CompaniesJun 1 2016

EEA group accuses advisers of holding back information

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EEA group accuses advisers of holding back information

The man leading the action group which represents EEA investors has claimed advisers have held back information after the fund was suspended.

David Trinkwon, who heads up the EEA Investors’ Group, said: “Most financial advisers and other intermediaries are holding back information from investors because of various concerns or restrictions, hoping that the problems will somehow go away.”

He attributed advisers’ worry to professional indemnity insurance and mis-selling claims, but said they should help put clients in contact with the action group “so they can make up their own minds about who to believe and what to do”.

EEA Life Settlements, which invested in second-hand insurance policies from elderly Americans, ran into trouble when the Financial Services Authority branded the policies “toxic” and possibly unsuitable for retail investors.

The Guernsey-based fund was suspended in November 2011 and returns plunged, losing $200m (£129m), which EEA blamed on the regulator. Investors’ cash has since been locked into the fund.

Last week, two broker firms - Southey Capital and Tullett Prebon Alternative Investments - lined up bids to purchase the EEA investments from shareholders for a portion of their net asset value.

Southey is offering between 32.4 per cent and 49.2 per cent of the holding’s value, whereas Tullet is expected to offer at least 26.7 per cent.

Mr Trinkwon, however, described these valuations as “dismal”, and said the offers are evidence to suggest the situation for EEA investors “will almost certainly get worse”.

He said advisers should “stop telling your investor clients that everyone will die eventually and that they will get all their money back from EEA. The former is true, but not the latter.”

A separate litigation group, EEALIT, has been set up to try and recover investor losses caused by the alleged negligence, misrepresentation and abuse of position by EEA and “relevant parties”.

“Many EEA investors are still sitting on the fence, believing or hoping that they will eventually get their money back from EEA,” Mr Trinkwon added.

Tony Catt, compliance officer and IFA at Anthony Catt Limited, said: “The advisers that have advised on those funds find themselves in a difficult position with their PI companies, and also more importantly their clients.

“The FCA should take a huge amount of blame as its spokespeople destroyed this market by labelling it as toxic without understanding how the products actually worked,” he said.

“The investors group needs to be more honest and perhaps should review their initial investment decision and not claim ignorance or misdirection in this regard.

“Most advisers that were putting clients into the funds understood the funds to an extent and would have made their clients aware of how the funds worked.

“The investors group is simply trying to place the blame elsewhere in their pursuit of compensation.”

katherine.denham@ft.com