Adviser company Omni Executive Group has told FTAdviser it could be forced into default after it lost a Financial Ombudsman Service claim over an unregulated film scheme investment that could precipitate an avalanche of £30m worth of complaints.
A Fos decision, dated 20 June 2013 and seen by FTAdviser, found that the business had misrepresented the nature of administration fees of £10,000 per annum, which were charged annually to clients.
The client in the case had agreed to pay the £10,000 annual fee for a total of seven years to stay invested in a film partnership, Eclipse Film Partners LLP, and the Braemar property fund. According to the decision, only £3,500 was paid to the promoter, Future Capital Partners, with the balance being kept by Omni.
The ombudsman upheld the complaint and ordered Omni to pay the difference between the £10,000 paid and the payment to the promoter of the film partnership, with interest of 8 per cent a year from the time the money was paid to the date of investment. Omni calculated this to be at least £18,000.
The complaint was brought by Rebus Investment Solutions, which is representing a number of clients who are pursuing claims against Omni. Rebus said the current value of claims amount to around £29m, of which £1m relate to these admin fees.
Following the decision, Omni wrote to the Fos, stating that the firm cannot comply with award, as it does not have professional indemnity insurance for the “property and interest deal”, which is the collective term for the two investments.
The letter said: “Irrespective of the actual figure due, which we calculate as being some £18,000 plus interest, the firm in nonetheless unable to make that payment. It simply has insufficient funds to do so, for which reason your assistance as to proceeding now is needed.”
Gary James, partner at Omni Executive Group, told FTAdviser: “Ultimately, the Fos decision went against us - not because it was incorrectly assessed but that they believe we didn’t make the charge sufficiently clear at outset.
“We disagree with this finding - believing it to be highly client biased - however, we have no choice but to accept it.
“It must be pointed out that Omni Executive Group LLP has not transacted any new business for over three years. It has only been in existence during this period solely to assist clients with their HMRC enquiries, to keep them abreast of developments on the various deals undertaken and, as you can imagine, to answer the complaints that are being sent to us via Rebus.
“It is not producing much income - some residual income to enable the company to continue - and has little in assets. Therefore, the loss of this case may cause the company to default. We continue to do our very best to support all of our clients in their various deals and will do so unless circumstances prevent us from being able to do so.”
Ombudsman Michael Stubbs said in his decision: “[The client] was clearly aware and willing to pay the sum of £10,000 per year. However, it remains my view that it was not made clear to him what this sum represented. Mr A believed that the whole of this sum was money that was to be passed on to the promoter of the film partnership.”
Adrian Cox, chairman at Rebus Investment Solutions, said: “The losers here are the investors. On one hand you’ve got a judgment from the Ombudsman, which speaks volumes about malpractice at this firm, and on the other you’ve got, what would appear to be, an IFA firm in rude financial health - enough so as to extract profits via a tax avoidance scheme - shirking its obligations to compensate those clients who’ve lost out as a result.”
