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The UK financial regulator has banned and fined James Lewis, the former chief executive of brokerage Shard Capital, for providing incorrect information about clients’ cash balances.
The penalty relates to activities Lewis carried out in relation to a “corporate group” that was a “key client which generated significant revenue for Shard”.
While the Financial Conduct Authority did not name that corporate group in its findings published on Tuesday, the Financial Times has previously reported on the extent that Lars Windhorst, the controversial German financier, relied on Lewis and Shard to carry out trades in esoteric securities. Windhorst’s own travails have included the collapse of several ventures, personal bankruptcy and a criminal conviction.
Details in the regulator’s final notice match with those of high-profile disputes in which Shard Capital became embroiled relating to Windhorst’s Tennor group of companies.
Deloitte resigned as auditor in May 2017 for an investment vehicle headed by Windhorst — and restated its 2014 and 2015 accounts — after accusing Shard Capital of providing “deliberately false” information about the vehicle’s cash position in its role as custodian.
The FCA’s notice states that an auditor resigned and restated a company’s accounts for 2014 and 2015, after Lewis informed the firm in May 2017 that no cash was held in a custodian bank account. The company’s cash position was revised down by around €700mn following this disclosure.
Lewis founded Shard Capital in 2010 as a bond brokerage firm. The 59-year-old Englishman, known as Jumbo, stepped down from managing Shard Capital in 2022 but remains a shareholder of the London-based brokerage, company filings show.
“Investors depend on accurate information, and Mr Lewis’s actions put investors at significant risk of losses. It is right that he won’t be allowed to work in regulated financial services again,” said Steve Smart, joint executive director of enforcement and market oversight at the FCA.
The regulator said that it was not in “a position to disclose individuals or firms” referred to in its notice.
Shard Capital, which has not been accused of wrongdoing, said: “We welcome the completion of the investigation into James Lewis, which we have been supporting throughout. As highlighted in the FCA’s final notice, Mr Lewis has not held a senior management function at Shard Capital for over two years.”
Lewis and Windhorst did not respond to requests for comment.
The FCA also fined Lewis £120,300, allowing him a 30 per cent reduction after he agreed to settle the matter.
The incident in which Lewis “risked misleading” a company’s auditor is one of two breaches flagged by the FCA. The other concerns a December 2019 transaction in which a client of Shard Capital instructed it to transfer $18mn of cash held for one of its “connected companies” to “its own account with Shard”.
The FCA noted that Shard Capital contacted the regulator about the matter last year after discovering the existence of several documents “as a result of evidence disclosed by another party in court proceedings”.
In evidence provided to the UK High Court last year, Shard Capital set out how Tennor instructed it to transfer $18mn from the client account of Sequa Petroleum to its own account in December 2019. Sequa is a listed oil and gas company in which Tennor has been a major shareholder.
The FCA stated that Lewis later represented that the company concerned “held substantial cash balances in its accounts with Shard when it did not”. The regulator noted that in WhatsApp messages, Lewis set out that “he expected to face serious consequences” for providing these representations, including the FCA “imposing a significant penalty and prohibition on him”.
Additional reporting by Suzi Ring in London
