FIRST SUPERVISORY NOTICE

TAKE NOTICE: The Financial Services Authority of 25 The North Colonnade, Canary
Wharf, London E14 5HS (the "FSA") has taken the following action

1.
ACTION

1.1. For the reasons listed below and pursuant to section 45 of the Financial Services and
Markets Act 2000 (the “Act”), the FSA has decided to vary the permission granted to
Omagis Capital Limited (“Omagis”) pursuant to Part IV of the Act (“Omagis’ Part IV
permission”), by removing all regulated activities with immediate effect. Accordingly,
Omagis’ Part IV permission no longer includes the following regulated activities:

(a)
advising on investments (except on pension transfers and pension opt outs);

(b)
agreeing to carry on a regulated activity;

(c)
arranging (bringing about) deals in investments;

(d)
arranging safeguarding and administration of assets;

(e)
dealing in investments as agent; and

(f)
making arrangements with a view to transaction in investments.

1.2. The FSA has further decided to vary Omagis’ Part IV permission by including the
following requirements, namely that within 14 days Omagis must:

(a)
notify in writing all clients for its regulated activities that it is no longer
permitted by the FSA to carry on regulated activities; and

(b)
provide the FSA with a copy of the written notification sent to all clients for its
regulated activities pursuant to (i) above, together with a list of all clients to
whom such notification has been sent.

2.
REASONS FOR ACTION

2.1. The FSA has concluded, on the basis of the facts and matters described below, that
Omagis is failing to satisfy the threshold conditions set out in Schedule 6 to the Act (the
"Threshold Conditions"). In the opinion of the FSA, Omagis has failed to deal with the
FSA in an open and co-operative way, in unreasonably failing to:

(a)
make payment to a skilled person, which has been requested by the FSA on
numerous occasions. As a consequence, the skilled person has been unable to
deliver the interim and final skilled person’s reports. Omagis has therefore failed
to comply with a Requirement Notice sent to it on 28 July 2010 under section
166 of the Act; and

(b)
provide information to the FSA despite being requested to do so on several
occasions, and respond substantively to communications from the FSA.

2.2. The FSA also considers, on the basis of those facts and matters, that it is necessary, in
order to protect the interests of consumers, for the action specified above to take
immediate effect.

Relevant statutory provisions

2.3. The FSA’s regulatory objectives established in section 2(2) of the Act include the
protection of consumers.

2.4. The FSA is authorised by section 45 of the Act to exercise the following powers:

• to vary an authorised person’s permission where it appears to the FSA that
such person is failing to satisfy the Threshold Conditions;

• to vary such a permission by removing a regulated activity from those for
which the permission is given; and

• to include any provision in the permission as varied that could be included if a
fresh permission were being given in response to an application under section
40 of the Act, including the imposition pursuant to section 43 of the Act of
such requirements as the FSA considers appropriate.

2.5. Section 53(3) of the Act allows such a variation to take effect immediately if the FSA
reasonably considers that it is necessary for the variation to take effect immediately.

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2.6. Paragraph 5 of Schedule 6 to the Act sets out Threshold Condition 5 which provides
that:

“The person concerned must satisfy the Authority that he is a fit and proper


person having regard to all the circumstances, including-

(c)
the need to ensure that his affairs are conducted soundly and
prudently.”

Relevant Handbook provisions

2.7. In exercising its power to vary a Part IV permission, the FSA must have regard to
relevant provisions in the FSA Handbook of Rules and Guidance (the "Handbook").
The main provisions relevant to the action specified above are set out below.

2.8. Principle 11 (Relations with regulators) requires a firm to deal with its regulator in an
open and co-operative way, and to disclose to the FSA appropriately anything relating
to the firm of which the FSA would reasonably expect notice.

Relevant Rules and Guidance

2.9. The FSA’s policy in relation to reports by skilled persons is set out in the Supervision
Manual ("SUP") (which is part of the Handbook) at SUP 5. A firm’s duties in respect
of the skilled persons are set out at SUP 5.5.

2.10. SUP 5.5.9R states that a firm must provide all reasonable assistance to any skilled
person appointed to provide a report under section 166 of the Act (Reports by skilled
persons).

2.11. SUP 5.5.12G states that, in complying with Principle 11, a firm is expected to take
reasonable steps to ensure that a skilled person delivers a report in accordance with the
terms of his appointment.

