IFA ‘completely disregarded’ interests of client: Fos

IFA ‘completely disregarded’ interests of client: Fos

A financial advice firm has been told to pay redress to a client after it “completely disregarded” her interests and put her money in unregulated schemes.

Ombudsman Louise Bardell said Buckland Harvester advised the client to make a number of investments. These included £150,000 in Stirling Mortimer No.8 UK Land fund and £50,000 in the Connaught Income Fund series 1, both unregulated schemes.

The client – known as Mrs B – met with Buckland Harvester’s adviser in 2009 to discuss investing £300,000 made available by downsizing her home, and considered herself a low-risk investor.

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Mrs B had other investments in Isas and investment bonds following earlier advice from Buckland Harvester, which, according to the 2008 fact-find, amounted to around £160,000.

This meant the Stirling Mortimer fund accounted for around a third of her total investable assets and the two unregulated collective investment schemes around 46 per cent.

Ms Bardell said this was too high a proportion and represented enough of a concentration risk to make the advice unsuitable.

She said: “Had it not been for Buckland Harvester’s unsuitable advice, Mrs B wouldn’t have made the investment.

“And I think the advice completely disregarded Mrs B’s interests. Buckland Harvester advised Mrs B to invest a significant portion of her funds into two unregulated funds with limited track records.

“And Buckland Harvester incorrectly assessed and described the risk associated with them. In these circumstances, I think that it’s fair and reasonable to hold Buckland Harvester responsible for the whole of the loss suffered by Mrs B.”

In order to compensate Mrs B, Buckland Harvester has been told to compare the performance of her investments with the average rate from fixed-rate bonds and pay the difference between the fair value and the actual value of the investments.

Both Mrs B’s investments currently have no realisable value. Therefore, Ms Bardell said that for the purposes of this calculation, the actual value of each should be assumed to be zero.

In March 2015, the Financial Services Compensation Scheme (FSCS) said IFAs can be held liable for mis-selling which may have occurred in relation to three Stirling Mortimer funds.

Earlier that year the FSCS said it was delaying making any decision regarding payments on claims against three Stirling Mortimer funds – No.4 Cape Verde fund, No.6 Morocco fund and No.7 Cape Verde II fund – as they were being investigated by the SFO.

Meanwhile,again in March 2015, the Financial Conduct Authority said it decided to investigate the activities of Capita and Blue Gate in connection with their roles as operators of the Connaught Income Series One fund.

It also announced it had withdrawn from negotiations aimed at securing an agreement to address the losses for investors in the fund.

Capita Financial Managers was replaced as operator of the Connaught Income Series One fund in September 2009 by another company.

The fund went into liquidation in 2012 and its liquidator has brought a claim against both former operators.