Clients who lost millions with DFM to recover all funds

Clients who lost millions with DFM to recover all funds

Clients of Strand Capital look set to recover almost the entirety of the millions they lost when the discretionary fund manager collapsed in 2017. 

In their seventh progress report, published today (December 23), administrators at Smith and Williamson said they had now paid 75 per cent of all the claims for client monies against the DFM. 

These payments, combined with compensation from the Financial Services Compensation Scheme, mean 99.4 per cent of Strand Capital clients with a claim for money have received their balance in full. 

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Administrators said as almost all of the failed DFM's clients received compensation from the FSCS, and most of the distributions paid by Smith and Williamson went straight to the lifeboat body. 

In June FTAdviser reported the industry-funded FSCS had successfully recouped millions via this process to cover the cost of successful Strand Capital claims. 

Strand Capital went into administration in May 2017 following the breakdown of an internal management buyout, with 2,500 clients holding investments with the company.

There are negligence claims against the firm, which was declared in default by the FSCS in September 2017, that may relate to unsuitable advice to transfer money into a self-invested personal pension, the FSCS has previously stated.

As a DFM Strand Capital had advice permissions but the FSCS said it was also aware FCA authorised advisers may have recommended customers invest with Strand Capital or that they transfer their existing pensions into a Sipp.

What happened?

In 2016 Strand Capital's sole shareholder sought to sell its shares in the company, claiming it was no longer a "strategic fit" with its ongoing business plan, and a sale via a management buyout was explored as a result.

However, the breakdown of this intended management buyout led to key senior management, who held the relevant FCA regulated functions, leaving Strand Capital in March 2017. 

Coinciding with a subsequent breakdown of the relationship with the DFM's trading platform provider, an agreement with the Financial Conduct Authority was reached to cease carrying out regulated activity and Strand Capital ceased dealing with client monies and assets. 

The DFM's director subsequently placed the company into special administration.

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