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Police in fraud probe into FCA-authorised friendly

Police in fraud probe into FCA-authorised friendly

A Financial Conduct Authority-authorised friendly society that is in the process of being liquidated is being investigated by the West Yorkshire and Humber regional fraud team in connection with fraud and money laundering allegations regarding pension investments

FTAdviser understands the friendly society is Cornerstone Friendly Society, to which transfers were blocked by Liberty Sipp and another self-invested pension firm last year amid concerns over alleged pension liberation activity.

A spokesperson for the West Yorkshire police told FTAdviser: “Yorkshire and Humber regional fraud team are investigating alleged fraud and money laundering offences linked to a friendly society involved in pension investments that mainly operated in Leeds.

“The Prudential Regulation Authority has applied to the court to have the friendly society wound up. All identified potential victims have been informed of the investigation.

“Ten people have been arrested in connection with this investigation and are on police bail. Enquiries remain ongoing and we are unable to comment further at this time.”

FTAdviser was contacted about Cornerstone Friendly Society around a year ago. Around that time Liberty Sipp and another self-invested provider who declined to be named blocked a number of transfers.

What makes the case unusual is that Cornerstone is regulated by the Financial Conduct Authority.

Cornerstone is still on the FCA register, however its permissions were updated earlier this year to state it is no longer allowed to accept any new deposits, enter into any new business, and cannot lend money to any third party.

The company also appears on the FCA’s mutuals public register, however the firm has now entered liquidation.

BDO LLP business restructuring partners, Malcolm Cohen and Mark Shaw, were appointed joint liquidators of Cornerstone, following an application by the Prudential Regulation Authority to the High Court for the society to be wound up, an order which was made on 16 June 2015.

Malcolm Cohen, BDO business restructuring partner, said: “The joint liquidators will investigate the affairs of the society in order to maximise recoveries of any available assets for the benefit of the creditors.

“Where necessary, we will work closely with the Financial Services Compensation Scheme, the Bank of England and any other relevant third parties to determine whether, and to what extent, any monies placed by members of the society are eligible to be covered by the FSCS, although at this stage it is too early to comment further on this.”

A BDO spokesperson could not confirm at this stage how long the liquidation will take to conclude.

John Fox, director of Liberty Sipp, said: “You don’t expect a FCA-regulated firm and a mutual registered firm to be involved. We spoke to them and visited their office but we were not convinced. We have not let any of this business through but other Sipps may be implicated as it ticked all the boxes.

“I imagine there are quite a few investors involved as Sipp providers are happy with investments that are standard.”

It was not possible to reach Cornerstone for comment. Previous attempts to contact the company for comment gave rise to a threat of legal action. At that time FTAdviser sought comment from Cornerstone on a number of points and the society strongly denied it was involved in pension liberation in the way it considered we alleged.