Sanctions lifted from manager involved in disgraced film scheme

Thursday 11 November 2021

Jersey's finance regulator has lifted sanctions against a former trust manager, who was banned from senior roles for his involvement in a plan to secretly pump millions of client cash into a failing film company founded by Beatle George Harrison.

James Nicholls (54) was banned from holding any ‘key person’ or ‘principal positions’ in financial services in 2015 after the JFSC found he “displayed levels of incompetence of the most serious kind with customers being placed at unnecessary risk of financial loss”.

But this week it was decided that the sanctions were no longer “necessary and proportionate” given the significant professional development training he had undergone since.

He had been a Trust Manager for a company called HTJL, linked to the Horizon Group, which was the subject of an investigation by the JFSC launched in 2013.

Many of its customers were described as “sophisticated ultra-high net worth individuals”, while others were “unsophisticated” and even “vulnerable”. 

Those customers were given the opportunity to invest in alternative wealth classes – such as films – and some became financially exposed to a UK media rights company called HandMade Films.

HandMade had previously enjoyed success with Monty Python’s Life of Brian and Lock, Stock and Two Smoking Barrels.

It had its AIM listing suspended in January 2010 due to financial uncertainty, and was later purchased by a company HTJL’s CEO claimed to beneficially own. The JFSC found that a “significant” factor in this acquisition was the protection of clients – some of whom helped finance the purchase bid. 

After the acquisition, HTJL – a company “devoid of media or film experience” according to the JFSC – was appointed to administer the film company.

Directors of HTJL were appointed as directors of the film company, creating “numerous conflicts of interest”.

A New Zealand structure was then set up, which ended up becoming the focus of the JFSC’s investigation.

Around £3.5m of client money was invested into this structure, which in turn was used to prop up HandMade, which was struggling with a significant debt pile stretching into the tens of millions.

At “at no time were customers informed about the Film Co’s serious financial difficulties”, the JFSC said, leading them to suffer “substantial losses”.

Mr Nicholls was Trust Manager at HTJL throughout the period, Director of a number of customer structures and Director to the general partner of the media fund.

While Mr Nicholls was found not to have been responsible for “corporate or governance failings”, he was found to have been aware that HandMade was only solvent due to its use of customer money to pay off its debts.

The JFSC also found that, as well as possessing “very little knowledge” about the media fund, “in spite of his complete lack of understanding of the investment structure, Mr Nicholls co-authorised 17 investments totalling £3.33 million into Structure X, thereby placing customer assets at inappropriate and avoidable risk.”

He was also found to have “frequently” chaired meetings in which it was resolved to invest client cash in the New Zealand structure.

In its ruling, the regulator said he “lacked competence” and “acted with disregard to his fiduciary obligations”.

In barring him from ‘principal person’ positions as a result, the JFSC also said it would be a sanctionable offence for anyone to employ him as one.

Yesterday, the JFSC ruled that this sanction could finally be withdrawn following “careful consideration”.

Mr Nicholls was said to have demonstrated insight into his actions, and since shown evidence of numerous professional  qualifications he had obtained over a five-year period.

He “demonstrated his understanding of topics such as good corporate governance, the duties of directors, ethics, the protection of vulnerable customers, and managing conflicts of interest”.

Mr Nicholls also produced evidence that he had a successful track record with no adverse issues raised by his later employers, including annual appraisals describing an employee “who made a significant positive contribution to the employer.”

The JFSC noted that “his experience and skill set had been enhanced through working closely with the boards and compliance personnel of different registered persons, which had impacted positively on his competence” and four senior professionals also showed “strong support” for him.

Concluding, the regulator said that the sanctions preventing him from holding senior finance roles were “no longer necessary and proportionate” and the JFSC ruled that they should be withdrawn.

Meanwhile, Horizon Group CEO David Francis remains barred from working in the finance industry. He unsuccessfully attempted to appeal the JFSC's ruling in the Royal Court in 2018.