UK Stockbroker Stung By Fraudster Slams Archaic Laws

by Robin Pilgrim, LawAndTax-News.com, London

07 September 2005

UK-based stockbroking firm, Charles Stanley has fallen victim to both a cunning fraudster and archaic anti-fraud laws, says chairman Sir David Howard.

According to a report in the Telegraph, the fraudulent activity began in October 2002 when share registrars for Unilever received a letter purporting to come from Mrs Jean Powell, the holder of 25,000 Unilever shares.

The letter - which turned out to be a forgery - notified them of a change of address from her Dorset home to one in south London. Later that week, Unilever's registrars reportedly received a forged change of address form from the fraudster, posing as Mrs Powell, resulting in her details being changed.

Although the registrar sent an "indemnity document" to her new address in London and a fraud check letter to her old address, the indemnity was returned with a faked AXA Insurance stamp and countersignature.

The fraudster then requested a new share certificate, claiming the original had been lost, stolen or destroyed, and the registrars issued a duplicate certificate in Mrs Powell's name to the new address.

Several months later, the shares were transferred to another name and sold by the bogus owner, who made over £100,000 in illegal profits.

When the fraud came to light, the real Mrs Powell was compensated for her lost shares by Unilever on November 3, 2003.

However, Charles Stanley became involved in the affair because it had sold the shares for the fraudulent investor after he asked a bank to carry out the transaction.

Unilever subsequently sued in the High Court for damages, and Charles Stanley settled out of court.

However, Sir David argued in the Telegraph that the 19th century law which states that a broker who sells shares is liable for reimbursing the registrars if they turn out to have been fraudulently owned, was unfair to brokers.

"We are just stuck in the middle and the innocent victims of a fraud that has been committed between two other parties. People might say that we should KYC (Know Your Client) but we have no idea who the client was," he announced, adding that:

"This case is symptomatic of a wider problem. We have no idea if someone comes in, and they check out and produce a real share certificate. There is not much more we can do. There should be more checks done by the registrars."

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