Guidance concerning the relevant Threshold Condition

2.12. Guidance on Threshold Condition 5 is set out in Chapter 2.5 of the Part of the
Handbook entitled Threshold Conditions (“COND”).

Guidance concerning - Threshold Condition 5: Suitability (paragraph 5, Schedule 6 to
the Act)

2.13. COND 2.5.1UK reproduces the relevant statutory provision that the person concerned
must satisfy the FSA that he is a fit and proper person having regard to all the
circumstances, including, among other things, the need to ensure that his affairs are
conducted soundly and prudently.

2.14. COND 2.5.4G(2)(a) states that the FSA, when forming its opinion as to whether a firm
is conducting its affairs soundly and prudently, will have regard to relevant matters,
including whether it conducts its business with integrity and in compliance with proper
standards.

2.15. COND 2.5.4G(3) states that the FSA will take into account relevant matters only to the
extent that they are significant in the context of the suitability of the firm.

2.16. COND 2.5.6G permits the FSA, when forming its opinion as to whether a firm is
conducting its business with integrity and in compliance with proper standards, to have
regard to relevant matters, including whether:

• the firm has been open and co-operative in all its dealings with the FSA
and is ready and willing to comply with the requirements and standards
under the regulatory system and other legal obligations; and

• the firm has contravened, among other things, the requirements of the
regulatory system, which include the Threshold Conditions, the FSA
Principles and other rules.

Other relevant regulatory provisions

2.17. The FSA's policy in relation to its enforcement powers is set out in the Enforcement
Guide (EG), certain provisions of which are summarised below.

2.18. EG 8.1(1) reflects the provisions of section 45 of the Act that the FSA may use its own-
initiative power to vary or cancel the permission of an authorised firm where a firm is
failing or is likely to fail to satisfy the Threshold Conditions.

Varying a firm’s Part IV permission on the FSA’s own-initiative

2.19. EG 8.1B provides that the FSA will have regard to its regulatory objectives and the
range of regulatory tools that are available to it, when it considers how it should deal
with a concern about a firm.

2.20. EG 8.3 provides that the FSA will exercise its formal powers under section 45 of the
Act, where the FSA considers it is appropriate to ensure a firm meets its regulatory
requirements. EG 8.3(1) specifies that the FSA may consider it appropriate to exercise
its powers where it has serious concerns about a firm or the way its business is being or
has been conducted.

2.21. EG 8.5 provides examples of the circumstances in which the FSA will consider
exercising its power, including where the firm appears to be failing, or appears to be
likely to fail, to satisfy the threshold conditions because, for instance, the firm appears
not to be a fit and proper person to carry on a regulated activity. One example of which
is because it has not been managed competently and prudently and has not exercised
due skill, care and diligence in carrying on one or more, or all, of its regulated activities
(EG 8.5(1)(b)(ii)).

2.22. EG 8.9 sets out the factors which will determine whether the urgent exercise of the
FSA’s own-initiative power is an appropriate response to serious concerns, including:

the extent of any risk of consumer loss or other adverse effect on consumers (EG
8.9(1)).

Facts and matters relied on

2.23. Omagis has been authorised by the FSA since 1 December 2001 to carry on designated
investment business.

2.24. Omagis has failed to:

• make payment of an initial fee of £7,500 by the due date of 13 September 2010, or
at all, to a skilled person. The failure to make payment to a skilled person has
meant that deadlines for the delivery of an interim skilled person’s report (due by
22 October 2010) and a final skilled person’s report (due by 13 December 2010),
pursuant to a Requirement Notice sent to Omagis on 28 July 2010 under section
166 of the Act, have not been met;

• respond to requests from both the skilled person and the FSA to make payment to
the skilled person;

• provide information to the FSA despite being requested to do so on several
occasions; and

• respond substantively to communications from the FSA.

