c) committed by management of investors’ own property—unnecessary that investors induced to enter arrangement relating to promoter’s property, from which profits said to arise:
Att. Gen. v. Young (Royal Ct.),
1998 JLR 101fraudulent inducement to take part in arrangements with respect to property under Investors (Prevention of Fraud) (Jersey) Law 1967, art. 12(
c)—“property” includes foreign currency dealt with for profit, even though transactions recorded on bankers’ books and no currency actually exchanged:
Att. Gen. v. Young (Royal Ct.),
1998 JLR 101intention that holder of securities should act on statement element of offence under Depositors and Investors (Prevention of Fraud) (Jersey) Law 1967, art. 12:
Lapidus v. Att. Gen. (C.A.),
1987–88 JLR N–7limitation period—possible need to reconsider limitation period for prosecuting large-scale fraud under Investors (Prevention of Fraud) (Jersey) Law 1967, art. 12(
c)—three-year limitation period specified in Law Reform (Miscellaneous Provisions) (Jersey) Law 1978, art. 2 may be insufficient:
Att. Gen. v. Young (C.A.),
1998 JLR N–16desirable for Jersey FSC to ensure registered persons sufficiently insured—unacceptable for unsophisticated, small investors in Jersey to have no redress for serious losses resulting from bad investment advice:
Jersey Fin. Servs. Commn. v. Alternate Ins. Servs. Ltd. (Royal Ct.),
2007 JLR 95proceedings for compensation by financial services providers
action by Jersey Financial Services Commission under art. 20(7) of Collective Investment Funds (Jersey) Law 1998 requiring payment to compensate investors is regulatory power in public law and not tort action—no prescription period:
Jersey Fin. Servs. Commn. v. A.P. Black (Jersey) Ltd. (C.A.),
2002 JLR 443action by Jersey Financial Services Commission under art. 20(7) of Collective Investment Funds (Jersey) Law 1998 requiring payment to compensate investors is tort action—action prescribed after three years:
Jersey Fin. Servs. Commn. v. A.P. Black (Jersey) Ltd. (Royal Ct.),
2002 JLR 294consideration to be given to establishing compensation scheme(s) under Financial Services (Jersey) Law 1998, art. 27—unacceptable for unsophisticated, small investors in Jersey to have no redress for serious losses resulting from bad investment advice by regulated persons:
Jersey Fin. Servs. Commn. v. Alternate Ins. Servs. Ltd. (Royal Ct.),
2007 JLR 95court has wide power to grant relief under Financial Services (Jersey) Law 1998, art. 26(2) to restore investor to position before entered transaction induced by investment adviser’s misleading statement contravening art. 30(1)(b)—not limited to strict rescission and relief possible against agent even if property passed to third parties—account to be taken of any benefit obtained by investor:
Jersey Fin. Servs. Commn. v. Alternate Ins. Servs. Ltd. (Royal Ct.),
2007 JLR 95Jersey FSC may only bring proceedings on behalf of investors under Financial Services (Jersey) Law 1998, art. 26(2) if registered person contravenes art. 30(1)(b) by making misleading statement
recklessly (dishonestly or otherwise)—similar powers may be desirable in cases of negligence or failure to meet professional standards:
Jersey Fin. Servs. Commn. v. Alternate Ins. Servs. Ltd. (Royal Ct.),
2007 JLR 95relief may be ordered against investment adviser under Financial Services (Jersey) Law 1998, art. 26(2) to restore investor to position before entered transaction induced by adviser’s contravening art. 30(1)(b), if (a) investor entered transaction with adviser constituting financial service business; (b) induced into transaction by adviser’s statements; (c) statements misleading or false; (d) statements made recklessly (dishonestly or otherwise); and (e) for purpose of inducing, or reckless whether might induce, investor to enter transaction:
Jersey Fin. Servs. Commn. v. Alternate Ins. Servs. Ltd. (Royal Ct.),
2007 JLR 95representative proceedings
stay pending outcome of test case,
e.g. regarding failed investment fund, appropriate if cases similar and decision in one will dispose of liability issues in all—relevant factors: how soon test case comes to trial, whether defendant overburdened by preparing multiple defences, priority of individual investors over corporate litigants:
Labia (née Heuston) v. Jefferson Seal Ltd. (Royal Ct.),
1997 JLR N–3accused only to be sentenced for offence of which convicted, but sentence to be viewed against background of large-scale fraud, including statute-barred offences—court to consider whereabouts of proceeds of fraud if accused pleads poverty—also to consider effect on Island’s financial reputation:
Att. Gen. v. Young (C.A.),
