Whether WhatsApp messages constituted investment advice or financial education was the subject of the High Court's summary judgement in FCA v (1) 24HR Trading Academy Limited ("24HRTA") and (2) Mohammad Fuaath Haja Maideen Maricar, delivered on 25 March 2021.

24HRTA was concerned in the transmission of trading signals to customers via WhatsApp and other instant messaging services. Mr Maricar was its sole director and shareholder.

The FCA sought return of profits and orders restraining the defendants from continuing with the following activities:

  1. Sending "Signals" via WhatsApp containing details of transactions relating to foreign exchange ("FX") that the defendants considered to be advantageous; and
  2. Connecting clients with two FX brokers, AvaTrade and VantageFX, via links on 24HR Trading's website. For those clients who opened accounts with its partner brokers, 24HRTA offered reduced fees for its services and received commission from the brokers.

The FCA asserted that these activities amounted to the carrying on of regulated activities (advising on investments within Article 53 of Financial Services and Markets Act (Regulated Activities) Order 2001("RAO") and arranging deals in investment within Article 25 of the RAO).

Section 19 of the Financial Services and Markets Act 2000 ("FSMA") sets out a General Prohibition on the carrying out of "regulated activities" in the UK without being an "authorised person" or an "exempt person". Neither defendant was authorised or exempt. In addition to this General Prohibition, Section 21(1) of FSMA states "A person… must not, in the course of business, communicate an invitation or inducement to … engage in investment activity".

"Engaging in investment activity" is defined by Section 21(8) of FSMA as entering into an agreement or performing a controlled activity in terms of Article 4 of FSMA (Financial Promotion) Order 2005 – "Buying or selling… contractually based investments".

The defendants argued that they were providing "financial education" and did not come within the FCA regulatory regime. The Court rejected the defendants' position and concluded that the Signals amounted to investment advice for the purposes of Article 53 of the RAO, regardless of a "disclaimer" sent via WhatsApp.

The Court determined in the FCA's favour on the question of whether 24HR Trading had engaged in activities falling within Article 25 of the RAO and in breach of Section 21 of FSMA, and accordingly fell within the remit of the FCA's enforcement regime. The Court also found that Mr Maricar was "knowingly concerned" in the contravention of the General Prohibition. However, it was not willing to summarily determine whether Mr Maricar had personally contravened Article 25 of the RAO or Section 21 of FSMA, holding that as an individual he had a "realistic prospect of establishing that only the company should suffer consequences for providing unauthorised investment advice".

The question of whether Mr Maricar as an individual is subject to the FCA regulatory regime is yet to be determined. However the Court did made a restitution order against Mr Maricar personally for the profits he received as "commission" following contraventions of Article 25 of the RAO and Section 21 of FSMA by 24HR Trading. This order totalled £530,695 and the funds will be distributed to customers of 24HR Trading who suffered losses as a result of these contraventions.

The court declined to make a similar order against 24HR Trading on the basis that there was no evidence that it made a profit as a result of the contraventions. However, an injunction for the purposes of Section 380 of FSMA has been made against 24HR Trading, preventing it from continuing to engage in the activity of transmitting Signals and providing unauthorised advice.

While there are outstanding questions that will be addressed in due course at trial, this case demonstrates the FCA's ongoing commitment to pursuing individuals and companies that conduct regulated financial activities without the necessary authorisation.

This summary judgement is of course fact specific, but it will be interesting to see how the FCA translates the outcome of this decision into its dealings with other unregulated entities and forums purporting to provide "financial education" which is in fact investment advice.

Those operating a similar business model to 24HR Trading should consider whether they are in fact providing investment advice for the purpose of Article 53 of the RAO and, accordingly, whether they require to seek authorisation to avoid breaching the General Prohibition.