Prevention of Fraud (Investments) Act 1939
| Jurisdiction | UK Non-devolved |
| Citation | 1939 c. 16 |
Prevention of Fraud (Investments) Act, 1939
(2 & 3 Geo. 6.) CHAPTER 16.
An Act to provide for regulating the business of dealing in securities; to restrict the registration of societies under the Industrial and Provident Societies Act, 1893, and confer on the registrar of building societies further powers in relation to such societies; to make general provision for preventing fraud in connection with dealings in investments; and to provide for purposes connected with the matters aforesaid.
[28th April 1939]
Be it enacted by the King's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—
Provisions for regulating the business of dealing in securities.
1 Licensing of dealers in securities.
(1) Subject to the provisions of the next following section, no person shall, on or after the appointed day,—
(a ) carry on or purport to carry on the business of dealing in securities except under the authority of a principal's licence, that is to say, a licence under this Act authorising him to carry on the business of dealing in securities, or
(b ) in the capacity of a servant or agent of any person carrying on or purporting to carry on that business, deal or purport to deal in securities except under the authority of a representative's licence, that is to say, a licence under this Act authorising him to deal in securities as a servant or agent of any holder of a principal's licence for the time being in force.
(2) Any person who contravenes this section shall be liable, on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine not exceeding five hundred pounds or to both such imprisonment and such fine or, on summary conviction, to imprisonment for a term not exceeding six months or to a fine not exceeding one hundred pounds or to both such imprisonment and such fine.
(3) Proceedings for an offence under this section shall not, in England, be instituted except by, or with the consent of, the Board of Trade or the Director of Public Prosecutions:
Provided that this subsection shall not prevent the arrest, or the issue or execution of a warrant for the arrest, of any person in respect of such an offence, or the remanding, in custody or on bail, of any person charged with such an offence, notwithstanding that the necessary consent to the institution of proceedings for the offence has not been obtained.
2 Saving for certain transactions.
(1) The restrictions imposed by section one of this Act in relation to dealing in securities shall not apply to the doing of anything by, or on behalf of,—
(a ) a member of any recognised stock exchange or recognised association of dealers in securities, or
(b ) the Bank of England, any statutory corporation or municipal corporation, any exempted dealer or any industrial and provident society or building society, or
(c ) any person acting in the capacity of manager or trustee under an authorised unit trust scheme.
(2) For the purpose of determining whether or not a person has contravened any of the restrictions imposed by section one of this Act, no account shall be taken of his having done any of the following things (whether as a principal or as an agent), that is to say,—
(a ) effecting transactions with, or through the agency of,—
(ii) the holder of a licence,
(b ) issuing any prospectus to which section thirty-five or section three hundred and fifty-four of the Companies Act, 1929 , applies,
(c ) issuing any document relating to securities of a corporation incorporated in Great Britain which is not a registered company, being a document which—
(i) would, if the corporation were a registered company, be a prospectus to which section thirty-five of the Companies Act, 1929, applies, and
(ii) contains all the matters which, by virtue of section three hundred and fifty-four of the said Act, it would have to contain if the corporation were a company incorporated outside Great Britain and the document were a prospectus issued by that company, and
(d ) issuing any form of application for shares in, or debentures of, a corporation together with—
(i) a prospectus which complies with the requirements of section thirty-five or Part XII of the Companies Act, 1929, or
or of his having, as a principal, acquired, subscribed for or underwritten securities, or effected transactions with a person whose business involves the acquisition and disposal, or the holding, of securities (whether as a principal or as an agent).
Nothing in this subsection shall be construed as authorising any person to hold himself out as carrying on the business of dealing in securities.
3 Applications for, and grant and extent of, licences.
(1) Subject to the following provisions of this Act, the Board of Trade—
(a ) upon an application in that behalf made by any person in the prescribed manner, and on payment of the prescribed fee, shall grant to that person a principal's licence, and
(b ) upon an application made by any person in the prescribed manner, and on payment of the prescribed fee, shall grant to that person a representative's licence.
(2) A licence shall, unless in the meantime it is revoked, be valid for the period of one year beginning with the day specified in the licence as the day on which it takes effect, and no longer.
(3) A principal's licence shall specify the name of the person thereby authorised to carry on the business of dealing in securities, and shall not authorise him to carry on that business under any name other than that specified in the licence as his name:
Provided that, if the Board of Trade think fit, such a licence may, at the request of the applicant for the licence, be framed so as to authorise the holder thereof to carry on the said business, either alone or jointly with any other person being the holder of a principal's licence, under such name or style as the applicant may specify in his application.
4 Deposits or guarantees required in connection with applications for principal's licences.
(1) Subject to the provisions of this section, the Board of Trade shall not grant a principal's licence unless the sum of five hundred pounds has been, and remains, deposited by the applicant for the licence with the Accountant General of the Supreme Court of Judicature.
(2) Where any sum has been deposited under this section, then—
(a ) in the event of the depositor becoming bankrupt, the amount of the deposit shall be paid to the trustee in bankruptcy; or
(b ) if, in a case where the depositor is a corporation, the corporation is ordered to be wound up by, or under the supervision of, the court, the amount of the deposit shall be repaid to the corporation;
and the Board of Trade may by regulations determine the circumstances in which, apart from the preceding provisions of this subsection, a sum deposited under this section may be withdrawn; but, save as aforesaid, no person shall be entitled to withdraw or transfer any deposit made under this section.
(3) The Board of Trade may make such regulations as appear to them to be necessary with respect to the investment of sums deposited under this section, the deposit of securities in lieu of money, the payment to the depositor of the interest or dividends from time to time accruing due on any securities in which a deposit under this section is for the time being invested, or on any securities deposited under this section in lieu of money, and the realisation of such securities as aforesaid in specified circumstances.
(4) Upon any application for a principal's licence the Board of Trade may dispense with the necessity of making a deposit under this section in relation to the application—
(a ) if there is given to the Board by a person approved by them an undertaking in the prescribed form that, in consideration of the Board granting such a licence upon that application, the person giving the undertaking will, upon the occurrence of the following event at any time before a further principal's licence is granted to the holder of the licence referred to in the undertaking, that is to say, the holder becoming bankrupt or, in a case where the holder is a corporation, the corporation being ordered to be wound up by, or under the supervision of, the court, pay the sum of five hundred pounds to the trustee in bankruptcy or to the corporation, as the case may be; or
(b ) if the Board are satisfied that the applicant has at all times since the beginning of the year nineteen hundred and thirty-nine been carrying on in Great Britain the business of dealing in securities, and that it would cause him undue hardship to make a deposit under this section.
(5) In the event in which, by virtue of an undertaking given under the last preceding subsection, any sum becomes payable to a trustee in bankruptcy or to a corporation, the trustee or the corporation, as the case may be, shall have the power and duty to recover that sum from the person by whom it is payable; but if, in a case where any sum is paid in pursuance of such an undertaking, it is found upon the administration in bankruptcy or the winding-up that the assets of the bankrupt or the corporation exceed...
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