1998 JLR N–16in public interest that offence under Depositors and Investors (Prevention of Fraud) (Jersey) Law 1967, art. 12 severely punished—essential to maintain highest standards of commercial conduct and complete reliability of commercial documents to protect Island’s reputation as important financial centre:
Lapidus v. Att. Gen. (C.A.),
1987–88 JLR N–7in public interest that offences under Depositors and Investors (Prevention of Fraud) (Jersey) Law 1967, severely penalized—essential to maintain high standards in business and finance to protect reputation of Island:
Att. Gen. v. Kirch (Royal Ct.),
1987–88 JLR N–7no guidance from breach of trust cases for sentencing for fraudulent inducement under Investors (Prevention of Fraud) (Jersey) Law 1967, art. 12(
c)—repeated frauds obtaining large sums of money, first offender: 4½ years’ imprisonment; bank employee colluding in false statements, first offender, no profit: 18 months’ imprisonment; bank recklessly allowing statements to be made: £750,000 fine on each count plus £300,000 towards costs of prosecution:
Att. Gen. v. Young (Royal Ct.),
1998 JLR N–17Jersey Financial Services Commission
applications for registration as trust company
apparent bias by Board—not unfair that applications both investigated and determined by Commission because required under Financial Services (Jersey) Law 1998—right of appeal to court in art. 11(3) adequate final remedy for perceived procedural lack of independence and impartiality or apparent bias by Board:
Anchor Trust Co. Ltd. v. Jersey Fin. Servs. Commn. (Royal Ct.),
2005 JLR 428appeals—refusal may be quashed on appeal under Financial Services (Jersey) Law 1998, art. 11(3) if found to be unreasonable, not merely mistaken—need not be found to be so unreasonable that no reasonable decision-maker could have made it (
i.e. Wednesbury unreasonable)—merits of decision to be considered:
Anchor Trust Co. Ltd. v. Jersey Fin. Servs. Commn. (Royal Ct.),
2005 JLR 428applicant to be open and cooperative—application may be refused under Financial Services (Jersey) Law 1998, art. 9(3)(b)(i) if failed to inform Commission of relationship with person convicted of dishonesty, even if not employee or “associate,” or under art. 9(3)(b)(ii) if provided untrue or misleading information,
e.g. that never been declared
en désastre whereas declaration made but recalled same day:
Anchor Trust Co. Ltd. v. Jersey Fin. Servs. Commn. (Royal Ct.),
2005 JLR 428applicant to be open and cooperative—duty of maximum disclosure and openness to Commission required—applicant to disclose any information which might affect Commission’s decision:
Anchor Trust Co. Ltd. v. Jersey Fin. Servs. Commn. (Royal Ct.),
2005 JLR 428applicant to be open and cooperative—duty to cooperate with Commission and other authorities extends to inspector appointed by Executive to conduct investigation—includes duty to respond to questions in reasonably courteous manner and give all possible assistance:
Anchor Trust Co. Ltd. v. Jersey Fin. Servs. Commn. (Royal Ct.),
2005 JLR 428conditional registration—Board entitled to adopt general policy of refusing conditional registration provided each case considered on merits to see if exception justified:
Interface Ltd. v. Jersey Fin. Servs. Commn. (Royal Ct.),
2003 JLR 524delay—if appoints third party as inspector or reporting accountant, Executive to ensure application determined as soon as reasonably practicable:
Anchor Trust Co. Ltd. v. Jersey Fin. Servs. Commn. (Royal Ct.),
2005 JLR 428duty to act fairly—Board not obliged to disclose to applicant legal advice obtained before making decision—disclosure could remedy any perceived unfairness:
Anchor Trust Co. Ltd. v. Jersey Fin. Servs. Commn. (Royal Ct.),
2005 JLR 428duty to act fairly—Chairman of Board to treat applicant and Executive equally at hearing—unfair to address Director General, for Executive, informally but applicant’s representatives formally, even though no real possibility of bias:
Anchor Trust Co. Ltd. v. Jersey Fin. Servs. Commn. (Royal Ct.),
2005 JLR 428duty to act fairly—Commission under duty to act fairly—includes duty to inform applicant of general nature of case against him and provide adequate opportunity to respond—degree of fairness required of administrative body depends on nature of decision:
Anchor Trust Co. Ltd. v. Jersey Fin. Servs. Commn. (Royal Ct.),
2005 JLR 428duty to act fairly—Commissioners on Board associated with firms instructed by Executive on separate matters not considered by fair-minded and impartial observer to be biased in its favour—Commissioner associated with firm which had advised on application should recuse himself:
Anchor Trust Co. Ltd. v. Jersey Fin. Servs. Commn. (Royal Ct.),
