Tenet has lost a High Court case after a judge ruled the network was in fact liable for the unregulated activities of one of its appointed representatives.
Mr Justice Ouseley ruled in favour of the Financial Ombudsman Service after Tenet sought to overturn a decision where it had ruled against the network.
The case centred around advice given by Alok Dhanda, a convicted fraudster who was recently release from prison after serving more than two years for defrauding 37 people of some £2.9m.
An ombudsman had ruled in favour of two of his clients that it would be "fair and reasonable" for Tenet to compensate them for the losses Dhanda caused but the network disagreed, claiming that while he was carrying out unregulated activity he in effect ceased to be one of its appointed representatives.
Mr Justice Ouseley said the central issue how closely the regulated and unregulated advice Dhanda provided were entwined, and whether or not a "bright or smudgy line" could or should be drawn between them.
He ultimately rejected Tenet's claims that there was a "bright line" between the regulated advice Dhanda provided to the couple to sell a Friends Life policy and the unregulated activity of advising to purchase property in Goa and loan of of the money to him.
Mr Justice Ouseley said: "It is plainly artificial to draw such a distinction where, on the facts, an adviser specifically recommends that a regulated investment should be sold because an alternative unregulated investment is preferable, but would not have made such a recommendation when no such preferable alternative existed.
"It would mean, for example, that regulated advice by an appointed representative to sell a specified investment specifically in order to make an unwise unregulated investment, or to put it into a Ponzi-fraud operated by such an IFA, would fall outside the scope of the compulsory jurisdiction over the principal."
He acknowledged there were cases when a recommendation to sell a regulated investment might be made and "some time later" the proceeds are placed in an unregulated investment but he rejected the idea of ruling out a link between the advice to buy and sell in all circumstances.
Mr Justice Ouseley added that the same reasoning led him to believe that when Dhanda was advising his clients to invest in Goan property he was still an appointed representative of Tenet under the Financial Services and Markets Act.
He said: "The fact that Dhanda had no actual authority, express or implied, to act as he did on Tenet's behalf, nor was he held out by Tenet as having such authority, does not answer the [...] issue.
"The fact that Dhanda's acts were fraudulent does not take them outside the scope of statute."