Around 100 financial advisers who recommended funds operated by Propertybourse could finally get answers on the sequence of failures through 2011 and 2012 that has left around £20m of investor money at risk, after ground was cleared for liquidators to launch an investigation.
A hearing at the Guernsey Royal Court on 5 August will endorse the appointment of joint liquidators for the final set of failed funds under the Propertybourse umbrella, after a company that had acted as an introducer for the business withdrew an objection last week.
A number of IFAs and clients had raised a total of £12,500 to fund an investigation into the complex accounts of the business in both Guernsey and the UK, after it was revealed it did not have any realisable assets.
A hearing was held on 22 July on a transfer of liquidator from Grant Thornton to BM Advisory consultant Malcolm Fillmore, who had previously acted in 2013 as liquidator of Muirfield, a property consultancy formed by Propertybourse founder Robin Christie, and as administrator of an order to probe unpaid invoices at Propertybourse itself.
Mission Corporate Finance, a closely related company which had promoted the Guernsey-domiciled Mission-branded funds set up by Propertybourse, objected to the appointment of Mr Fillmore without giving grounds and was given until 28 July to present its reasons. The objection was withdrawn last Friday (25 July).
Powers of investigation will now need to be granted from the Guernsey court and the liquidators will seek the assistance of the High Court in obtaining similar powers in England, as this is where most of the relevant parties are based.
Mr Fillmore said he hoped that getting access to the books and records of the Guernsey company would reveal the reasons for the funds going bust.
He said: “Investors would have paid directly into Guernsey through their IFAs... into a company called Bordeaux Services, which was the partner that took the money in and spent it in accordance with the fund’s instructions.
“They will have the cash book records of the cell company, so we’re trying to find where the breakdown was between what investors were told their money would be invested in and what actually happened, in order try understand who is responsible for the complete loss of invested funds.
“If we can ascertain responsibility then we can work out who might be made financially responsible. It sounds quite straightforward, but it’s really a forensic accounting exercise to see where the money came from, where it went to and was it properly managed.”
Mr Christie set up “property manager of managers” Propertybourse in 2005, which developed into several funds that invested in property in the UK, Germany and Italy. It went into liquidation in November 2013, following its FCA deauthorisation in September 2013 and the placement into administration of its core German and Italian Mission funds in 2012.
Mr Christie told FTAdviser that the funds were hit by the 2008 financial crisis and had struggled for liquidity after banks withdrew huge volumes of capital from the market, which prompted the firm to launch a number of rights issues to “patch things up”. He said the funds were “stabilised”, but were hit again by the re-emergence of the euro crisis in 2011.
He added that alongside the London-based Mission fund, which he said remains in “good health” with underlying assets worth £6m, there is some residual value in the failed funds that should limit investor losses to around £10m.
Mr Fillmore said that while there have been between 15 to 20 financial advisers taking a keen interest for the last couple of years, many are keeping their heads down.
He said: “The IFAs involved are caught between a rock and a hard place, they put the investors into these funds on the basis of the representations and documentation provided by Propertybourse and the associated companies, and of course those investors are now very unhappy.”
Stephen Dockerty, director of Activate Financial Management, had nine clients invested in the property funds, seven of which put £500 each towards the investigation, while he gave £1,000 to support it.
He said: “I have pledged to my investors that I will fight this, but there are not that many IFAs pushing as hard as I am.
“Some haven’t even told clients they were invested yet, it appears to me that very few IFAs actually ever question fund managers about their specific fund failures. I suspect that the vast majority are well aware that small, UK based IFAs usually end up taking the rap for the losses.”