2005 JLR 428duty to act fairly—Executive, Board and Commission as whole under duty to act fairly throughout application process—includes duty to inform applicant of general nature of case against him and provide adequate opportunity to respond:
Interface Ltd. v. Jersey Fin. Servs. Commn. (Royal Ct.),
2003 JLR 524duty to act fairly—if explanation offered to rebut allegation of dishonesty of applicant, Director General either to modify report in relation to allegation or explain why unconvinced by it:
Interface Ltd. v. Jersey Fin. Servs. Commn. (Royal Ct.),
2003 JLR 524duty to act fairly—not unfair that applications both investigated and determined by Commission because required under Financial Services (Jersey) Law 1998—right of appeal to court in art. 11(3) adequate final remedy for perceived procedural lack of independence and impartiality or apparent bias by Board:
Anchor Trust Co. Ltd. v. Jersey Fin. Servs. Commn. (Royal Ct.),
2005 JLR 428duty to give reasons—Board’s reasons for decision satisfactory if provide sufficient information for applicant to understand why application refused—if request for reasons under Financial Services (Jersey) Law 1998, art. 11(2) made prior to decision, reasons to be provided within 14 days of decision not request:
Anchor Trust Co. Ltd. v. Jersey Fin. Servs. Commn. (Royal Ct.),
2005 JLR 428duty to give reasons—statement of reasons under Financial Services (Jersey) Law 1998, art. 10(2) must be in sufficient detail to enable applicant to know exact case against him—entitled to know (a) which of Executive’s reasons for recommending refusal of registration relied on by Board; and (b) findings of fact made:
Interface Ltd. v. Jersey Fin. Servs. Commn. (Royal Ct.),
2003 JLR 524Executive’s caution to interviewees—Executive to revise caution, that answers may be given in evidence if proceedings brought against interviewee, to reflect more accurately position under Financial Services (Jersey) Law 1998, art. 33 that answers may only be given in proceedings under arts. 28 or 33:
Anchor Trust Co. Ltd. v. Jersey Fin. Servs. Commn. (Royal Ct.),
2005 JLR 428inspector—applicant to respond to questions in reasonably courteous manner and give every possible assistance with inquiry:
Anchor Trust Co. Ltd. v. Jersey Fin. Servs. Commn. (Royal Ct.),
2005 JLR 428reasonableness of refusal—Board may rely on own experience and knowledge of finance industry to make adverse finding against applicant that practices inadequate—may occasionally be unfair and unreasonable not to indicate that applying own experience if could not be reasonably anticipated by applicant:
Anchor Trust Co. Ltd. v. Jersey Fin. Servs. Commn. (Royal Ct.),
2005 JLR 428reasonableness of refusal—may be refused under Financial Services (Jersey) Law 1998, art. 9(3)(b)(i) if applicant failed to inform Commission of relationship with person convicted of dishonesty, even if not employee or “associate” under Law, or under art. 9(3)(b)(ii) if provided untrue or misleading information that never been declared
en désastre, whereas declared but recalled same day:
Anchor Trust Co. Ltd. v. Jersey Fin. Servs. Commn. (Royal Ct.),
2005 JLR 428reasonableness of refusal—refusal under Financial Services (Jersey) Law 1998, art. 9(3)(a) not unreasonable if applicant’s attitude towards and procedures for detecting and preventing money laundering and financial crime inadequate—unreasonable to refuse merely because previously handled criminal proceeds:
Anchor Trust Co. Ltd. v. Jersey Fin. Servs. Commn. (Royal Ct.),
2005 JLR 428reasonableness of refusal—unreasonable for Board to make finding against applicant if inconsistent with Executive’s recommendations without providing opportunity for applicant to address concerns:
Anchor Trust Co. Ltd. v. Jersey Fin. Servs. Commn. (Royal Ct.),
2005 JLR 428Commission to specify in directions, not covering letter, if requires registered person to do something at own expense—specific directions required if wishes third party to pay costs otherwise paid by regulated entity—may be enforced under Financial Services (Jersey) Law 1998, art. 24(1) unless successful appeal under art. 23(6):
Jersey Fin. Servs. Commn. v. Anchor Trust Co. Ltd. (Royal Ct.),
2007 JLR N [6]enforcement—if Commission withdraws directions issued under Financial Services (Jersey) Law 1998, art. 23, court has no jurisdiction under art. 24(1) to order regulated entity to perform outstanding obligation—jurisdiction only conferred by 1998 Law and not affected by Act of Court recording agreement between Commission and regulated entity for performance of obligation—Commission to consider outstanding issues before withdrawing directions and replace with identical provision if wishes to maintain position:
