InvestmentsOct 31 2012

Legal financing fund at centre of allegations suspended

Search sponsored by

The £100m Axiom Legal Financing Fund has been suspended after the director of the Cayman Islands-based investment manager’s resignation and the appointment of external auditors to review the fund’s assets following press allegations.

In a letter sent to investors from directors of the Axiom Legal Financing Fund, the directors state that the fund has suspended redemptions for participating shares designated to the fund. This is due to “a significant number of redemption requests” being received by the fund for the 1 November 2012 and 1 December 2012 redemption dates.

It follows the appointment of KPMG to conduct an audit of the fund’s assets.

The letter, seen by FTAdviser, says an update on the status of the suspension and information with respect to the KPMG’s findings will be announced by the middle of November.

The suspension follows the recent resignation of Tim Schools, a director of Cayman Islands-based investment manager Tangerine Investment Management, who stepped down shortly after a review was confirmed by the fund manager of the fund’s assets in a letter to investors.

The letter also says that the fund directors are in discussions with the investment manager with respect to a proposal that would see an FSA regulated adviser introduced into the fund’s structure in order to bring “additional support, oversight and transparency to the management of the fund’s portfolio”.

The letter states: “We understand that the investment manager has been in discussions with an FSA regulated advisor since August 2012 with a view to having it act in respect of the fund. Since the potential advisor’s due diligence on the fund is well advanced, the investment manager anticipates that, subject to the agreement of the fund to the proposed changes, the new advisor will be engaged shortly.”

Previously the fund manager wrote to investors stating that two press articles had made certain allegations against the fund and the fund manager.

Separately, Mr Schools has been under investigation by the UK Solicitors Regulation Authority in relation to alleged misconduct at ATM Solicitors, an English firm he sold last year. He faces a number of allegations including that he acted where there was a conflict of interest, failed to act with integrity, acted recklessly and failed to maintain proper books of accounts and financial records.

The SRA has referred his case to the Solicitors Disciplinary Tribunal, where it will be heard in due course. The allegations are as yet unproven and Mr Schools denies any wrongdoing.

Law firm Regulatory Legal has previously raised concerns over advisers placing clients into the fund without having seen the outcome of the KPMG review.