2.25. The facts and matters described above lead the FSA, having regard to its regulatory
objectives, which include the protection of consumers, to the following conclusions:

• in failing to make payment to a skilled person and failing to respond to requests
made by that skilled person to do so, which has meant that a skilled person has
been unable to undertake the skilled persons review and deliver it to the FSA by
the deadlines or at all, Omagis has breached SUP 5.5.9R and failed to act in
accordance with the standards set in SUP 5.5.12G;

• by not responding to requests by the FSA to make payment to the skilled person,
in failing to provide information to the FSA despite being requested to do so on
several occasions, and in not responding substantively to FSA communications,
Omagis has failed to deal co-operatively with the FSA in breach of Principle 11;

• Omagis is therefore failing to satisfy Threshold Condition 5 (Suitability), as it has
failed to ensure that its affairs are conducted soundly and prudently, and in
compliance with proper standards;


• as the skilled person’s review would have identified if customers had suffered
loss, whether that loss was caused by unsuitable advice, and calculated any redress
payable to the customers, the FSA considers that Omagis’ actions in causing this
review not to be undertaken means there is a risk of loss and/or other adverse
effect on Omagis’ customers and to confidence in the market. The FSA therefore

has very serious concerns about Omagis such that the exercise of the FSA’s own-
initiative power to vary its Part IV permission with immediate effect is an
appropriate response to those concerns; and


• specifically the immediate variation of Omagis’ Part IV permission is desirable in
order to protect the interests of consumers or potential consumers.

3.
DECISION MAKER

3.1. The decision which gave rise to the obligation to give this Supervisory Notice was
made by the Chairman of the Regulatory Decisions Committee.

4.
IMPORTANT

4.1. This Supervisory Notice is given to Omagis under section 53(4) and in accordance with
section 53(5) of the Act, and is being served on Omagis at its principal place of
business last notified to the FSA. The following statutory rights are important.

The Tribunal

4.2. Omagis has the right to refer the matter to which this Supervisory Notice relates to the
Upper Tribunal (the “Tribunal”). The Tax and Chancery Chamber is the part of the
Upper Tribunal which, amongst other things, hears references arising from decisions of
the FSA. Under paragraph 2(2) of Schedule 3 of the Tribunal Procedure (Upper
Tribunal) Rules 2008, Omagis has 28 days from the date on which this Supervisory
Notice is given to Omagis to refer the matter to the Tribunal.

4.3. A reference to the Tribunal can be made by way of a reference notice (Form FTC3)
signed by Omagis and filed with a copy of this Supervisory Notice. The Tribunal’s
contact details are:

The Upper Tribunal, Tax and Chancery Chamber, 45 Bedford Square, London WC1B
3DN (telephone: 020 7612 9700; email: financeandtaxappeals@tribunals.gsi.gov.uk).

4.4. Further details are contained in “Making a Reference to the UPPER TRIBUNAL (Tax
and Chancery Chamber)” which is available from the Tribunal website:

4.5. Omagis should note that a copy of the reference notice (Form FTC3) must also be sent
to the FSA at the same time as filing a reference with the Tribunal. A copy of the
reference notice should be sent to Craig Drury at the FSA, 25 The North Colonnade,
Canary Wharf, London E14 5HS.

Representations

4.6. Omagis has the right to make written and oral representations to the FSA (whether or
not it refers this matter to the Tribunal). If Omagis wishes to make written
representations it must do so by 9 March 2011 or such later date as may be permitted by
the FSA. Written representations should be made to the Regulatory Decisions
Committee and sent to Ben Wright, Regulatory Decisions Committee Professional

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Support Services. The Regulatory Decisions Committee Professional Support Services'
address is: 25 The North Colonnade, Canary Wharf, London E14 5HS. If Omagis
wishes to make oral representations, it should inform the FSA of its intention to do so
by 14 February 2011. If Omagis does not notify the FSA by 14 February 2011, it will
not, other than in exceptional circumstances, be able to make oral representations.

Confidentiality and publicity

4.7. Omagis should note that this Supervisory Notice may contain confidential information
and should not be disclosed to a third party (except for the purpose of obtaining advice
on its contents). Omagis should also note that section 391 of the Act requires the FSA
when the Supervisory Notice takes effect (and this Supervisory Notice takes immediate
effect), to publish such information about the matter as it considers appropriate.

FSA contacts

4.8. If Omagis has any questions regarding the procedures of the Regulatory Decisions
Committee, it should contact Ben Wright (direct line: 020 7066 3194).

4.9. For more information concerning this matter generally, Omagis should contact Craig
Drury at the FSA (direct line: 020 7066 8460 / fax: 020 7066 8461).

Tim Herrington
Chairman, Regulatory Decisions Committee