Jersey Fin. Servs. Commn. v. Anchor Trust Co. Ltd. (Royal Ct.),
2007 JLR N [6]Executive’s caution to interviewees
Executive to revise caution, that answers may be given in evidence if proceedings brought against interviewee, to reflect more accurately position under Financial Services (Jersey) Law 1998, art. 33 that answers may only be given in evidence in proceedings under arts. 28 or 33:
Anchor Trust Co. Ltd. v. Jersey Fin. Servs. Commn. (Royal Ct.),
2005 JLR 428advice to regulated company that allegedly unfounded and malicious criticism of Commission on employee’s website inappropriate (coupled with suggestion that website be closed down) not abuse of Commission’s powers—powers under Financial Services Commission (Jersey) Law 1998, to protect public interest and Island’s financial reputation, to be exercised with prudence and discretion:
Walsh v. Jersey Fin. Servs. Commn. (Royal Ct.),
2005 JLR N [1]may bring proceedings on behalf of investor under Financial Services (Jersey) Law 1998, art. 26(2) for relief restoring investor to position before entered transaction induced by investment adviser’s contravening art. 30(1)(b), if (a) investor entered transaction with adviser constituting financial service business; (b) induced into transaction by adviser’s statements; (c) statements misleading or false; (d) statements made recklessly (dishonestly or otherwise); and (e) for purpose of inducing, or reckless whether might induce, investor to enter transaction:
Jersey Fin. Servs. Commn. v. Alternate Ins. Servs. Ltd. (Royal Ct.),
2007 JLR 95may only bring proceedings on behalf of investor under Financial Services (Jersey) Law 1998, art. 26(2) if registered person contravenes art. 30(1)(b) by making misleading statement
recklessly (dishonestly or otherwise)—similar powers may be desirable in cases of negligence or failure to meet professional standards:
Jersey Fin. Servs. Commn. v. Alternate Ins. Servs. Ltd. (Royal Ct.),
2007 JLR 95to ensure registered persons sufficiently insured—unacceptable for unsophisticated, small investors in Jersey to have no redress for serious losses resulting from bad investment advice:
Jersey Fin. Servs. Commn. v. Alternate Ins. Servs. Ltd. (Royal Ct.),
2007 JLR 95Maintenance of anti-money laundering procedures
defence—burden on financial services provider seeking to rely on defence in Proceeds of Crime (Jersey) Law 1999, art. 37(10),
i.e. to prove took all reasonable steps and exercised due diligence, probably compatible with presumption of innocence in European Convention on Human Rights, art. 6(2)—assumption adverse to accused to be reasonable—relevant factors include seriousness of money laundering; strict liability offence in art. 37(4) with serious penalty; financial services providers’ awareness of need to maintain procedures; defence in art. 37(10) concerns accused’s own knowledge; and assistance unlikely from attempted money launderers:
Bell v. Att. Gen. (C.A.),
2006 JLR 61single breach by financial services provider of requirement in Money Laundering (Jersey) Order 1999, art. 2(1)(a) to maintain anti-money laundering procedures may constitute offence—failure need not be systemic:
Att. Gen. v. Bell (Royal Ct.),
2005 JLR N [42]single breach by financial services provider of requirement in Money Laundering (Jersey) Order 1999, art. 2(1)(a) to maintain procedures may constitute offence under Proceeds of Crime (Jersey) Law 1999—failure need not be systemic—“maintain” requires procedures to be established and also kept in proper working order, to prevent and forestall money laundering whenever business relationship formed or one-off transaction carried out:
Bell v. Att. Gen. (C.A.),
2006 JLR 61Managers appointed by court
owe same duty of confidentiality to clients as trust company for which appointed managers—liable to disclose information obtained from clients if required by Attorney General’s notice under Investigation of Fraud (Jersey) Law 1991, art. 2:
Viscount v. Att. Gen. (Royal Ct.),
2002 JLR 268public interest in ensuring free flow of information from company directors to court-appointed managers—to be considered by Attorney General before deciding to require disclosure of information from company or managers under Investigation of Fraud (Jersey) Law 1991, art. 2:
Viscount v. Att. Gen. (Royal Ct.),
2002 JLR 268principles—financial penalties imposed to promote high standards of regulatory conduct by deterring offending firm or individual from further breaches, deterring others, and showing benefits of compliance—fines may be higher if breach involves money laundering:
Att. Gen. v. Caversham Fiduciary Servs. Ltd. (Royal Ct.),
2005 JLR N [47]
