Embattled overseas property investment firm Harlequin has sounded a tone of defiance after it announced the first completion of its flagship Caribbean hotel complex, in spite of a fresh warning from the regulator over esoteric investments that could diminish adviser interest.
The first completion and transfer of title has taken place for an overseas property in the Buccament Bay Resort in St Vincent and the Grenadines, with Harlequin Hotels and Resorts claiming it is “a clear indication” it can fulfill its obligations to investors.
The group has come under fire over the past 18 months, after its UK sales arm entered administration and the Serious Fraud Office announced an investigation.
It has been fighting a number of legal battles with former auditors, a construction firm that it had previously contracted and investors who had launched action, as well as facing regular criticism relating to projects that have run into delays after investor money has been taken.
Under the Harlequin model, investors either place a 30 per cent cash deposit or “transfer their Sipp” to an off-plan property in the Caribbean and are contractually obliged to settle the remaining balance once their property is built and ready to receive paying guests, Harlequin said.
Yesterday, the Financial Conduct Authority issued its latest alert to advisers and signaled its toughest stance yet on recommendations to clients to transfer their pensions into self-invested alternatives weighted to “non-mainstream investments”.
In the alert, which did not name Harlequin specifically, the FCA in particular highlighted overseas property developments, store pods and forestry, saying “such transfers or switches are unlikely to be suitable for the vast majority of retail customers”.
It added that following a recent ban for two advisers it continues to see “very poor standards of advice” and expects further referrals to its enforcement division in the coming months.
The move followed two alerts last year that were specifically targeted at advisers which had transferred clients into Sipps weighted to Harlequin last year. FTAdviser has previously revealed advisers took up to 9 per cent commission for recommending the investments.
A Harlequin spokesperson told FTAdviser: “Harlequin has always understood and believed that its products are suitable for Sipp investment.
“Harlequin has always made it clear that clients should seek independent financial advice based on their personal circumstances and requirements as Harlequin has never been in a position to provide such advice.
“It is Harlequin’s belief that the poor performance of pensions led many people to pursue alternative investments, such as Harlequin.”
Following the completion at Buccament Bay, the firm added further completions are expected to be finalised in the coming weeks. It said approximately 90 purchasers in various stages of completing on their properties, but timeframes are determined by the speed at which solicitors representing purchasers can complete their processes in the Caribbean.
A Harlequin spokesperson said: “After what undoubtedly has been a tough 12 months for Harlequin, this is a clear indication that the company can fulfil its obligations to purchasers and, considering the business’ overall position, there is good cause for optimism going forward.
“We are currently in advanced negotiations with a major international hotel management company for their assistance in acquiring the funds needed to accelerate the development of Harlequin’s projects across the Caribbean.”
In January 2013, Harlequin was forced to deny the flagship resort was in liquidation, following a certificate of status which revealed Buccament Bay was in “default of its obligations” under the Companies Act as it has not filed financial statements nor annual annual returns from the period 2005-2012.
A spokesperson for Buccament Bay Resort blamed “historic problems” with its accountants Wilkins Kennedy, with whom it is currently in a legal dispute.
