FSCS invites claims against defaulted Scottish broker
Claims against firm in liquidation could add further £10m to FSCS redress for 2011-2012 financial year.
The Financial Services Compensation Scheme has issued a statement inviting claims against Scotland-based broker firm Direct Sharedeal after it was declared in default.
FTAdviser revealed last month that the FSCS had added the firm to its list of company’s in default. According to the statement, published on the scheme’s website, the company is now in default “for the purposes of the FSCS” after liquidators were appointed on 12 April.
Regulatory Legal, a law firm representing 84 investors in Direct Sharedeal previously told FTAdviser that there are eligible claims against the firm and that its collapse could add “significant” further redress to the 2012/2013 FSCS financial year, estimating it to be in the region of £10m.
In February 2010, the Financial Services Authority fined Direct Sharedeal £101,500 after an appointed representative, First Colonial investments firm used misleading sales pitches when recommending contract for difference products.
CFDs are derivative products that are designed to allow investors to bet on price movements, by providing a return based on the difference between the opening and closing price are a given security or market. If the underlying asset decline in value, investors can lose money.
The products are typically leveraged, meaning that gains - and losses - can be large.
Gareth Fatchett, director at Regulatory Legal, said: “The Direct Sharedeal Ltd firm had already been sanctioned by the FSA prior to it crashing into administration.
“Our clients brought significant multi-million pound claims to Direct Sharedeal Ltd in relation to the management of the accounts.
“We believe the claims [the claims are eligible for redress] as the management of our clients’ accounts was in our opinion way below accepted standards.”
The FSCS has said that it is “still gathering the evidence it requires” in relation to CFD investments and that it will post an update on this category of claim on the website as soon as possible.