Two former directors of Connaught Asset Management have been disqualified for a combined 16 years for allowing another to misuse investment funds of up to £106m, after an investigation by the Insolvency Service.
Nigel Walter of Medstead, Hampshire was banned for nine years and Michael Anthony Davies of Radstock, Somerset was banned for seven years.
The disqualifications, which started on the 24 November 2014 and 4 December 2014, respectively, mean that the two directors cannot control or manage a company without leave of the court.
Connaught managed several funds sold to members of the public through financial advisers and was placed into administration in September 2012 with around £34m owed to creditors.
The largest fund was launched around March 2007 and had investment totalling £106m. It primarily loaned money to Tiuta International, which would then make residential and commercial bridging loans. It was suspended in March 2012 and placed into liquidation in December 2012.
Joanne Covell, head of investigations at the Insolvency Service, stated that the lengthy bans reflect the seriousness of failings and the robust stance taken against those whose conduct falls below accepted commercial standards.
Neither Mr Walter nor Mr Davies disputed that they failed to ensure Connaught carried out its responsibilities and that they failed to review the progress on bridging loans made by Tiuta, as well as ensuring that all monies were repaid to the fund following completion of repayments.
Tiuta received redemptions from its borrowers but failed to pass these payments to the fund as it was contractually obliged to, the investigation found. Redemptions which were not repaid to the fund amounted to at least £23m. Tiuta retained funds drawn from the fund for loans that it did not make to its customers which amounted to at least £3.4m.
In March 2011, Connaught became aware that there were problems with Tiuta’s loan book, but failed to establish the true position. From then, it repeatedly failed to prevent Tiuta retaining redemptions; during this period the fund lost out by approximately £12m.
At the start of November this year the Financial Conduct Authority extended its “support” for negotiations to address investor losses in the Connaught Series 1 Fund until January 2015, after intensive talks through the summer failed to yield a settlement.
peter.walker@ft.com
